Banking Obstacles Plague Hong Kong’s Crypto Firms Hub Aspirations

Hong Kong’s cryptocurrency firms are struggling to open local bank accounts following the closure of two of the world’s largest crypto-friendly banks, Silvergate Bank and Signature Bank. Hong Kong is aiming to become a virtual asset hub, but banks in the city remain reluctant to serve cryptocurrency businesses. The closure of Silvergate, Silicon Valley Bank, and Signature Bank, all counted among the US’s most crypto-friendly financial institutions, has resulted in Hong Kong’s cryptocurrency-related companies scrambling to find suitable banking partners around the world and in their home city.

Challenges of Banking for Virtual Asset Firms

Current regulations for virtual assets in Hong Kong do not prohibit local banks and financial institutions from working with businesses engaged in crypto-related activities. However, the Hong Kong Monetary Authority requires banks to perform due diligence and ongoing monitoring of these clients, making it challenging for many virtual asset service providers (VASPs) to open a bank account. Banks must also check if the VASP is licensed and assess their Anti-Money Laundering and Counter-Financing of Terrorism controls.

Hong Kong’s licensed virtual asset firms also face challenges opening bank accounts, with limited options available. As a result, firms are seeking alternative banking options in Switzerland, the UK, and the United Arab Emirates, where some crypto-friendly banks remain. Hong Kong firms are now hoping that local banks will expand their services and develop solutions fit for crypto companies.


Becoming a True Virtual Asset Hub

In October 2022, Hong Kong introduced policies aimed at boosting its virtual asset sector and becoming a hub, proposing rules to legalize retail crypto trading. However, some industry players believe that such measures are insufficient. They argue that there is no proper, regulated, and convenient fiat on-ramp and off-ramp infrastructure in Hong Kong, which must be in place for Hong Kong to become a true Web3 hub.

Private sectors, including the banking sector, must share the same vision and move in the same direction as the government to realize Hong Kong’s aim to become a virtual asset hub. Hong Kong firms and regulators will need to work together to overcome the challenges posed by banks’ reluctance to serve cryptocurrency businesses and to develop a robust fiat on-ramp and off-ramp infrastructure to support the city’s virtual asset sector.