Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, has urged banks to support licensed virtual asset service providers for the process of setting up their bank accounts in the city.
“To cope with the fast-moving technology landscape, AIs [or licensed banks] should take a forward-looking approach and seek to strengthen their understanding of new and developing sectors as well as related market developments, which will help AIs differentiate individual customers with different risk characteristics,” HKMA deputy chief executive Arthur Yuen said in a circular issued on Thursday.
“In particular, AIs should endeavour to support virtual asset service providers (VASPs) licenced and regulated by the Securities and Futures Commission (SFC) on their legitimate need for bank accounts in Hong Kong,” Yuen added.
Currently, virtual asset service providers (VASPs) that are licenced to operate in Hong Kong are required to obtain Type 1 and Type 7 licences. Starting from June 1, all VASPs, whether existing or new, will not only be required to hold the two licences mentioned above but also the VASP licence under the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022.
The new licencing regime enables crypto firms to offer trading services to retail investors, which marks a significant shift of attitude by the Hong Kong government, while countries like the US have been clamping down on the crypto industry through a series of enforcement actions.
However, banking remains a major pain point. For crypto-focused firms, it could take up to three months to open a corporate bank account, whereas non-crypto firms only take a month. This has resulted in crypto firms tapping Indian and Japanese banks, or even virtual banks like ZA Bank, Bloomberg reported on March 27.
For companies that process transactions in crypto tokens, there are no traditional banks in the city that offer token and fiat currency transfer services — leaving firms to resort to overseas crypto-friendly banks, per the report.
HKMA has directed banks to facilitate account opening for those crypto firms that are in the due diligence process and have received in-principle approval from the relevant authority, even if they are yet to commence their licenced operations.