Hong Kong central bank pushing major banks to support crypto firms

June 19, 2023

By Tsering Namgyal

Major Hong Kong banks such as HSBC, Standard Chartered and Bank of China have been pressured by the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, to take on more cryptocurrency firms, the Financial Times reported on Thursday.

The paper cited sources in those banks and a letter the HKMA sent out to the banks in April, urging them to be more receptive to licensed crypto exchanges.

In response to the report, the HKMA told Reuters that it had indeed sent out a note to the banks on April 27 in which it said that the diligence on potential customers should not “create undue burden”, especially “for those setting up an office in Hong Kong.”

Standard Chartered said “it was in regular dialogue with regulators on different subjects”, while HSBC said that “it remained engaged on policies and developments” in Hong Kong’s budding crypto industry, according to Reuters.

Opening up bank accounts is seen as one of the major hurdles for crypto exchanges while setting up offices in Hong Kong as many banks do not want to sign them up due to perceived high risk associated with exchanges.

Hong Kong is currently pursuing an ambitious bid to regain its lost glory as an international crypto and Web3 hub. Many major crypto firms were born here including Crypto.com, now-bankrupt Sam Bankman-Fried-led FTX, and BitMEX, one of the world’s leading derivatives exchanges.

FTX, the world’s second largest crypto exchange before its implosion last year, left for Bahamas, while Crypto.com, has since moved to Singapore. Partly, the reason behind the exodus was the major crypto crackdown in neighboring China over the past few years that has rendered crypto trading all but illegal in the country.

Despite the turbulence in the global crypto markets especially in the aftermath of the FTX bankruptcy, Hong Kong is bent on promoting itself as a global financial center for cryptocurrencies.

Earlier this month, the city’s securities regulator the Securities and Futures Commission (SFC) rolled out a licensing regime for crypto exchanges which would allow retail investors to trade in cryptocurrencies. The HKMA also said that it will finalize a regulatory framework for stablecoins by the end of 2024. It has just wrapped up a consultation on the discussion paper on cryptocurrencies pegged to traditional assets.

Hong Kong’s embrace of the crypto firms comes at a time when the US is clamping down on cryptocurrencies. Recently, the US Securities and Exchange Commission (SEC) sued Binance.US and Coinbase, accusing them of violating securities laws.

One Hong Kong lawmaker, Jonny Ng, also a member of China’s top political advisory body, has even gone as far as to invite Coinbase to set up shop in the city following the SEC lawsuit.

About the author

Tsering Namgyal is the chief content officer of NFTMetta.com.

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