Hong Kong is rapidly becoming a key player in the global cryptocurrency market, thanks to recent partnerships with major Chinese state-affiliated banks.
Despite mainland China’s strict ban on crypto-related activities, these banks are now working with regulated crypto companies in Hong Kong to facilitate the depositing and withdrawal of fiat currencies.
Chinese Banks Embrace Hong Kong’s Crypto Scene
The Bank of Communications Hong Kong arm is one of the state-owned Chinese banks that has shown a keen interest in collaborating with cryptocurrency businesses registered in the city. According to a Wall Street Journal report, the bank is currently in talks to open accounts for regulated crypto companies.
Furthermore, ZA Bank, Hong Kong’s largest virtual bank controlled by Chinese internet insurer ZhongAn Online P&C Insurance, is also set to act as a settlement bank for these crypto firms.
These banks’ involvement will enable authorized exchanges to process token deposits and withdrawals in Hong Kong, Chinese, and U.S. dollars.
This move is a direct result of the region’s government’s push to collaborate with more crypto firms in 2023. Approximately 80 cryptocurrency companies have expressed interest in opening or expanding their businesses in the city.
During the Hong Kong Web3 Festival, government officials confirmed the city’s dedication to becoming a fully regulated crypto hub, aiming to attract investment and Web3 startups.
Financial Secretary Paul Chan Mo-po emphasized the importance of appropriate regulations and oversight for sustainable development.
The Hong Kong Securities and Futures Commission (SFC) is reportedly planning to regulate decentralized finance (DeFi) as well. The agency’s stance is that DeFi platforms should be considered the same as centralized finance (CeFi) and should be subject to the same regulatory requirements.
The Road Ahead
Starting in June, new regulations will require all Hong Kong crypto exchanges to be licensed by the SFC. Although the licensing process is strict, with stringent requirements for token listings, regional banks are increasingly embracing crypto.
ZA Bank, for example, has announced plans to offer transfers and conversions between crypto and fiat currencies for its clients.
However, mainland Chinese retail traders will not have access to Hong Kong’s crypto market due to existing restrictions. The market will primarily serve Chinese banks, institutions, and corporations seeking legal entry into the crypto space.
With only two fully licensed crypto exchanges currently operating in the region – HashKey and OSL – the city’s burgeoning crypto industry is poised for significant growth, fueled by strategic partnerships with China’s state-affiliated banks.
