The Hong Kong Monetary Authority (HKMA) recently released a circular urging banks to support legitimate cryptocurrency businesses. Dated April 27, the document emphasizes the necessity for banks to provide access to financial services for these firms while maintaining a risk-based approach to anti-money laundering initiatives. Importantly, the HKMA insists on treating all banking customers equitably.
Chinese State-owned Banks Eye Hong Kong’s Crypto Sector
This development comes from reports that Chinese state-owned banks, such as the Bank of Communications, the Bank of China, and the Shanghai Pudong Development Bank, are exploring opportunities to offer banking services to Hong Kong’s growing cryptocurrency industry.
Hong Kong’s largest digital bank, ZA Bank, recently announced its plans to facilitate transfers and conversions between cryptocurrencies and fiat currencies. The bank has already secured partnerships with digital asset exchanges HashKey and OSL.
Alongside Singapore, Hong Kong has established itself as one of Asia’s foremost cryptocurrency hubs. Consequently, the city’s regulators have taken proactive steps to oversee the expanding crypto and Web3 sectors.
Supporting Licensed Virtual Asset Service Providers
In their latest guidelines, the HKMA notes that financial institutions “should endeavor to support virtual asset service providers (VASPs)” licensed by the Securities and Futures Commission (SFC). The document’s release precedes the anticipated launch of the city’s VASP license in May.
Under the new framework, cryptocurrency exchanges and other crypto-related firms must register with the SFC. Notably, these rules will apply to both decentralized and centralized exchanges.
In its most recent guidance, the HKMA underscores the importance of “approval in principle” before the new regulations take effect. Banks should not wait for businesses to receive their VASP licenses. Instead, the regulator advises treating approved firms as if the licensing regime is already operational.
Hong Kong: A Crypto Investment Hotspot
With a robust regulatory framework and bank support, Hong Kong is rapidly becoming a center for crypto investment. For instance, ProDigital Futures, a Hong Kong-based investment firm, revealed plans to launch a $100 million crypto fund in March.
Hong Kong hosted the World of Web3 (WOW) Summit this week, featuring a competition where over 150 startups pitched their ideas to various investors, venture capitalists, and accelerators. Participants included Cyberport, Newman Capital, and Blockchain Founders Club, further highlighting the city’s thriving crypto ecosystem.
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