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- 1 The crypto industry needs support from the traditional finance sector, and the Hong Kong regulator is looking to ease it.
- 2 HSBC, Standards Chartered, and the Bank of China hold crucial positions in the city’s banking sector.
Hong Kong is making deliberate efforts to anticipate becoming a crypto hub. In addition to the number of efforts towards the goal, the country’s financial regulator HKMA has been reported to ensure gathering support for cryptocurrency firms.
HKMA is seeking support from players in the banking sector, including HSBC and Standard Chartered, to provide crypto exchanges with required financial assistance.
Financial Times reported, citing three people with information on the subject, that the Hong Kong Monetary Authority (HKMA) is pressurizing banking institutions like HSBC and Standard Chartered to include cryptocurrency exchanges in their clientele.
HKMA asked the lenders and the Bank of China for their reasons for not accepting crypto exchanges as clients, the report added. Though the crypto and decentralized finance (DeFi) industry is supposed to set up a parallel financial system, it is still dependent on traditional finance.
Banking institutions have not put a ban on crypto firms to be accepted as clients. However, the fear of being questioned in case of their involvement with their crypto clients in illicit activities like money laundering, etc., is making them hesitant.
Support from the Hong Kong Regulator
According to the report, one of the sources stated Hong Kong’s financial regulator encouraged the banks to be afraid of nothing. Despite the support and assurance, the “conventional banking mindset” has resistance, and it is strong at the senior executives level at traditional banking institutions.
The UK banking giants, HSBC and Standard Chartered, and China’s leading bank, Bank of China, hold a strong position in the financial system of Hong Kong. The Bank of China is a chair of the Hong Kong Association of Banks, and the other two—HSBC and Standard Chartered—are vice-chairs. These entities are responsible for the issuance of the city’s currency.
HSBC is said to engage in “policies and developments” around the crypto industry in Hong Kong, and, Standard Chartered said it had been in “regular dialogue” with the regulators.
Contrasting Stance towards Crypto
Hong Kong’s aspirations for crypto are in stark contrast with China and the United States. Crypto activities are banned in the former, while the regulators in the latter have a strict attitude toward the burgeoning asset class.
The crypto industry has witnessed a devastating fall of companies and projects, especially since last year. The fall of Terra (LUNA) network, lender Celsius and Voyager, crypto hedge fund Three Arrows Capital (3AC), and one of the biggest blows with FTX filing for bankruptcy took place in 2022 alone.
The instances made the financial institutions skeptic of crypto and ramped up scrutiny and enforcement actions, especially in the US. Recent actions of the Securities and Exchange Commission (SEC) were looked upon as a crackdown on the emerging financial system. The financial regulator charged major cryptocurrencies like Coinbase with selling unregistered securities.
Still, such actions against the crypto industry have failed to deter Hong Kong from its aspirations. Hong Kong Legislative Council Member, Johnny Ng Kit-chong, reportedly invited Coinbase and other cryptocurrency exchange firms to apply for licenses and operate in the region.
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.
