Hong Kong urges banks to embrace crypto exchanges

Share This Post

 3 w, tags: hong kong crypto - images.unsplash.com
3 w – images.unsplash.com

The Hong Kong Monetary Authority (HKMA), the city’s banking regulator, is actively urging major financial institutions such as HSBC, Standard Chartered and Bank of China to consider accepting cryptocurrency exchanges as clients.

Amid the skepticism towards cryptocurrencies, Hong Kong has been actively pursuing various initiatives to attract crypto firms and promote the adoption of digital currencies.

Its proactive efforts have revealed the ambition to become a global crypto hub. These include actively courting crypto firms, attracting mainland Chinese enterprises and even announcing plans to test the feasibility of a digital currency in its mortgage market.

Hong Kong also plans to legalize Bitcoin buying, selling and trading for all residents starting this month.

In a letter on April 27, the HKMA advised banks to facilitate the onboarding process for cryptocurrency companies — referred to as “virtual asset service providers” — and ensure they have access to banking services without facing unnecessary obstacles during due diligence.

The authority emphasized the importance of providing banking services to these companies, particularly those looking to establish a presence in Hong Kong to explore regional opportunities.

This stands in contrast to the actions taken by regulators in other parts of the world. In fact, major cryptocurrency exchanges such as Binance and Coinbase have faced legal challenges from the U.S. Securities and Exchange Commission for alleged violations of securities laws.

Responding to these developments, Hong Kong lawmaker Johnny Ng, who also serves as a member of China’s top political advisory body, extended a warm invitation to Coinbase and other cryptocurrency exchanges to establish themselves in the city.

On Twitter, Ng expressed his willingness to assist and support their official trading platforms and future growth plans.

“I hereby offer an invitation to welcome all global virtual asset trading operators including @coinbase to come to HK for application of official trading platforms and further development plans,” he wrote. “Please feel free to approach me and I am happy to provide any assistance.”

Hong Kong banks respond with caution

Despite the prevailing enthusiasm for cryptocurrencies, the finance sector in Hong Kong has not fully embraced this trend. While there is no ban on crypto exchanges, the city’s finance sector has shown hesitancy in embracing cryptocurrency clients.

During a meeting last month, the HKMA questioned HSBC, Standard Chartered and Bank of China about their reluctance to accept cryptocurrency exchanges as clients.

The banks, among the largest in the world, are concerned about potential legal consequences if these platforms are used for illicit activities like money laundering, according to HKMA.

The resistance especially prevalent among senior executives at traditional banks, stemming from a more conventional banking mindset. “HKMA encouraged the banks to not be afraid,” said a person familiar with the discussions.

In response, an HKMA spokesperson emphasized that banks in Hong Kong should strive to meet the legitimate business needs of licensed Virtual Asset Service Providers and provide the necessary banking services.

“The HKMA has consistently communicated the importance of banks following the risk-based approach to managing the risks of individual customers,” the spokesperson said.

The spokesperson also mentioned that the HKMA had issued a circular in April to provide additional guidance to banks on offering banking services to corporate customers, including crypto firms.

Globally, banks and payment processors have faced challenges in their relationships with crypto companies. In various instances, payment processors severed ties with local exchanges, such as in India, while reports have recently surfaced about Australian banks blocking payments to crypto exchanges.

“We have active dialogues with virtual asset players to exchange views on a range of topics, including but not limited to account opening,” an HSBC spokesperson told CoinDesk. “We remain very engaged on policies and developments of this nascent industry in Hong Kong.”

Standard Chartered also confirmed its regular communication with regulators on different subjects.

The evolving regulatory landscape, particularly in the U.S., adds to the banks’ caution. They are mindful of striking a balance between supporting the crypto industry’s growth and avoiding potential risks associated with money laundering and other issues.

Hong Kong’s crypto market to surge to $243.90 million

According to the latest data from Statista, Hong Kong’s cryptocurrency market is set to flourish, with projected revenues of $142.5 million in 2023. The market is expected to maintain a steady annual growth rate of 14.38 percent, leading to an estimated US$243.90 million by 2027.

The positive outlook for Hong Kong’s crypto industry can be attributed to the city’s evolving attitude, policies and regulatory framework surrounding digital assets. These changes have instilled confidence in the local market, prompting numerous prominent enterprises to seek licenses and actively participate in crypto.

One noteworthy example is the Hong Kong-based subsidiary of Huobi, a leading global trading platform. Huobi HK has recently announced its to introduce spot trading and managed services tailored to cater to the needs of both local businesses and retail clients.

Hong Kong’s Securities and Futures Commission (SFC) began accepting applications for licenses from crypto trading platforms on June 1.

This move sparked optimism within the local crypto industry, hoping that regulators would further expand the range of legitimate activities involving virtual assets, including derivatives and stablecoins.

If these developments come to fruition, it could profoundly affect the crypto market. Institutional interest in the sector may increase, as regulated virtual asset activities would provide a more secure environment for trading.

The availability of derivatives and stablecoins could pave the way for partnerships between traditional financial institutions and licensed exchanges. Such collaborations could enable services like fiat currency conversions and promote a more seamless integration between crypto and traditional finance.

Gaven Cheong, head of investment funds at Tiang & Partners, the PwC legal network firm in Hong Kong, predicts that the increased interest in the crypto market over the next year will lead to a broader range of tokens becoming accessible to retail investors.

Meanwhile, Esme Pau, head of internet and digital asset research for Hong Kong and China at Macquarie Capital, commended the regulators for establishing a framework for virtual assets with appropriate safeguards in place.

Pau highlights the importance of maintaining regulatory standards and optimizing the value chain within the virtual assets ecosystem in the future.


Related Posts

Immutable, SuperDuper collaborate to launch Overlord-based Web3 game

Immutable and SuperDuper have partnered to create a game...

Rated-R mafia’s SinVerse metaverse unveils beta version to public

Since its debut at the 2021 GITEX conference, the...

Valve cracks down on CS:GO traders, bans millions of dollars worth of skins

On Wednesday, Valve had community-banned over 40 Counter-Strike: Global...

ORB brings Web3 integration to gaming on Tezos blockchain

ORB is a platform on Tezos blockchain for game...

Ubisoft unveils first blockchain game in collaboration with Oasys

In a significant step toward becoming a leader in...

Exploring the potentials of metaverse and crypto convergence

The metaverse has gained rising popularity recently. It is...