28/04/23

HONG KONG: Jurisdiction seeks to help crypto firms escape their exile from the banking sector.

As published on businesstimes.com.sg, Friday 28 April, 2023.

Hong Kong urged banks to provide services to licenced virtual-asset firms, part of the city’s push to become a crypto hub and a stance that contrasts with a crackdown on the digital-asset sector in the US.

Banks should support regulated virtual-asset businesses with “their legitimate need for bank accounts” in the city, the Hong Kong Monetary Authority said in a circular late on Thursday (Apr 27) signed by deputy chief executive Arthur Yuen.

The statement also enjoined lenders to train staff and form dedicated teams to support the digital-asset sector while avoiding a “wholesale de-risking approach” that turns away new industries or certain nationalities.

A major challenge for crypto companies globally is that banks are increasingly sceptical about the industry following a market crash and blowups like the FTX exchange. The collapse of crypto friendly lenders Signature Bank and Silvergate Capital in this year’s US banking crisis was a particularly big blow, forcing the sector to scour the globe for alternative payment rails.

The prolonged turmoil led the US to turn up the regulatory heat on the crypto industry, including warnings about liquidity risks stemming from it. A growing number of virtual-asset businesses have exited the world’s largest economy or could consider doing so, while others are pursuing non-US expansion.

In contrast, Hong Kong plans to let retail investors trade major tokens like Bitcoin and Ether in a new licencing regime for crypto platforms due Jun 1.

The Hong Kong arms of Bank of Communications, Bank of China and Shanghai Pudong Development Bank have either started offering banking services to local crypto firms or have made inquiries to the field, according to people with knowledge of the matter.

Hong Kong’s biggest virtual bank, ZA Bank, plans to offer token-to-fiat currency conversions over licenced exchanges.

The Hong Kong Monetary Authority, the city’s de facto central bank, and the Securities and Futures Commission are co-hosting a round-table on Friday for lenders and virtual-asset platforms to exchange views on account opening and other useful information, Yuen said separately.