According to a Financial Times report, Hong Kong’s banking regulator is exerting pressure on major lenders such as HSBC and Standard Chartered to accept crypto exchanges as clients, despite regulatory crackdowns on the industry in the U.S. In a meeting last month, the Hong Kong Monetary Authority (HKMA) questioned these UK-based banks and the Bank of China about their reluctance to work with crypto exchanges, according to three sources familiar with the matter.
Hong Kong recently introduced a new licensing regime for crypto platforms, aiming to attract more crypto businesses to the city. Neil Tan, Chair of the FinTech Association of Hong Kong, stated that the government had taken all necessary measures to encourage banks to offer banking services to the crypto sector. The HKMA, in an April 27 letter seen by the Financial Times, stated that due diligence on potential customers should not impose an undue burden, especially for those seeking opportunities in Hong Kong.
While banks in Hong Kong do not have a ban on crypto clients, they have been hesitant to engage with exchanges due to concerns about potential prosecution if the platforms are involved in money laundering or illicit activities. The pressure from the HKMA highlights the challenges Hong Kong faces as it strives to establish itself as a global hub for the crypto industry. However, traditional banking executives have shown resistance, possibly due to a conventional mindset.
Coinbase and Binance, two of the world’s largest crypto exchanges, were recently sued by the U.S. Securities and Exchange Commission (SEC) for allegedly violating US securities laws. Nevertheless, Hong Kong has shown enthusiasm for the sector, with pro-Beijing lawmaker Johnny Ng inviting Coinbase and other exchanges to set up operations in the city following the SEC lawsuit.
Lenders in Hong Kong find themselves in a delicate position, caught between supporting the crypto industry as encouraged by the Hong Kong government and concerns about potential anti-money laundering and know-your-customer issues.
Although Hong Kong has a history as a crypto hub, its position has diminished due to Beijing’s crackdown on cryptocurrencies that began in 2017. However, Hong Kong aims to regain its status as a leading industry hub, with the government expressing its desire to create a facilitating environment for digital assets groups.
HSBC, Standard Chartered, and Bank of China play important roles in Hong Kong as issuers of the city’s currency and hold key positions within the Hong Kong Association of Banks lobby group. Standard Chartered stated that it maintains regular dialogue with regulators on various topics, while HSBC emphasized its active engagement in policies and developments within the nascent industry in Hong Kong.
