China-based Banks Extend Friendly Hands to Crypto Firms in Hong Kong Despite Mainland Ban

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Ahead of the highly anticipated shift in licensing regime for crypto exchanges scheduled for June, cryptocurrency companies based in Hong Kong have surprisingly found a source of potential support in China owned-banks. 

A New Ally in the Crypto Sphere

According to a Bloomberg report, China-owned banks have reportedly been lending a supporting hand to crypto companies based in Hong Kong over the past few months. These banks include the Bank of China Ltd, Shanghai Pudong Development Bank, and the Bank of Communications, 

The propeller of the sudden interest may be attributed to the recent announcement made by the government of Hong Kong

The government proposed a legislation notion to regulate digital assets and infused the Securities and Futures Commission (SFC) to introduce a new regime in June 2023. 

As detailed in the proposal document, all centralized exchanges with active operations in its region must obtain licenses from the SFC authority. 

The requirements entail custody of assets, cyber security, know-your-customer verification (KYC), accurate accounting and auditing, anti-money laundering/counter-financing of terrorism policies, and risk management. 

Crypto enthusiasts and communities believe the announced legislation and new regime show progress in the form of an increased understanding of crypto assets within the traditional institutional sphere.

There have been reported claims that these banks sent delegates pitch banking services to crypto firms in Hong Kong. The unexpected ally in the form of Chinese banks’ shocking consideration of the active mainland ban for well over a year. 

The rising development comes from these firms being stuck with complexities in setting up bank accounts to pay staff and vendors and sort related expenses. 

The development comes as local crypto companies in the city have been facing increasing difficulty when trying to set up corporate bank accounts to pay staff and vendors. 

The partnership may be symbiotic as it comes at a time when crypto firms are in need of banking partners, which have taken downtrends due to the collapse of FTX and the recent crypto and banking corporation crises in the United States.

Already, U.S crypto-friendly banks, including Silvergate Capital, Silicon Valley, and Signature Bank, have shut the doors on any crypto-related collaboration. 

Julia Pang, the head of banking relations for Hong Kong-based digital asset platform OSL, affirmed that the fast-paced interest from an array of traditional China-state-owned banks relating to the regulated crypto industry would generate a symbiotic benefit for each entity. 

She emphasized that the soon-to-be partnership is a positive sign for industries and ecosystems. 

Furthermore, Christopher Hui, the present Secretary for Financial Services and Treasury Bureau in Hong Kong, encouraged Hong Kong’s government’s vision to develop a seamless hub where virtual assets can thrive and act as a precedent for web3 adoption. 

Hong Kong Growing Desire to Become a Hub for Crypto Innovations

The United States of America provides diverse crypto industries with a spate of somewhat friendly and safe regulations to thrive in growth and expansion. 

However, new regions are emerging as hubs for the digital asset industry – one such is Hong Kong. 

As aforementioned, Hong Kong proposed a new regime that enables crypto enthusiasts to trade digital assets on licensed exchanges, in stark contrast to its border, China, where all crypto-related transactions have been outrightly banned since 2021. 

Since China’s active ban on crypto trading, Hong Kong has created new developments to accommodate digital assets and Web3 startups that were exiled from China and shifted focus abroad. 

Some crypto-based platforms have settled in regions with social legislation, such as Dubai and Singapore. 

With Hong Kong’s introduction of a friendly regime set to be effective on June 2023, some of these China-founded virtual assets and Web3-focused companies in exile might return. 

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.