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Hong Kong banks are worried about regulatory repercussions for their crypto clients if money laundering is discovered. According to HKMA’s press release on June 15th, banks are urged to accept crypto exchanges as customers.
It should be noted that Hong Kong banks do not have a restriction preventing them from accepting cryptocurrency clients; however, they are reluctant to attract regulatory scrutiny if their clients engage in criminal activity. The Hong Kong Monetary Authority (HKMA) encourages banks to accept crypto experts as clients. FTX’s collapse and the alleged mismanagement of client funds have prompted banks to become increasingly cautious.
The HKMA is attempting to encourage banks to accept crypto clients to further its goal of making Hong Kong a global hub for the crypto industry. According to the regulator, banks should not place an undue burden on crypto businesses seeking to establish operations in Hong Kong by imposing their due diligence procedures. Despite the influx of fintech companies, Niel Tan, the chair of the FinTech Association of Hong Kong, said: “Everything has been done on the government’s side to encourage these banks to facilitate the opening of banking services to the sector.”
The Hong Kong government introduced a revised licensing regime on June 1st to ensure clear regulations for crypto exchanges that provide services to retail investors. Over the next 18 months, the HKMA intends to introduce comprehensive stablecoin regulations.
As a result of increased regulatory scrutiny, the US exchanges have begun looking for alternative crypto-friendly locations, with Hong Kong competing for business. Coinbase has been invited to open an office in Hong Kong by pro-Beijing lawmaker Johnny Ng following the SEC’s lawsuit.
During last month’s meeting, the HKMA expressed concerns about the reluctance of HSBC, Standard Chartered, and the Bank of China to onboard cryptocurrency firms as clients. An unidentified source familiar with the discussion stated that the HKMA “encouraged the banks not to be afraid. There is resistance from a conventional banking mindset; we are seeing some resistance from senior executives at traditional banks.”
In the report, banks appeared receptive to regulatory encouragement to support crypto exchanges. However, they are also closely monitoring developments regarding the US regulatory process. As part of the government policy, Hong Kong banks intend to assist the crypto industry in developing. Nevertheless, cryptocurrency exchanges are concerned that they might get into trouble with the regulators if they are found to violate anti-money laundering laws or know-your-customer regulations.