The Hong Kong Monetary Authority (HKMA) has alerted investors to be cautious of crypto companies describing themselves as “banks.” The financial watchdog warned that crypto companies are not banks and that describing their products as deposits is deceptive.
According to a press release published today, the HKMA also issued a warning for the crypto companies that they might be breaching Hong Kong’s Banking Ordinance.
Labeling themselves as a crypto bank, crypto asset bank, digital asset bank, and digital trading bank is deceptive to citizens, said the regulator, as are some of their product offerings that promote savings plans as “low risk” with “high returns.”
“These descriptions may mislead members of the public into believing that those crypto firms are banks authorized in Hong Kong, to which they can entrust their savings,” read today’s notice.
Authorities also “wish to remind members of the public” that crypto companies which are not licensed or supervised by the regulatory agency are not protected by the Hong Kong Deposit Protection Scheme.
Sounds reminiscent of the battle the Federal Deposit Insurance Corporation has fought against crypto firms that suggest customers deposits are protected by the FDIC.
Today’s statement comes only one day after another of Hong Kong’s financial watchdog’s, the Securities and Future Commission (SFC) issued a warning of its own. It alerted investors of “suspicious features,” on the JPEX crypto exchange, prompting the company to update its withdrawal fees and modify its business practices.
Although not far from the staunch anti-crypto country of China, Hong Kong has been adding the building blocks to what it hopes to be a crypto hub moving forward. In that vein, it recently passed a number of landmark crypto rules and regulations, along with creating a dedicated Web3 Task Force.
These much needed actions mean that crypto firms will be receiving a stringent regulatory sandbox to continue operating, protecting the industry and investors alike.