Hong Kong Monetary Authority (HKMA), the city’s central bank, is urging lenders such as HSBC, Standard Chartered and Bank of China to provide services to crypto exchanges, according to a Financial Times report on Thursday.
See related article: HKMA urges local banks to provide services to regulated digital asset firms
Fast facts
- The three banks were questioned by the HKMA, at a May meeting, on why they were not accepting crypto exchanges as clients, according to the Financial Times citing unnamed sources.
- Demand for banking services from Hong Kong crypto firms is on the rise, especially after the city introduced its new licensing regime for virtual asset service providers on June 1.
- According to Hong Kong’s Secretary for Financial Services and the Treasury, in March, over 80 foreign and mainland China Web3 companies expressed interest in setting up shop in Hong Kong. These included crypto exchanges, Web3 security companies, blockchain payment companies, and software firms building blockchain infrastructure.
- The May meeting was not Hong Kong regulators’ first attempt to have the local lenders open up to the crypto industry. In a letter published on April 27, HKMA deputy chief executive Arthur Yuen reminded financial institutes that “there is no legal and regulatory requirement prohibiting banks in Hong Kong from providing banking services to virtual assets related entities.”
- “We have also reminded banks to adhere to a ‘risk-based approach’ when conducting customer due diligence and avoid unnecessary processes, and refrain from adopting a “one-size-fits-all” approach to reject account opening applications,” wrote Yuen.
- After a flurry of crypto frauds and collapses in 2022, especially the implosion of FTX, financial institutions have grown more cautious about the risks in the crypto industry. U.K.-based HSBC in February reportedly blocked crypto asset purchases through its credit card, joining several U.K. lenders in imposing restrictions on the crypto sector.
- Despite the overall cautious sentiment, some financial institutions have begun to venture into the crypto industry in Hong Kong. The Bank of China was among several Chinese state-owned banks that inquired about servicing local crypto firms, according to a March report by Bloomberg, while ZA Bank, the city’s largest online-only bank, started offering cryptocurrency conversion services in April through licensed crypto exchanges.
See related article: Largest banks should fill crypto void after lender failures, says Standard Chartered’s Geoff Kendrick