Hong Kong Struggles to Become a Crypto Asset Hub as Crypto Firms Find It Hard to Open Bank Accounts

Despite the Hong Kong government’s efforts to make the city a crypto asset hub, many cryptocurrency firms are still struggling to open local bank accounts. Even licensed crypto firms are finding it difficult to do so, especially after the closure of Silvergate Bank and Signature Bank, two of the world’s biggest crypto-friendly banks.

According to SCMP, banks in the city are not keen to serve them, and as a result, Hong Kong’s cryptocurrency-related companies are scrambling to find ideal banking partners around the world and in their home city.

Adrian Wang, the founder and CEO of digital asset management firm Metalpha, stated that quite a few crypto funds and firms are seeking to find local Hong Kong banking partners to do business with to prevent the SVB-style crisis from happening to them again. While digital asset regulations in the city have become friendly overall, Hong Kong banks still have stringent requirements when dealing with crypto businesses.

Current regulations for crypto assets in Hong Kong do not restrict local banks and financial institutions from working with businesses engaged in crypto-related activities. However, the Hong Kong Monetary Authority requires banks to perform due diligence and ongoing monitoring of these clients. For instance, if the customer is a crypto asset service provider (VASP), the bank will need to see if the VASP is licensed and assess its Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) controls.

As many VASPs are not currently licensed in Hong Kong nor registered for AML/CTF requirements, this poses a significant hurdle for many VASPs to open a bank account in Hong Kong. But even licensed crypto firms in Hong Kong face challenges, as they can also find it difficult to open bank accounts and often have very limited options.

Many Hong Kong firms are now hoping that local banks could expand their services and develop solutions fit for crypto companies, now that the government has set its mind to attract such businesses back to the city after a previous exodus. In October last year, Hong Kong unveiled a range of policies aimed at boosting its crypto asset sector and becoming a hub and proposed rules on legalizing retail crypto trading.

However, some industry players think such measures are not enough. There are already multiple ways for retail customers to buy crypto, and the real question is that there’s no proper, regulated, and convenient fiat on-ramp and off-ramp infrastructure in Hong Kong.

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