Hong Kong’s central bank warns against these crypto firms

• Hong Kong’s financial regulator earlier called out JPEX for operating in the region without approval.
• The central bank, HKMA, alerted that such businesses didn’t come under its purview. 

Hong Kong’s central bank Hong Kong Monetary Authority (HKMA) warned the public to be wary of crypto businesses marketing themselves as “banks” and urged them to conduct due diligence before engaging with such entities.

In a press release shared on 16 September, the financial regulator said that there have been incidents of crypto companies labeling themselves as crypto bank, digital asset bank, or digital trading bank.

In other cases, firms were found to be using “deposits” for the funds entrusted in them by clients. The HKMA categorically stated that all of these constituted a gross violation of the region’s banking laws.

“Under the Banking Ordinance, only licensed banks, restricted license banks and deposit-taking companies (collectively known as “authorized institutions”), which have been granted a license by the HKMA can carry out banking or deposit-taking business in Hong Kong.”

The central bank cautioned the public that money placed in such entities was not protected by the Hong Kong Deposit Protection Scheme. To avoid getting deceived, people were asked to refer to the list of authorized institutions from HKMA’s official website.

As market opens, so do risks

The advisory came amidst the rush of crypto companies to get licensed in the special administrative region. The local government liberalized its digital asset regulatory framework earlier this year.

Previously restricted to institutional investors, the new guidelines allowed trading platforms to serve the public as well. However, with the easing of restrictions, the region’s financial watchdogs had the added responsibility of ensuring compliance with the newly-rolled out guidelines.

Earlier this week, the Hong Kong Securities and Futures Commission (SFC) warned people about crypto exchange JPEX. The trading platform was reportedly operating without a license. The SFC also highlighted a list of “suspicious” features associated with the operations of JPEX.

In contrast to mainland China’s hostile policies, Hong Kong has been vying to become the global crypto hub. The regime has been aggressively pursuing methods to capitalize on Web3’s growth potential. In addition, a task force has been formed to support Web3 development in the region.