HKMA Warns That Misleading Use of the Word “Bank” by Crypto Firms Not Only Deceives Consumers but also Breaches Hong Kong’s Banking Ordinance

On November 15, 2024, the Hong Kong Monetary Authority (HKMA), the region's de facto central bank, issued a stern warning about two overseas cryptocurrency

Two overseas cryptocurrency firms have been found to be misrepresenting themselves as banks, prompting a stern warning from the Hong Kong Monetary Authority (HKMA) on Tuesday.

One of the firms is said to have described itself as a bank on its website, while another referred to its card as a “bank card.”

The HKMA expressed concern that such claims could mislead consumers into believing that these firms are licensed banks in Hong Kong and that their products and services are provided by licensed banks in the city-state.

“Such acts may constitute a contravention of the Banking Ordinance,” the HKMA said.

The Banking Ordinance specifies the institutions that are permitted to carry out banking business in Hong Kong. Only licensed banks, restricted license banks, and deposit-taking companies, which are licensed by the HKMA, are authorized to operate banking and deposit-taking businesses.

No other person is permitted to carry on banking business or to hold itself out as a bank, and a person shall not use the word “bank” in the name of his business or in describing any business carried on by him unless he is a licensed bank, the ordinance states.

The HKMA said that the use of the term “bank” by crypto firms not only misleads the public but also constitutes a breach of the ordinance.

“The HKMA will take follow-up actions, including referring the relevant cases to the Department of Justice for legal proceedings if necessary,” the monetary authority said.

Hong Kong has been positioning itself as a major global crypto hub, with increasing momentum in recent years.

In June 2023, the city introduced a licensing regime designed to regulate crypto trading platforms while promoting innovation within the digital asset sector.

The system mandates that licensed crypto firms follow stringent guidelines to ensure consumer protection, such as maintaining a minimum capital requirement, adhering to cybersecurity standards, and implementing measures to prevent money laundering and terrorist financing.