Hong Kong Pressures Banks Over Crypto Collaborations
Summary: Hong Kong has been trying to become Asia's crypto hub, but conventional banks are hesitant to follow suit. Financial institutions are now in a precarious situation and must proceed with caution otherwise they find themselves in a legal mess like to the one in the United States.
Hong Kong has been working hard to establish itself as Asia’s cryptocurrency center, but traditional financial institutions are still cautious to follow suit. Hong Kong’s financial regulator has been putting pressure on large banks like Standard Chartered and HSBC for collaborating with cryptocurrency exchanges, according to a recent piece in the Financial Times.
According to those in the know, the Hong Kong Monetary Authority (HKMA) has lately questioned the two UK-based lenders and the Bank of China about why they are not equipped to manage crypto consumers.
Big Blow for HK’s Ambitions
As reported by the Financial Times, on April 27 the Hong Kong Monetary Authority (HKMA) sent a letter to banks warning them not to “create undue burden” while doing due diligence on cryptocurrency firms, particularly “for those setting up an office in Hong Kong to look for the opportunities here.”
However, big financial institutions are still hesitant to deal with the cryptocurrency business for fear of legal ramifications if consumers use cryptocurrency exchanges for illicit objectives like money laundering, even though no government has explicitly outlawed cryptocurrencies. But this might be a blow for Hong Kong’s ambitions to become a global crypto centre.
Banks Fear of U.S Like Scenario
Coinbase, a cryptocurrency exchange, was sued by the US Securities and Exchange Commission (SEC) last week for allegedly violating federal securities laws. The Hong Kong politician didn’t waste any time inviting Coinbase to set up office in the city.
However, due to recent developments, financial institutions are now in a dangerous position. According to a senior executive who spoke at a meeting of the banks, there is a lot of pressure on the banks to promote crypto and exchanges. Financial institutions are being urged to assist cryptocurrencies and exchanges, but they must tread carefully to avoid getting into legal trouble, similar to the one seen in the United States.
The executive went on to say that banks are caught between supporting the expansion of the company if it is a policy of the Hong Kong government and fearing an investigation for possible breaches of anti-money laundering and know-your-customer requirements.