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Hong Kong Banks Looking To Be The Leader In Cryptocurrency Moving To Virtual Assets

Hong Kong is encouraging banks to cater to the needs of licensed virtual-asset firms — a move that highlights the city's ambition.

Hong Kong is encouraging banks to cater to the needs of licensed virtual-asset firms — a move that highlights the city’s ambition to establish itself as a leading cryptocurrency center.

Meanwhile, in the U.S., banks are tightening restrictions on the digital-asset sector.

A logo of the digital currency Bitcoin is pictured on an ATM in a mall in Hong Kong on November 1, 2022. – In contrast to mainland China where crypto has been all but banned, Hong Kong is looking to relax regulations and claw back some of the business that has left and is exploring whether to legalise crypto trading by retail investors. PETER PARKS/BENZINGA

The Hong Kong Monetary Authority (HKMA) issued a statement on Thursday, which called on banks to assist regulated virtual-asset businesses by addressing “their legitimate need for bank accounts” in the city, Bloomberg reported.

The statement, signed by Deputy Chief Executive Arthur Yuen, advised banks to invest in staff training and establish specialized teams to support the digital-asset sector, while cautioning against a “wholesale de-risking approach” that might deter new industries or specific nationalities.

Globally, banks are becoming more cautious about the industry, particularly after events such as the FTX (CRYPTO: FTT) exchange debacle and the market crash.

The fall of crypto-friendly banks Signature Bank and Silvergate Capital Corp. this year has been particularly damaging, forcing the sector to search worldwide for alternative payment channels.

As the U.S. tightens regulations on the cryptocurrency industry and issues warnings about liquidity risks, an increasing number of virtual-asset businesses are either leaving the U.S. or considering doing so, while others seek to expand abroad.

In contrast, Hong Kong plans to introduce a new licensing system for crypto platforms on June 1, allowing retail investors to trade major tokens like Bitcoin (CRYPTO: BTC) and Ether (CRYPTO: ETH).

Bank of Communications Co., Bank of China Ltd., and Shanghai Pudong Development Bank’s Hong Kong branches have either started providing banking services to local crypto firms or have expressed interest in doing so, according to sources familiar with the situation.

“As Hong Kong is stepping up efforts to cultivate a web3-friendly environment, ZA Bank’s online account opening for Web3 startups represents a major step forward in the integration of traditional banking services with the web3 world,” said Ronald Lu, CEO of ZA Bank.

“It signals a greater acceptance and recognition of the importance of this emerging sector and hopefully will encourage other financial institutions to follow suit in offering tailored banking services for web3 companies. We look forward to exploring collaborations with key global web3 businesses such as HashKey, OKX and more.”

Hong Kong’s largest virtual bank, ZA Bank Ltd., intends to offer token-to-fiat currency conversions through licensed exchanges. In addition, Arthur Yuen announced that the HKMA and the Securities and Futures Commission are co-hosting a round table on Friday, bringing together lenders and virtual-asset platforms to discuss account opening procedures and share other relevant information.

Banks in China have been cautious about dabbling the use of cryptocurrencies as they have become popular in the U.S. 

El Salvador is the only country in the world that is use bitcoin as their legal tender, but not recognized by the International Monetary Fund.

Produced in association with Benzinga

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