Situation of Bitcoin and other cryptocurrencies in Hong Kong concept. Stack of Bitcoin coins on Hong Kong flag.

Hong Kong urges banks to offer services to digital asset firms

Hong Kong has called on commercial banks to play nice with virtual asset service providers (VASPs) as the city-state continues to position itself as a top global digital asset destination.

In a blog post, the Hong Kong Monetary Authority (HKMA) called on banks to embrace new opportunities, including digital assets, as the state’s economy recovers from the pandemic.

HKMA has been in active discussions with commercial banks about the budding digital asset sector “and reminded them that there is no legal and regulatory requirement prohibiting banks in Hong Kong from providing banking services to virtual assets (VA) related entities.”

According to the central bank, some VASPs have approached it with complaints about the difficulty of opening a bank account in the state. They said that some banks have used anti-money laundering concerns to deny them services, while others said VASPs have higher perceived risks.

Hong Kong banks must “adhere to a ‘risk-based approach’ when conducting customer due diligence (CDD) and avoid unnecessary processes, and refrain from adopting a ‘one-size-fits-all’ approach to reject account opening applications.”

In adopting a risk-based approach, banks must judge every customer’s needs and risk profile independently, HKMA pointed out. Procedures and requirements for opening an account must be “transparent, reasonable and efficient.”

While most banking regulators globally have not prohibited banks from servicing VASPs (although some, like Nigeria, have), banks have continued to blackball the industry. Most companies have complained that they are buried in mountains of documents that take several months to review.

In a circular sent to banks on the same day, HKMA called on banks to train their staff and form dedicated teams to handle Bitcoin customers. The circular, signed by Deputy Chief Executive Arthur Yuen, urged the banks to support VASPs with “their legitimate need for bank accounts,” Bloomberg reports.

Hong Kong goes all out to woo digital asset firms

Hong Kong is friendlier than most to digital assets, with most banks in the city-state serving VASPs. ZA Bank, the state’s largest digital bank, has embarked on a campaign targeting Web3 companies and is already facilitating digital asset-to-fiat conversions for HashKey and OSL, two licensed exchanges in Hong Kong.

Even Chinese banks with operations in the state are joining the action. China’s second-largest bank, the Bank of China, has reportedly been servicing VASPs. Others like the Bank of Communications, the fifth-largest in China, and the Shanghai Pudong Development Bank have also been making inquiries into the industry. Executives at these banks have been attending Crypto events and are eager to learn about how to partner with companies in the field, reports say.

HKMA’s call came on the same day the Securities and Futures Commission (SFC) revealed it would publish digital asset guidelines in May. Speaking at an event, CEO Julia Leung told the SFC has been engaging in a consultation process that will inform the regulatory framework.

Under the new framework, retail investors will be allowed to trade tokens starting in June, she added. This would lift a ban against retail investing that has caused outrage from the digital currency community and legislators alike. SFC says it’s looking to strike a balance between market development and investor protection.

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