The Hong Kong Monetary Authority, in its latest press release, has cautioned the public about certain crypto firms that are posing as banks. This comes as local regulators intensify efforts to combat fraud amid the region’s push to establish itself as a crypto hub.

It noted two overseas crypto firms that are not licensed banks in Hong Kong. The bank noted that one of the firms was reported to have represented itself as a bank, while the other firm had described its card product offered on its website as a ‘bank card’. 

The HKMA expressed concerns that “such claims by these firms mislead consumers to believe they are licensed banks in Hong Kong and are under the HKMA’s supervision.”

”It stated that using the term “bank” in names or product descriptions without the authority’s written consent could potentially be a criminal offense for entities.“Under the Banking Ordinance, only licensed banks, restricted licence banks and deposit-taking companies (collectively known as authorized institutions) which are authorized by the HKMA can carry on banking business or deposit-taking business in Hong Kong.”

Other than licensed banks in Hong Kong, it is an offence for any person to use the word “bank” in the name or description under which the person carries on business, or makes any representation that the person is a bank or is carrying on banking business in Hong Kong, the bank stated. 

It further reminded the public that crypto firms that are not authorized institutions in Hong Kong are not supervised by the HKMA.  Overseas crypto firms with names carrying the word “bank” or overseas “crypto banks” claiming to be licensed elsewhere are not necessarily licensed banks in Hong Kong.  Also, products or services with names carrying the word “bank” are not necessarily provided by licensed banks in Hong Kong. 

With these measures, HKMA is aiming to mitigate potential risks posed by unauthorized entities in the growing crypto sector

Hong Kong’s Evolving Crypto Landscape

In June 2023, it officially started a crypto licensing regime for crypto trading platforms, allowing licensed exchanges to offer retail trading services. The regulator has so far granted three licenses to OSL Exchange, HashKey Exchange and HKVAX.

One of its major endeavors includes a forthcoming stablecoin regulatory framework, prioritizing fiat-backed stablecoins to ensure financial stability. The legislation is set to be introduced by the end of 2024. Recently in August 2024, the HKMA launched Project Ensemble Sandbox, enabling interbank settlements through experimental tokenized money. 

The HKMA has also advanced its e-HKD pilot program to Phase 2, collaborating with over 20 firms, including prominent ones like HSBC, Visa, Standard Chartered, and DBS. This initiative explores the practical use cases of a Central Bank Digital Currency (CBDC). 

By introducing a robust regulatory framework for virtual assets, Hong Kong is putting in efforts to position itself as a global leader in digital finance. Backed by institutions like the HKMA, the city is cultivating a thriving digital asset ecosystem and advancing innovation in the Web3 sector.

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