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- The Hong Kong Monetary Authority has issued guidelines for banks.
- Now banks are required to offer services to Virtual Asset Service Providers (VASPs) licensed by the Securities and Futures Commission (SFC).
- HKMA notified two new guidelines and one ‘good practice’ regarding VASPs.
A light rap on the fist for Hong Kong’s Banks
On April 27th, the Hong Kong Monetary Authority or HKMA asked authorized institutions (AIs) not to conduct additional due diligence measures for SFC licensed VASPs. The regulator has politely asked banks to train their staff to deal with VASPs and not to offer at least simple banking services to foreign companies regardless of industry.
Additional CDD measures are required only for those VASPs that are providing correspondent services to overseas VASPs, wrote Deputy Chief Executive Arthur Yen.
“AIs should endeavor to support virtual asset service providers (VASPs) licensed and regulated by the Securities and Futures Commission (SFC) on their legitimate need for bank accounts in Hong Kong.”
The regulatory authority is responsible for regulating Hong Kong’s financial institutions and setting standards. In the notice, it noted that despite its regulatory efforts, corporates complained of poor services from AIs.
HKMA noted that a VASP was asked to ‘furnish an independent assessment report on the VASP’s systems and controls with respect to Anti Money Laundering/ Counter Financing of Terrorism (AML/CFT)’ in order to open a bank account with an AI. The regulator wrote that making such reports is ‘costly and time consuming.’ It said that the ‘information collected should be reasonable.’
Essentially, the regulator wants banks in Hong Kong to not target crypto exchanges or any other type of VASPs that apply to open bank accounts. It exhorted financial institutions to at least consider basic services like opening of simple bank accounts to VASPs (those that have SFC license) that are just starting out in Hong Kong.
The regulator expects banks to provide services to corporates based on a risk based approach (RBA) and not exclude companies from specific industries. It also expects banks to give due regard to the “approval-in-principle” given to institutions that have applied for a SFC license for Virtual Assets or VASPs.
What is the new Licensing Regime in Hong Kong?
The new licensing regime (Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022) requires a VASP or a cryptocurrency exchange to get a VASP License from the SFC (under section 53ZRD of the bill).. Operating without that license will be an offense once the regime comes into effect.
The bill was passed in December last year. Initially, the new licensing regime was to become effective from March 1st, 2023. However, the date was later postponed to June 1st, 2023 after receiving feedback from the Hong Kong Association of Banks and regulators.
An exchange that facilitates the trade of virtual assets (cryptographically-secured value) and directly handles money from transacting parties is a VASP and must obtain a license from the SFC to operate, failing which would be an offense. However, in case the
Per the new regime, to obtain an SFC license to operate as a VASP, a crypto exchange must satisfy the SFC’s Fit and Proper Guidelines. These guidelines require the appointment of responsible officers to oversee the operation of the VASP and compliance with AML and CFT.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
