The Hong Kong Monetary Authority urges prominent banks to engage with crypto exchanges to stimulate the digital assets industry.
The Hong Kong Monetary Authority (HKMA) is urging key banks, including HSBC and Standard Chartered, to onboard cryptocurrency exchanges as clients to establish the city as a global cryptocurrency industry hub. This comes despite recent regulatory crackdowns on the industry by US authorities.
Financial Times reports that in a meeting last month, the HKMA questioned the UK-based banks and Bank of China regarding their hesitation to accept crypto exchanges as clients. The regulators encouraged banks not to impose an “undue burden” on potential customers, especially those setting up offices in Hong Kong, as revealed in a letter dated April 27.
While there is no explicit ban on cryptocurrency clients, traditional banks are hesitant to engage with exchanges over concerns of potential legal implications if these platforms are implicated in money laundering or other illicit activities.
The developments illustrate the complexity of Hong Kong’s efforts to cement its position in the global crypto landscape despite several high-profile setbacks, such as the recent collapse of FTX. The resistance arises from traditional banking perspectives, with many senior bank executives showing reluctance.
The US SEC recently filed lawsuits against Binance and Coinbase, two of the world’s largest crypto exchanges, accusing them of breaching US securities laws. Despite this, Hong Kong’s commitment to the sector remains undeterred, with leading pro-Beijing lawmaker Johnny Ng inviting crypto exchanges to establish operations in the city.
As a result, banks are navigating a challenging balancing act – supporting the emerging crypto sector while being aware of the evolving international regulatory landscape.
The conflicting interests of supporting a government-backed initiative while ensuring compliance with stringent anti-money laundering and know-your-customer regulations have left banks in a quandary.
Jonathan Crompton, a Hong Kong-based partner at RPC, a law firm, highlighted the vocal expectations of the HKMA and the Securities and Futures Commission, dubbing the HKMA’s stance as “unusual” compared to the more crypto-skeptical global regulators.
Despite facing headwinds following Beijing’s crypto crackdown in 2017, Hong Kong is keen to reclaim its position as a crypto hub. The city is home to significant players in the industry, such as the now-defunct FTX exchange and Crypto.com, and introduced a new licensing regime for crypto platforms earlier this month to attract more crypto companies to the city.
Both HSBC and Standard Chartered, integral to Hong Kong as issuers of the city’s currency, affirmed their commitment to the evolving policies and developments in Hong Kong’s crypto landscape. The Bank of China declined to comment.