After the Hong Kong Encryption New Deal, banks did not cooperate with opening accounts, and regulators put pressure on many banks

Organized by: Felix, PANews

After the crypto market plunged by $1.5 trillion in 2022 and the bankruptcy of several high-profile companies such as FTX, the crypto industry has come under fire from regulators around the world, including the US SEC, such as the recent SEC lawsuits against Binance and Coinbase. Meanwhile, Hong Kong is seen as a crypto-friendly place after it officially launched the application for a cryptocurrency trading platform on June 1. Wu Jiezhuang, a member of the Hong Kong Legislative Council, even said that global virtual asset trading platforms, including Coinbase, are welcome to apply for a compliance platform in Hong Kong. But in practice, crypto companies have encountered difficulties in obtaining banking services in Hong Kong due to strict KYC and anti-money laundering rules.

On June 15, the Financial Times quoted people familiar with the matter as reporting that the Hong Kong Monetary Authority questioned why British and Chinese banks did not accept cryptocurrency exchanges as customers, including putting pressure on HSBC, Standard Chartered Bank and Bank of China, Requiring them to include cryptocurrency exchanges as customers. In a letter to banks dated April 27, the Hong Kong Monetary Authority said that "due diligence on potential clients should not 'create an undue burden', especially 'for those who set up offices in Hong Kong to seek opportunities here. explain'."

In response to doubts, a spokesperson for HSBC said: "We have an active dialogue with virtual asset participants, exchanging views on a range of topics, including but not limited to account opening. We remain very concerned about the policies and development of this emerging industry in Hong Kong." Standard Chartered Bank said, Standard Chartered is in "regular dialogue" with regulators on various topics. Bank of China declined to comment.

Banks and payment settlers are known to have troubled relationships with crypto firms around the world. Some payment settlers cut off services with local exchanges in India last year, and while there is no ban on crypto customers in Hong Kong, banks appear reluctant to participate in the industry for fear of facing legal action in the event of a scam.

Faced with banks' concerns, Hong Kong is actively engaging in dialogue. On June 16, Bloomberg quoted people familiar with the matter as reporting that Hong Kong’s financial regulators had convened banks, encryption platforms and other industry participants on Monday to discuss how to solve the ongoing challenges faced by encryption companies in opening bank accounts. To promote banks to provide services to virtual asset companies. A person familiar with the matter said. "The Hong Kong Monetary Authority encourages banks not to be afraid, and there is resistance in the traditional banking way of thinking," said a spokesperson for the Hong Kong Monetary Authority. In fact, the central bank "maintains close dialogue with the banking industry and relevant stakeholders on various topics from time to time."

It is reported that this is the second meeting of Hong Kong regulators to push banks to participate in the encryption field since late April. Previously, the Hong Kong Monetary Authority and the Securities and Futures Commission held a roundtable meeting to communicate directly with the banking industry and some virtual asset-related institutions on the "difficulty of opening an account". Some 20 banks and a similar number of cryptocurrency-related companies participated in the roundtable addressing the needs of the banking industry. In response to the meeting, an HKMA spokesman said in an email: "Our general practice is not to confirm, deny or comment on any of these meetings."

At a time when the United States and other countries are heavily regulating the encryption industry, Hong Kong's recent doubts and meetings have not only released positive signals, but also aimed to build a "global encryption center". On June 1, the "Guidelines Applicable to Operators of Virtual Asset Trading Platforms" issued by the Hong Kong Securities Regulatory Commission (SFC) officially came into effect, issuing VSP licenses for virtual asset trading permits, hoping to create more standardized and transparent encrypted asset transactions order. Whether Hong Kong will become a global encryption "Holy Land" in the future is unknown, but it seems to be working towards this direction.

Related reading: Interpretation of Hong Kong's new regulations on virtual assets from multiple perspectives: more flexible regulation than expected, and will be dynamically adjusted according to the actual situation in the future