Hong Kong steps up regulation of crypto companies

Once known for its lenient regulation of the crypto world, Hong Kong is now revising its strategy, adopting a tougher stance towards companies operating without a license and stepping up its outreach, a move that may displease some industry players.

HKMA adopts tough approach to unregulated crypto companies

The HKMA, Hong Kong Monetary Authority, alerted the public about crypto companies abusing banking terminology. According to this financial regulator, it is misleading for these companies to present themselves as banks and call their products “deposits”.

According to HKMA, many of these companies, sometimes referred to as “crypto banks” or “digital asset banks”, claim to offer bank-like services, thereby misleading the public.

However, in accordance with Hong Kong banking laws, only licensed entities may use such terms or offer deposit services.

The position of HKMA is unequivocal: crypto companies falsely presenting themselves as banks, without having the proper authorizations, are not only breaking the law, they are also escaping the supervision of the monetary authority. Consequently, the funds they manage do not enjoy the level of protection offered by traditional banking institutions.

Hong Kong steps up surveillance of crypto companies

Hong Kong is not limiting itself to a single regulatory effort. The SFC, another of the territory’s regulatory authorities, recently cracked down on the crypto exchange platform, JPEX. The latter, accused of offering its services without the appropriate license in Hong Kong, suffered notable consequences.

Following a warning from SFC, several JPEX employees gave up, and the platform drastically increased its withdrawal fees while modifying its commercial practices.

This is not the only recent incident. Indeed, social media influencer, Joseph Lam Chok, was arrested on Monday in Hong Kong, accused of promoting an exchange in Dubai.

Despite a recent tightening of its regulations, Hong Kong remains one of the destinations of choice thanks to generous legislation, prompting crypto players to consider a setting up there.