Hong Kong’s banking regulator is pressuring significant lenders, including HSBC and Standard Chartered. They urge a bold move to embrace crypto exchanges as clients, diverging from recent US regulatory actions.
This signals a progressive stance in Hong Kong’s financial sector. Amid setbacks and collapses, the city aims to become a global crypto hub, showcasing its development and resilience.
In a meeting last month, the Hong Kong Monetary Authority (HKMA) challenged UK-based lenders and the Bank of China. The HKMA’s letter advises banks to avoid burdening customers during due diligence.
It mainly emphasizes individuals or businesses exploring opportunities in Hong Kong. Efficient processes should be in place for establishing offices and exploring local opportunities.
Hong Kong banks don’t ban crypto clients but hesitate due to legal concerns, avoiding engagement with exchanges. Financial institutions fear being held liable if illicit activities, such as money laundering, exploit the platforms.
The regulator’s pressure serves as a reminder of Hong Kong’s challenges as it endeavors to establish itself as a leading center for the crypto industry. FTX collapse aside, HKMA urges banks to embrace the evolving landscape, leaving behind conventional mindsets and adapting.
Interestingly, the recent actions of US regulators present a contrasting perspective. The US (SEC) initiated legal action against Binance and Coinbase, alleging their violation of securities laws.
Hong Kong lawmaker Johnny Ng invited Coinbase and crypto exchanges despite SEC’s efforts, showing support for the industry. Banks in Hong Kong find themselves walking a tightrope as they receive encouragement to support the crypto industry and exchanges.
However, they remain wary owing to the current crisis in the United States. The government’s industrial policies are causing executives within these financial institutions to be torn between supporting them. They are also concerned about safeguarding money and know-your-customer issues.
Hong Kong’s Crypto Ambitions Amidst Regulatory Divergence
According to Jonathan Crompton, a Hong Kong-based lawyer at RPC, the HKMA and the Securities and Futures Commission (SFC) have voiced firm hopes. Both regulatory bodies have communicated these expectations. Crompton further highlights that the HKMA’s position is unique.
Regulators in other parts of the world tend to exhibit more skepticism toward cryptocurrencies. Hong Kong, which has historically been a crypto center, saw a decline in its position after Beijing’s crackdown on cryptocurrencies in 2017.
However, the city intends to regain its status as a leading industry hub. In October, the Hong Kong government committed to creating a facilitating environment for digital asset groups. HSBC, Standard Chartered, and Bank of China are significant in Hong Kong as the city’s currency issuers.
They also hold key positions within the Hong Kong Association of Banks lobby group. Standard Chartered states that it regularly engages with regulators on various subjects.
At the same time, HSBC expresses a high level of engagement in the policies and developments of the nascent industry in Hong Kong. The Bank of China did not respond. Hong Kong has recently implemented a new licensing regime for crypto platforms to attract more crypto groups to the city.
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Neil Tan, the chair of the FinTech Association of Hong Kong, affirms that the government has significantly encouraged banks. They are now offering banking services to the crypto sector.