Hong Kong regulator requires banks to open accounts for crypto firms

Hong Kong’s central bank has urged banks to provide services to crypto firms even before they receive the license.

The Hong Kong Monetary Authority (HKMA), the city’s central banking institution and regulator, has called on banks to provide their services to cryptocurrency firms.

On April 27, HKMA issued a circular related to the access of corporate customers to banking services. In the document, the regulator has required authorized institutions, referred to as AI, to adopt a risk-based approach in Anti-Money Laundering efforts.

HKMA also urged the institutions in Hong Kong to pay attention to market developments and take a forward-looking approach to new sectors like the crypto market. Hong Kong’s central bank has specifically required the institutions to help virtual asset service providers (VASPs) in getting banking services, stating:

“AIs should endeavor to support VASPs licensed and regulated by the Securities and Futures Commission on their legitimate need for bank accounts in Hong Kong.”

The regulator stressed that customer due diligence (CDD) measures should be proportionate to the risk level of customers in order not to create an undue burden on the customers.

For example, if a VASP has applied for a license under Hong Kong’s new crypto regulatory regime and only wants to open an account for its own corporate use, AIs should provide the service even before the approval, HKMA said. The authority wrote:

“[Authorized institutions] should give due regard to the ‘approval-in-principle’ issued by the relevant authority to VASP license applicants in the CDD process instead of taking no actions until the VASP license is actually granted.”

Additionally, the statement encouraged lenders to train staff and form dedicated divisions to support the crypto industry while avoiding a “wholesale de-risking approach” that turns away new industries or certain nationalities.

The news comes amid Hong Kong preparing to adopt new crypto regulations that will officially allow retail investors to buy and sell cryptocurrencies like Bitcoin (BTC) and Ether (ETH). As previously reported, the new crypto licensing regime is scheduled to be enforced on June 1, 2023.

While Hong Kong has been actively attracting crypto companies, some major global jurisdictions like the United States have been somewhat pushing the industry away. A number of major American exchanges, including Coinbase, have considered leaving the U.S. due to the government’s unwillingness to come up with clear regulations on crypto.

According to a report by Andreessen Horowitz, the share of global crypto developers based in the U.S. declined by 26% from 2018 to 2022.

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