HKMA suggests that AIs should provide the requested banking service before crypto firms receive VASP license.
The Hong Kong Monetary Authority (HKMA), the administrative region's central banking institution, is urging local banks to accommodate the banking needs of cryptocurrency firms in the city.
On April 27th, the central banking institution and regulator released a circular addressing corporate customers' access to banking services.
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The document instructs authorized institutions, or AIs, to adopt a risk-based approach when combating money laundering. The HKMA also encouraged these institutions to stay up-to-date with market developments and maintain a forward-looking attitude toward emerging sectors like cryptocurrency.
Specifically, the central bank institution demanded that AIs support virtual asset service providers (VASPs) in obtaining banking services in Hong Kong, stating:
AIs should endeavor to support VASPs licensed and regulated by the Securities and Futures Commission on their legitimate need for bank accounts in Hong Kong.
The regulator emphasized that customer due diligence (CDD) measures should be proportional to the risk level of customers, ensuring that customers aren't overly burdened.
For instance, if a VASP has applied for a license under Hong Kong's new crypto regulations and wants to open an account for corporate use, AIs should provide the requested service before the approval. The HKMA explained:
<Authorized institutions> should give due regard to the 'approval-in-principle' issued by the relevant authority to VASP license applicants in the CDD process instead of taking no actions until the VASP license is actually granted.
The statement also advised lenders to train their staff and establish dedicated divisions to support the crypto industry while steering clear of a "wholesale de-risking approach" that alienates new industries or specific nationalities.
This development comes as Hong Kong prepares itself to implement new crypto regulations, which will officially allow retail investors to trade cryptocurrencies like Bitcoin (BTC) and Ether (ETH). The new crypto licensing regime is set to take effect on June 1st, 2023.
The HKMA's call for banks to provide services to cryptocurrency firms demonstrates the growing acceptance of the crypto industry in Hong Kong and the importance of supporting its development.
