Hong Kong’s de facto central bank, the Hong Kong Monetary Authority (HKMA), has reminded banks that they are allowed to provide services to virtual asset (VA) companies, according to a column written by the deputy chief executive of the HKMA, Arthur Yuen. This comes amid complaints about the difficulty of opening bank accounts in Hong Kong. Yuen wrote that there is no legal or regulatory requirement prohibiting banks in Hong Kong from providing banking services to VA-related entities. However, the HKMA has reminded banks to adhere to a “risk-based approach” when conducting due diligence and refrain from one-size-fits-all approaches to rejecting account opening applications.
It should be noted that some virtual businesses may present higher anti-money laundering risks and banks may be more cautious when processing account opening applications. Yuen also notes that banking staff have less experience in dealing with new markets and may be turning customers away to avoid hassle. Hong Kong has been giving virtual asset services providers more regulatory clarity in a bid to attract more companies to the jurisdiction. The regulator released a circular on the same day to clarify best practices for offering banking services.
The HKMA’s move comes as a welcome relief to virtual asset companies in Hong Kong, who have long complained about the difficulty of opening bank accounts. These companies have been facing a tough time in the jurisdiction, with many banks reluctant to provide them with banking services due to concerns over money laundering and terrorist financing. This has made it difficult for virtual asset companies to operate in Hong Kong, which has traditionally been a hub for financial services in Asia.
The HKMA’s reminder to banks is part of a wider effort by the regulator to provide more clarity to virtual asset companies operating in Hong Kong. The regulator has been working on a framework for virtual asset exchanges, which it hopes will attract more companies to the jurisdiction. The framework is expected to provide more clarity on the regulatory requirements for virtual asset exchanges, as well as guidelines on best practices for operating in the jurisdiction.
The move by the HKMA also comes as virtual asset companies around the world face increasing regulatory scrutiny. Regulators in many jurisdictions have been cracking down on virtual asset companies, with some countries banning them altogether. This has made it difficult for virtual asset companies to operate, as they struggle to find banking partners and comply with regulatory requirements.
The HKMA’s reminder to banks is likely to be welcomed by virtual asset companies in Hong Kong, who have been struggling to find banking partners. The move is also likely to boost the reputation of Hong Kong as a hub for financial services in Asia, as it shows that the jurisdiction is willing to embrace new technologies and provide regulatory clarity to companies operating in the space.