Hong Kong’s central bank, the Hong Kong Monetary Authority (HKMA), is urging banks to provide services to cryptocurrency firms, even before these companies have obtained the necessary licenses. This move is part of a broader effort by the regulator to promote a forward-looking approach towards emerging sectors, such as the cryptocurrency market.
In a recent circular, the HKMA asked authorized institutions (AIs) to adopt a risk-based approach to Anti-Money Laundering efforts and support virtual asset service providers (VASPs) in obtaining banking services. The regulator emphasized that customer due diligence (CDD) measures should be proportionate to the risk level of customers, in order to prevent creating an undue burden on them.
For instance, AIs should offer banking services to VASPs that have applied for a license and only require an account for corporate use, even before license approval. The HKMA advised that AIs should consider the ‘approval-in-principle’ granted by relevant authorities in their CDD process, rather than waiting for the VASP license to be issued.
Moreover, the HKMA encouraged banks to train staff and establish dedicated divisions to support the burgeoning crypto industry, while avoiding a “wholesale de-risking approach” that could exclude new industries or certain nationalities. This initiative comes as Hong Kong prepares to introduce new cryptocurrency regulations, set to be enforced on June 1, 2023, which will allow retail investors to trade cryptocurrencies like Bitcoin and Ether.
Contrastingly, major global jurisdictions like the United States have been less welcoming to the crypto industry. Many prominent American exchanges, such as Coinbase, have contemplated leaving the US due to a lack of clear regulations. A report by Andreessen Horowitz revealed that the percentage of global crypto developers based in the US has dropped by 26% from 2018 to 2022.