Hong Kong Monetary Authority Urges Banks to Provide Services to Crypto Firms
The Hong Kong Monetary Authority (HKMA), the central banking institution and regulator of Hong Kong, has issued a circular urging banks to provide services to cryptocurrency firms. In the document released on April 27, the HKMA has called for authorized institutions (AIs) to adopt a risk-based approach in Anti-Money Laundering (AML) efforts and pay attention to market developments in new sectors like the crypto market. The HKMA has specifically required AIs to support virtual asset service providers (VASPs) in getting banking services.
A Risk-Based Approach in Anti-Money Laundering Efforts
The HKMA has emphasized the importance of adopting a risk-based approach in AML efforts, where customer due diligence (CDD) measures should be proportionate to the risk level of customers. This is to ensure that the implementation of AML measures does not create an undue burden on customers. For example, if a VASP has applied for a license under Hong Kong’s new crypto regulatory regime and only wants to open an account for its own corporate use, AIs should provide the service even before the approval is granted.
The HKMA has also encouraged lenders to form dedicated divisions to support the crypto industry while avoiding a “wholesale de-risking approach” that turns away new industries or certain nationalities.
New Crypto Regulations in Hong Kong
Hong Kong is preparing to adopt new crypto regulations that will officially allow retail investors to buy and sell cryptocurrencies like Bitcoin (BTC) and Ether (ETH). The new crypto licensing regime is scheduled to be enforced on June 1, 2023.
The HKMA’s circular comes amid Hong Kong’s active attraction of crypto companies. The new regulations are expected to provide a clearer regulatory framework for the crypto industry, unlike some major global jurisdictions like the United States which have partially impeded the industry.
Conclusion
The HKMA’s circular is a positive development for the crypto industry in Hong Kong. With the regulator urging banks to provide services to crypto firms, this could potentially pave the way for greater adoption of cryptocurrencies in the region. As the world becomes increasingly digital, it is essential for regulators to take a forward-looking approach to new sectors like the crypto market, and Hong Kong’s central bank seems to be doing just that.
Reference
- Andreessen Horowitz. (2022). Crypto in Context: Understanding the State of Crypto Adoption and Regulations. Retrieved from https://a16z.com/2022/04/05/crypto-in-context-understanding-the-state-of-crypto-adoption-and-regulations/
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