The Hong Kong government has reportedly "pressured" three major banks – HSBC, Standard Chartered, and Bank of China – to accept crypto exchanges as clients. The government’s push aims to prevent the city from losing out on the economic opportunities associated with the fast-growing digital asset industry. It underscores the ambition to turn the city into an Asian cryptocurrency hub rivaling Singapore.

Hong Kong banks have not banned clients dealing with cryptocurrencies. Nevertheless, Hong Kong Monetary Authority (HKMA) claims that banks are hesitant to interact with crypto exchanges due to concerns over potential prosecution if the platforms are used for illicit activities.

On June 1st, Hong Kong implemented new crypto regulations, which permit locally licensed crypto companies to commence their operations. From now on, any licensed firm can provide services to retail investors, enabling them to trade cryptocurrencies.

Now, the government argued that the banks were undermining Hong Kong's competitiveness by denying financial services to legally licensed crypto companies, according to two sources close to the matter. Hong Kong's Financial Services and the Treasury Bureau conveyed this view to the banks and suggested they revisit their stance.

The regulator also issued guidance (PDF) clarifying how crypto firms should be regulated to address the banks' worries over compliance and risk management.

Due diligence on potential customers should not “create undue burden,” particularly “for those setting up an office in Hong Kong to look for the opportunities here.”

NKMA letter, PDF

Together, all these measures present quite the opposite picture of crypto-regulation in the United States.

The pro-crypto push by Hong Kong aims to shore up the city's status as an international financial center, the sources said. Fintech and cryptocurrency sectors have become pillars of Hong Kong’s broader plans to diversify its economy beyond the traditional finance sector and real estate. By embracing cryptocurrency companies as clients, HSBC and Standard Chartered would significantly expand the options available to the nascent local crypto industry.

These regulatory moves also highlight how Hong Kong is pulling ahead in the race with Singapore to dominate cryptocurrency finance in Asia. The island state has been courting crypto companies, too, but lacks similar pressure on its local banks to welcome the sector.

A Hong Kong legislator's tweet

As part of their engagement with the crypto industry, Hong Kong regulators are working to strengthen the regulatory frameworks surrounding digital assets. Hong Kong aims to strike a delicate balance between innovation and oversight, fostering an ecosystem that supports the responsible growth of the crypto sector.