Hong Kong Mandates Banks to Provide Accounts for Cryptocurrency Companies

Hong Kong’s central bank is telling banks to start providing services to cryptocurrency companies even if they haven’t received their license yet.

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Hong Kong’s central bank and regulator, the HKMA, has requested that banks offer their services to companies dealing with cryptocurrencies.

On April 27, the Hong Kong Monetary Authority (HKMA) issued a document about how corporate customers can access banking services. The document asks authorized institutions (AI) to take a risk-based approach to prevent money laundering.

The HKMA is encouraging banks in Hong Kong to keep up with the latest market developments and provide their services to virtual asset service providers (VASPs). This is to help them obtain banking services by taking a forward-looking approach to new sectors like the crypto market. The regulator has asked authorized institutions to assist VASPs and take a risk-based approach to Anti-Money Laundering efforts.

Hong Kong’s central bank has asked banks to help licensed and regulated virtual asset service providers (VASPs) in getting bank accounts in Hong Kong, acknowledging their legitimate need for banking services.

The HKMA emphasized that banks should assess the level of risk posed by their customers and apply appropriate measures for Customer Due Diligence (CDD). This is to ensure that the measures are not too burdensome for the customers.

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“As an example, if a virtual asset service provider (VASP) has requested to open a bank account for its own corporate use before getting the regulatory license, the authorized institutions (AIs) should still provide the service, according to HKMA’s circular”.

If a virtual asset service provider (VASP) has applied for a license under Hong Kong’s new crypto regulatory regime and wants to open an account for their own use, banks should provide the service before the approval. They should consider the “approval-in-principle” issued by the relevant authority to VASP license applicants in the customer due diligence (CDD) process instead of waiting for the VASP license to be granted.

The HKMA’s statement also suggested that banks should train their employees and create separate departments to serve the crypto industry. At the same time, banks should not reject new industries or certain nationalities altogether, which is known as a “wholesale de-risking approach.”

Hong Kong is getting ready to implement new crypto rules that will allow individuals to buy and sell cryptocurrencies legally. The rules are expected to be put in place on June 1, 2023.

Hong Kong has been encouraging cryptocurrency companies to set up their businesses in the city, while other major countries such as the United States have been pushing away the industry. This has caused some American exchanges like Coinbase to consider moving their operations outside of the U.S. because of unclear regulations.

A report by Andreessen Horowitz shows that the percentage of cryptocurrency developers located in the United States has fallen by 26% from 2018 to 2022.

 

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