Hong Kong wants to become the global digital asset hub, and it’s sparing no effort in its push. A new report reveals that the city-state’s banking regulator has been pushing the three largest banks to take on digital asset clients.
The Hong Kong Monetary Authority (HKMA) questioned HSBC (NASDAQ: HSBC) and Standard Chartered (NASDAQ: SCBFF) on why they were not taking on more digital asset clients. The HKMA is also pressing the Bank of China (NASDAQ: BACHF) to take on more virtual asset service providers (VASPs).
The three banks are the most significant in Hong Kong. Aside from their market share, they are the only commercial banks with a license from the regulator to issue banknotes.
HKMA’s push is the latest effort by Hong Kong to attract VASPs. Globally, the sector continues to suffer a lack of banking services, with most major banks reluctant to open accounts for digital asset firms. Hong Kong is a step ahead, but regulators believe it must improve.
Banks must not “create undue burden” for VASPs that are exploring new opportunities in the state, HKMA told banks in a letter.
And yet, despite the push by the government and the central bank, commercial banks are reluctant to take on digital asset clients.
“There is resistance from a conventional banking mindset . . . we are seeing some resistance from senior executives at traditional banks,” says a source with knowledge on the matter.
He claims that banks are afraid of being involved with businesses that engage in money laundering or other financial crimes. The collapse of major VASPs last year, from FTX and Celsius to Terra and BlockFi, has made banks wary. The recent legal actions by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase have also played a part.
The three major banks have yet to make any official stand on digital assets. Responding to the report, a spokesperson for Standard Chartered said the bank has “regular dialogue” with regulators, without providing any details.
“We have active dialogues with virtual asset players to exchange views on a range of topics, including but not limited to account opening. We remain very engaged on policies and developments of this nascent industry in Hong Kong,” an HSBC spokesperson said.
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