Hong Kong’s digital banks urged to improve services for Web3 firms

Getting your Trinity Audio player ready...

Virtual banks in Hong Kong have been charged to improve the scope of their services to Web3 companies in the city-state following a raft of regulatory support directed into them over two years.

Virtual banks in Hong Kong have seen a sharp increase in their market share, propped up by key decisions by the banking regulator, according to a South China Morning Post (SCMP) report. Despite the rise of digital banks in the city-state, industry players claim that Web3 service providers do not have seamless access to their services.

In an interview, Hong Kong Legislative Council member Johnny Ng Kit-Chong noted that virtual banks must work to expand their services to virtual currency service providers in Hong Kong. He opined that access to streamline banking services in Hong Kong will attract global Web3 firms, contributing to achieving its digitization ambitions.

“The government has made efforts to develop virtual banks and upgrade services in the past few years,” said Kit-Chong. “It’s an important time for the city to contribute more to the Web 3.0 sector in the next two years.”

Aware of the importance of virtual banks to the financial ecosystem, the Hong Kong Monetary Authority (HKMA) halted the issuance of new banking licenses to new players, pegging the number of licensed digital banks at eight. Industry sources say the move is designed to allow the initial eight banks the time and space to blossom into regional powerhouses.

The HKMA sees virtual banks as a key piece in the puzzle to attract Web3 firms following the decision of traditional financial institutions to keep their guard up with digital asset firms. While several digital banks are embracing Web3 firms, surveyed respondents point to several bottlenecks affecting access to banking services.

Opening bank accounts appears challenging, with several Hong Kong-based digital banks requiring Web3 company executives to be domiciled in the region. Virtual banks that have waived away this requirement typically mandate digital asset companies to make large fixed-term deposits.

“Going forward, with a focus on financial inclusion, we will further expand our innovative offerings, especially in emerging sectors, to deliver an enriched digital banking experience,” said Mox Bank CEO Barbaros Uygun.

Hong Kong goes all in on Web3

Following the departure of several digital asset exchanges, Hong Kong is doubling its digital currency efforts to lure in key industry players. The country has rolled out enabling legislation for digital currency exchange-traded funds while providing regulatory clarity for stablecoins.

Experiments with a central bank digital currency (CBDC) are proceeding without a hitch following the injection of capital by the HKMA to support Web3 firms. Despite the hurried approach, Hong Kong is putting up guardrails to protect consumers from black swan events with strict regulations.

Watch: B2029 Meetup highlights the fusion of AI and Web3