On Thursday, the Hong Kong Monetary Authority (HKMA) requested the local financial providers to offer banking services to crypto firms. The HKMA report outlined the new regulation concerning the provision of banking services to institutional customers.
The HKMA team requested regulatory agencies, including the authorized institutions (AIs), to invest in developing a risk assessment approach in Anti-Money Laundering (AML) regulations.
Hong Kong Banks to Support Crypto Firms
In addition, the HKMA team urged institutional investors to pay close attention to current market trends. The HKMA encouraged the investors to adopt an innovative culture within the institutions.
They mentioned the benefits linked to monitoring emerging technologies, including crypto assets. In a previous report, the Hong Kong apex bank demanded that financial institutions support the country’s digital asset service providers (DASP) in accessing banking services.
They urged the AIs in the region to support DASP in acquiring regulatory licenses. On the other hand, the Hong Kong Securities and Futures Commission (SFC) was tasked to supervise the crypto firms and support them in obtaining the required banking services.
According to the regulators, the Hong Kong customer due diligence (CDD) protocols will be observed during the implementation of the new regulations to prevent cases where customers are exposed to undue burdens.
New Crypto Regulations in Hong Kong
Citing the new crypto licensing requirements, the regulators outlined the procedures to acquire the permit. At the initial application stage, the DASP is required to submit their account opening proposals to the AIs.
After reviewing the application, the AIs will advise the licensing regulators on matters concerning the approval of the permit. Reportedly, the AI’s role in reviewing the application should conform with the VASP requirements.
The regulators urged the lending platforms to invest in staff training and upskilling programs to ensure the support team delivers timely service to crypto firms.
The proposed training aims to eliminate the wholesale de-risking obstacles that prompt investors to flee the industry. The new banking regulations coincide with the impending launch of crypto laws.
The amendment of the crypto regulation will allow Hong Kong retail clients to engage in trading with significant crypto assets such as Bitcoin (BTC) and Ether (ETH). The regulators plan to enforce the new regulation, including licensing, from June 1.
Assessing the Suitability of the Hong Kong Market
Besides the amends of the crypto regulations, the Hong Kong authority had been seeking to adopt a friendly environment to attract foreign investors to the region. The remarkable achievement of Hong Kong regulators has inspired fast-growing crypto firms to expand to the region.
A few days ago, the San Francisco crypto exchange Coinbase announced plans to enter the Hong Kong market, citing the unfriendly crypto environment in the region. The regulatory clampdowns in the US have triggered the crypto activities in the region to decline.
A recent study by Andreessen Horowitz revealed that the share of global crypto developers in the US experienced a sharp decline of 26% from 2018 to 2022.