Hong Kong Authority Warns Crypto Companies Misleading Description as Banks

The Hong Kong Monetary Authority (HKMA), in its Friday, September 15 press release, alerted the public of deceptive crypto companies profiling themselves as banks. The regulator notice indicates that describing crypto companies as banks misleads the unaware public to entrust them with savings. 

The financial watchdog warned that it is deceptive for the crypto companies to label their products as deposits. The notice read that crypto companies identifying their products as banks were breaching the Banking Ordinance.

HKMA warned the citizens to avoid becoming victims of misleading crypto projects identified as digital asset banks. Also, the regulator expressed concerns about using crypto assets and digital trading banks in product offerings. The notice indicated that the product offerings were profiled as promoting savings by guaranteeing high returns at low-risk exposure. 

HKMA Crackdown on Deceptive Crypto Companies

The Friday notice argued that using descriptions carrying banks in their naming nomenclature misleads the public into believing the firms are authorized banks to operate in Hong Kong. Consequently, the individuals unaware of the risk harbored by the crypto product offerings entrust the companies with their savings. 

The HKMA statement reiterated that unlicensed crypto companies, alongside those not supervised by the regulator, are disqualified from the Hong Kong Deposit Protection Scheme. The notice mirrors the initiative undertaken by the Federal Deposit Insurance Corporation to indicate that customer deposits in crypto firms lack the scheme’s protection.

HKMA restated the Banking Ordinance provisions that restrict deposit-taking business to institutions licensed banks collectively identified as authorized institutions. Though accepting customer deposits, crypto companies lack the HKMA approval to execute the banking and deposit-taking business within Hong Kong.

The statement considers it offensive for anyone to utilize the word bank in their name and description. Also, the HKMA decries representation and description that one was executing banking business within Hong Kong. The notice condemns individuals running deposit-taking businesses and invites public members to make such deposits. 

Hong Kong’s SFC Warns JPEX Misleading Claims

The statement by the HKMA comes 24 hours after another financial watchdog agency, the Securities and Futures Commission (SFC), served JPEX with a tough warning. SFC alleged that the JPEX crypto exchange harbors suspicious features. 

SFC indicated that JPEX had never sought approval to execute crypto services in Hong Kong. The notice prompted JPEX to adjust its withdrawal fees and modify its business practices. Wednesday, September 13, indicated that crypto exchange JPEX was advancing misleading claims concerning its licensing. 

SFC argued that online influencers are at the forefront of advancing misleading statements regarding JPEX. The regulator’s statement found the representation misleading since JPEX was yet to apply for the virtual asset trading platform (VATP) license. 

The statement clarified that no single entity within the JPEX group sought approval for a VATP license in Hong Kong. The financial regulator warned investors to exercise caution since investment opportunities represented as good lack the requisite approval and harbor undisclosed risks. SFC decries investment advice by paid promoters who have masqueraded as finfluencers and investment professionals. 

The SFC cited the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, whose provisions govern the VATP licensing scheme. Violations would attract a 10-year term and a fine capped at US$1.3 million.

SFC directed opinion leaders and influencers to cease promoting JPEX and misrepresenting approval status for its products and services. The notice dismissed the claim that overseas regulators license the JPEX platform.

Hong Kong Steps Up War Against Noncompliant Crypto Projects

The notices alerting investors against deceptive crypto projects portray Hong Kong’s priority to guarantee compliance. Hong Kong is adopting a contrasting approach to the anti-crypto crusade. 

Instead, the administrative region’s regulators are integrating building blocks to propel Hong Kong’s match towards becoming a regional crypto hub. The city passed several landmark crypto rules and supportive regulations besides creating a Web3-specific Task Force. 

The notices issued by SFC and HKMA restate the regulators would subject the crypto firms to the stringent regulatory sandbox. Doing so is necessary to safeguard the digital assets industry and investors. 

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