Hong Kong Central Bank

Hong Kong Central Bank Urges Banks to Provide Services to Cryptocurrency Firms

On April 27, Hong Kong Central Bank, “the Hong Kong Monetary Authority” (HKMA), issued a circular calling on banks to provide services to cryptocurrency firms. The HKMA, which serves as the region’s central banking institution and regulator, has required authorized institutions to adopt a risk-based approach in Anti-Money Laundering efforts.

The regulator has specifically required institutions to support virtual asset service providers (VASPs) licensed and regulated by the Securities and Futures Commission in obtaining banking services in Hong Kong. The HKMA stressed the importance of proportionate customer due diligence measures based on the level of risk to avoid undue burden on customers.

As Hong Kong prepares to adopt new crypto regulations on June 1, 2023, the HKMA encouraged lenders to train staff and form dedicated divisions to support the crypto industry while avoiding a wholesale de-risking approach. The new regulations will officially allow retail investors to buy and sell cryptocurrencies like Bitcoin (BTC) and Ether (ETH).

The move comes amid Hong Kong’s active efforts to attract crypto companies, while major global jurisdictions such as the United States have partially impeded the industry due to the lack of clear regulations. As per a report by Andreessen Horowitz, the share of global crypto developers based in the U.S. declined by 26% from 2018 to 2022.

The HKMA’s circular is a welcome move for the cryptocurrency industry, as it promotes a risk-based approach in Anti-Money Laundering efforts and encourages banks to provide services to VASPs. It remains to be seen how banks will respond to the HKMA’s call and whether other jurisdictions will follow suit in supporting the crypto industry.

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