HKMA Urges Banks To Provide Services To Licensed Crypto Firms!

Credit: The Standard

01 May 2023

This is in contrast to the U.S.’s crackdown on the digital-asset sector. The Hong Kong Monetary Authority issued a circular on Thursday, signed by Deputy Chief Executive Arthur Yuen, stating that banks should form dedicated teams to support the digital-asset sector while avoiding a wholesale de-risking approach that turns away new industries or certain nationalities.

One of the major challenges for crypto companies globally is that banks are becoming increasingly skeptical about the industry following market crashes and blowups. The US banking crisis this year, which saw the collapse of crypto-friendly lenders Signature Bank and Silvergate Capital Corp., was a particularly big blow. This has forced the sector to seek alternative payment rails globally.

In contrast, Hong Kong plans to let retail investors trade major tokens like Bitcoin and Ether in a new licensing regime for crypto platforms, which is due to be implemented on 1st June. The Hong Kong arms of Bank of Communications Co., Bank of China Ltd., and Shanghai Pudong Development Bank have either started offering banking services to local crypto firms or have made inquiries to the field. Hong Kong’s biggest virtual bank, ZA Bank Ltd., plans to offer token-to-fiat currency conversions over licensed exchanges.

The Hong Kong Monetary Authority and the Securities and Futures Commission are co-hosting a round-table for lenders and virtual-asset platforms to exchange views on account opening and other useful information. The prolonged turmoil in the industry has led the US to turn up the regulatory heat on the crypto industry, including warnings about liquidity risks stemming from it. A growing number of virtual-asset businesses have exited the world’s largest economy or could consider doing so, while others are pursuing non-US expansion.