Hong Kong Pressures Banks To Embrace Crypto Exchanges
Hong Kong’s banking regulator, the Hong Kong Monetary Authority (HKMA), is reportedly pressuring banks, including HSBC and Standard Chartered, to onboard cryptocurrency exchanges as clients, despite increasing regulatory scrutiny of the crypto industry in other jurisdictions. The HKMA questioned these UK-based lenders and Bank of China during a meeting held last month regarding their reluctance to accept crypto exchanges as clients, according to sources familiar with the matter.
Hong Kong’s banking regulator is pressuring lenders including HSBC and Standard Chartered to take on crypto exchanges as clients. FT reported.
Banks do not have a ban on crypto clients, but they are reluctant to take on exchanges over fears they could be prosecuted if the…
— Wu Blockchain (@WuBlockchain) June 15, 2023
Hong Kong’s Crypto Enthusiasm
In an April 27 letter seen by the Financial Times, the HKMA urged banks not to create undue burdens in their due diligence processes, particularly for those crypto exchanges seeking opportunities in Hong Kong. Although there is no official ban on crypto clients, banks have been cautious due to concerns about potential legal repercussions if these platforms are involved in money laundering or other illicit activities.
The pressure from the HKMA highlights the challenges faced by Hong Kong in positioning itself as a global hub for the crypto industry. The city has experienced high-profile collapses, including FTX, which has raised doubts among traditional banks regarding the safety and regulatory compliance of crypto exchanges.
While US regulators have recently taken a stricter stance on cryptocurrencies, including lawsuits against major exchanges Binance and Coinbase for violating securities laws, Hong Kong remains enthusiastic about the sector. Pro-Beijing lawmaker Johnny Ng, also a member of China’s top political advisory body, has invited Coinbase and other crypto exchanges to establish themselves in the city following the SEC’s legal actions.
Risky Terrain of Crypto Support
Hong Kong banks now find themselves in a delicate position, caught between encouragement from local authorities to support the crypto industry and the potential risks associated with the US regulatory environment. Executives within these banks expressed concerns about being implicated in anti-money laundering or know-your-customer issues, while acknowledging the government’s policy goals.
The HKMA’s approach, seen as unusual compared to regulators elsewhere, demonstrates Hong Kong’s commitment to re-establishing itself as a crypto center after the decline resulting from Beijing’s crackdown on cryptocurrencies starting in 2017. In October of last year, the Hong Kong government announced its intention to create a facilitating environment for digital asset groups.
HSBC, Standard Chartered, and Bank of China, being key players in Hong Kong’s financial landscape, hold special positions in the city and play important roles in the Hong Kong Association of Banks. Standard Chartered stated that it engages in regular dialogue with regulators, while HSBC expressed active engagement in the policies and developments of the nascent crypto industry. Bank of China declined to comment on the matter.
