Hong Kong, a former Crown Colony, is fast becoming a haven for crypto companies. A statement written by Arthur Yuen, Deputy Chief Executive of the Hong Kong Monetary Authority (HKMA), discussed how to handle virtual asset-related entities. He reminded banks that no legal and regulatory requirement prohibits them from providing services to virtual asset-related entities.
To this end, in recent months we have actively discussed with banks and reminded them that there is no legal and regulatory requirement prohibiting banks in Hong Kong from providing banking services to virtual assets (VA) related entities. We have also reminded banks to adhere to a “risk-based approach” when conducting customer due diligence (CDD) and avoid unnecessary processes, and refrain from adopting a “one-size-fits-all” approach to reject account opening applications.
Yuen, A. (2023)
This clarity is the opposite of what is happening in the United States, wherein crypto entities are slowly being de-banked. Instead of shutting off a whole industry, the HKMA has made clear that servicing the crypto industry is not illegal. Instead, the agency reminded banks to conduct customer due diligence while voiding unnecessary processes.
Crypto and Virtual Assets Have Banking Clarity
The Hong Kong government gave a clear policy on how to handle virtual assets last October. The goal is to promote sustainable and responsible development of the industry while protecting investors at the same time. But the clarity does not mean that those companies who present money laundering risk will be easily admitted. The policy still advises caution and should not apply a one-size-fits-all approach.
The HKMA also promised to release a circular to clarify possible misinterpretations and would also share good practices The agency also seems to be open to discussions with virtual asset service providers (VAS), since they have organized a round-table discussion.
Hong Kong as a Crypto Hub
Hong Kong is a major financial center. It is located on the Pearl River Delta south of Guangdong Province and the City of Shenzhen. The port of Hong Kong is a major Hub in the Southeast and East Asian Region. The former British Colony was returned to China’s jurisdiction in 1997.
The city is fast becoming a top destination for Crypto Companies. The trend is due to a supportive regulatory environment that focuses on maintaining a competitive business landscape while protecting investors. Hong Kong also has a strong financial base and is host to major businesses. Other financial hubs like Tokyo and Singapore are also nearby.
The Exodus to Friendlier Jurisdictions
Many crypto projects came from the United States, but hostile regulations made it hard for them to do business. Many digital asset companies and investors opted to invest in places where they were treated better. This was the exact sentiment of some lawmakers when they noticed that regulators were driving crypto players out of the country. Money and talent that should have been working for the U.S. economy were being utilized in other countries.
Businesses will only thrive under favorable conditions, and Hong Kong is giving a better environment for investors. Crypto is slowly leading us to the future, and it will not wait for any country or government. Either we join the ride or be left behind.
Source: Hong Kong Monetary Authority
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