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Reports indicate several Chinese state-owned banks with branches in Hong Kong have turned crypto-friendly as they offer their services to local crypto companies.
Bloomberg reports numerous Chinese state-owned banks with branches in Hong Kong have started offering their services to local crypto companies as Hong Kong attracts a growing list of firms looking to establish roots in the city. The city announced in October that it wants to become the next global crypto hub and has started enacting legislation to do so.
Christian Hui, the Secretary for Financial Services and the Treasury, recently revealed that more than 80 foreign and Mainland China crypto firms had expressed interest in establishing offices in Hong Kong and obtaining local licenses. He said:
As of end-February 2023, Invest Hong Kong has received expressions of interest from over 80 virtual asset-related Mainland and foreign companies in establishing their presence in Hong Kong. These companies included VA exchanges, blockchain infrastructure companies, blockchain network security companies, virtual currency wallets and payment companies, as well as other projects on building the Web3 ecosystem.
Chinese Banks Court Firms in Hong Kong
The Strait Times reports that the Hong Kong branches of the Bank of Communications, Bank of China and Shanghai Pudong Development Banks have begun offering banking services to local crypto firms or have made inquiries into doing so. Banks from Mainland China have recently been reaching out to crypto-related firms, adding to the rumour that Hong Kong’s goal of becoming a central digital asset hub has Beijing’s support, even though crypto trading has been banned in China since September 2021.
The outreach is notable, given the difficulties experienced by crypto firms to secure normal banking services. The move is especially significant after the failures of U.S. tech banks SVB, Silvergate Bank and Signature Bank.
Securing banking services for crypto firms has never been an easy feat. Banks often shy away from crypto firms due to their anonymous nature. Anonymity has been a red flag for traditional banks where KYC procedures are required for compliance.
Hong Kong-based crypto firms who have agreed to speak on the condition of anonymity say the difficulty in obtaining banking services has forced many digital asset firms to find workarounds to meet their banking needs. Firms say it often takes up to three months to secure corporate bank accounts, compared to one month for non-crypto firms. The significant delays mean they often contact more than a dozen lenders. Concerns, however, remain as even with a bank account, banks often flag transactions related to crypto firms and can suspend accounts after an initial warning.
The realities for those who deal in crypto are even more challenging, considering almost no traditional banks offer to help transfer tokens to fiat as a regular service. The alternative is to turn to crypto-friendly banks overseas.
The future for digital asset firms certainly looks much better if more traditional banks back the sector. With support from the banking sector and the Hong Kong government’s continued investment in developing its regulatory framework, the city is primed to become the world’s leading crypto hub.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.