Banking Difficulties Remain in Hong Kong for Crypto Start-Ups
While Hong Kong has demonstrated a very clear crypto-friendly stance over the course of the past six months, crypto start-ups are still struggling with banking in the Chinese autonomous territory.
Licensing backlog
All the signs are that Hong Kong is striving to develop itself as a regional hub for crypto and blockchain related business. Encouraged by that stance, against a background of the United States becoming openly hostile to crypto over that very same time frame, applications are streaming in from international firms to be licensed to operate their businesses in the city.
In discussion with crypto start-up applicants, CoinDesk has established that the issue extends to firms that have already obtained a license to operate. To compound matters, the Hong Kong regulator, the Securities and Futures Commission (SFC), has a shortage of manpower, with just eight officials currently working on the applications of eighty crypto firms.
Speaking to that backlog, Amy Yu, APAC CEO for Swiss crypto financial services company, SEBA Bank, stated: “This probably would have been a different story six or nine months ago.”
A known problem
It appears that both the SFC and its regulatory peer, the Hong Kong Monetary Authority (HKMA) were aware of the issue and tried to get out ahead of it. Late last month, both regulators convened a meeting with bank officials and virtual asset service providers (VASPs).
The objective was to try to forge a path forward such that banks could amend their approach, enabling greater facilitation and acceptance of crypto businesses such that the banks would be more inclined to approve bank account applications from those fledgling businesses.
Arthur Yuen, Deputy CEO of the HKMA addressed the matter in a blog post published to the regulator’s website on April 27. Yuen was clear in calling on the banks to enable banking for VASPs:
“With the implementation of the regulatory regime for VA [virtual assets] activities in Hong Kong and the strengthening of supervisory regimes in different jurisdictions according to the international standards, and as the banking industry develops a better understanding of the VA industry over time, we expect that regulated virtual asset service providers (VASPs) will be able to successfully apply for a bank account through a reasonable process.”
Banker resistance
Elaborating on the matter further, it’s clear that Yuen and his colleagues understand the importance of banking in enabling this nascent business sector such that the broader strategy of a pro-crypto business environment is affected in Hong Kong. “To attract businesses from new markets, it is crucial to have high quality financial services, while enhancing corporate access to bank accounts would be one of the key priorities,”he stated.
An attendee at that regulator-organized round-table last month said that “It was more like a wish list from the regulator,” and that “whether the banks fully embrace it is another matter.” The issue remains as a major impediment to the ability of crypto start-up companies to operate, Some are being forced to try and work around the stumbling block, relying instead on overseas banking partners.
