Banks in Hong Kong Asked to Onboard Crypto Clients: Report

Hong Kong’s top financial watchdog is reportedly putting pressure on international banks like HSBC and Standard Chartered to accept more crypto exchanges as clients as the city looks to advance its efforts to become a Web3 hub, according to the Financial Times. The regulator allegedly faces resistance from senior executives at “traditional” banks who are not fully sold yet on crypto.

Banks Afraid to Take On Crypto Clients After 2022 Collapses

The Hong Kong Monetary Authority (HKMA), the city’s financial regulator, is reportedly urging major banks such as HSBC and Standard Chartered to start taking crypto exchanges as clients, despite the clampdown on the industry in the US, the Financial Times reported, citing sources familiar with the matter.

Specifically, the watchdog reportedly met with UK-based HSBC and Standard Chartered, and the Bank of China, asking them why they were not accepting cryptocurrency exchanges as clients. Due diligence on potential clients is not supposed to cause an “undue burden” for new companies “setting up an office in Hong Kong to look for the opportunities,” HKMA said in an April 27 letter to banks obtained by the Financial Times.

While banks that operate in Hong Kong are not banned from working with crypto clients, they appear to be increasingly skeptical when it comes to taking on digital asset exchanges due to concerns that they could face legal actions if those platforms turn out to be used for money laundering or other illicit means. Those fears intensified following a series of high-profile collapses in the crypto sector in 2022, with the implosions of FTX and Terraform Labs being some of the highlights.

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HKMA Notes a ‘Resistance’ From Traditional Banks’ Top Officials

HKMA’s pressures on lenders to take on crypto clients likely stems from Hong Kong’s broader aim to become a regional fintech and digital asset hub. According to the FT report, the regulator allegedly “encouraged the banks to not be afraid” of the potential repercussions of collaborating with crypto exchanges.

“There is resistance from a conventional banking mindset . . . we are seeing some resistance from senior executives at traditional banks.”

– an anonymous source reportedly told the Financial Times.

To achieve its objective, Hong Kong’s government introduced a comprehensive bill to regulate crypto in October 2022, aiming to attract prominent crypto firms to open shops in the city. Meanwhile, regulators in the US have been intensifying their crackdown on digital asset service providers in recent months, with the US Securities and Exchange Commission (SEC) leading the charge.

Do you think international banks have reason to avoid working with crypto exchanges? Let us know in the comments below.