Hong Kong’s banking regulator is applying pressure on banks in the city-state, including HSBC and Standard Chartered, to take on crypto exchanges as clients, despite regulatory crackdowns in other parts of the world.
At a meeting held last month, the Hong Kong Monetary Authority (HKMA) questioned the UK-based firms and Bank of China about their reluctance to establish relationships with cryptocurrency exchanges, according to a Financial Times report that cited three people with knowledge of the matter.
HKMA advised the banks in a letter dated 27 April that they should not impose an excessive burden on potential clients during their due diligence process, especially for those establishing a presence in Hong Kong to seek regional opportunities.
Hong Kong banks have not banned clients involved in cryptocurrencies. However, the report stated that there is hesitancy to engage with exchanges due to concerns over potential prosecution if the platforms are utilized for illicit activities such as money laundering.
“HKMA encouraged the banks to not be afraid. There is resistance from a conventional banking mindset… We are seeing some resistance from senior executives at traditional banks,” a person familiar with the matter said.
This pressure serves as a reminder of the obstacles Hong Kong faces in its efforts to make itself a significant player in the global cryptocurrency industry, despite a number of shocking industry implosions, including the demise of FTX.
Hong Kong’s enthusiasm for the cryptocurrency industry has been demonstrated through its willingness to embrace the sector, despite actions by other regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), towards major players like Binance and Coinbase. Earlier this month, the SEC took legal action against these global exchanges, accusing them of violating U.S. securities laws.
Nonetheless, Hong Kong’s pro-business government has taken a favorable approach toward crypto, recognizing the potential benefits of the industry and actively seeking to establish itself as a hub for the sector.
Hong Kong recently launched a new licensing system for cryptocurrency platforms to attract more companies in the sector to the city.