3 - 4 minute read
The Hong Kong Monetary Authority (HKMA) has called on banks to provide their services to cryptocurrency firms, highlighting the growing acceptance of digital assets in traditional finance. The city’s central banking institution and regulator issued a circular on April 27 related to the access of corporate customers to banking services, urging institutions to take a forward-looking approach to new sectors like the crypto market.
According to the circular, authorized institutions (AI) in Hong Kong are required to adopt a risk-based approach in anti-money laundering efforts and to help virtual asset service providers (VASPs) in getting banking services. The regulator has specifically required the institutions to support VASPs licensed and regulated by the Securities and Futures Commission on their legitimate need for bank accounts in Hong Kong.
The HKMA stressed that customer due diligence (CDD) measures should be proportionate to the risk level of customers in order not to create an undue burden on the customers. For example, if a VASP has applied for a license under Hong Kong’s new crypto regulatory regime and only wants to open an account for its own corporate use, AIs should provide the service even before the approval.
“AIs should endeavor to support VASPs licensed and regulated by the Securities and Futures Commission on their legitimate need for bank accounts in Hong Kong.”
The news comes as Hong Kong prepares to adopt new crypto regulations that will officially allow retail investors to buy and sell cryptocurrencies like Bitcoin and Ether. The new crypto licensing regime is scheduled to be enforced on June 1, 2023.
This move towards greater acceptance of digital assets in traditional finance is in stark contrast to the approach taken by some major global jurisdictions like the United States, which has been somewhat pushing the industry away. A number of major American exchanges, including Coinbase, have considered leaving the U.S. due to the government’s unwillingness to come up with clear regulations on crypto.
According to a report by Andreessen Horowitz, the share of global crypto developers based in the U.S. declined by 26% from 2018 to 2022. This shift in crypto development away from the U.S. highlights the need for clear and consistent regulations in the industry, in order to foster innovation and growth.
The Bottom Line
The HKMA’s call on banks to provide services to cryptocurrency firms is a positive development for the industry and highlights the growing acceptance of digital assets in traditional finance. However, traders should still exercise caution and carefully evaluate the risks and opportunities associated with investing in cryptocurrencies.
