Hong Kong Regulators Force HSBC and Stan Chartered to Take Crypto Clients, Banks Refuse

As per the latest industry reports, Hong Kong’s banking regulator has been pressuring top banking institutions such as HSBC and Standard Chartered for offering services to crypto clients.

While the US SEC and other regulators have been cracking down on cryptocurrencies, Hong Kong is seeing this as an opportunity to establish as the crypto hub of Asia. Source familiar with the matter told Financial Times that the Hong Kong Monetary authority (HKMA) has questioned the two UK lenders along with the Bank of China over their reluctance to serve crypto clients.

In the letters earlier on April 27, and accessed by FT, the HKMA said that due diligence of customers should not “create undue burden”, particularly “for those setting up an office in Hong Kong to look for the opportunities here”.

Currently, banks have not put a ban on crypto, however, they fear the chances of prosecution in the case that these crypto trading platforms are exposed to illegal activities or for money laundering. However, this move from the banks could serve as a roadblock in Hong Kong’s push of establishing itself as the crypto-friendly destination for the world.

A person in knowledge of the matter told FT: “HKMA encouraged the banks to not be afraid. There is resistance from a conventional banking mindset . . . we are seeing some resistance from senior executives at traditional banks.”

Last week, the US SEC sued crypto exchange Coinbase accusing them of violating the US securities laws. Soon after, pro-Beijing lawmaker Johnny Ng, a member of China’s top political advisory body, invited Coinbase and other exchanges for setting up base in Hong Kong.

During the meeting with banks, one of the senior executives briefed that banks “are having to tread a fine line between on the one hand getting encouragement to support crypto and exchanges, but on the other hand being aware of the US situation”.

One of the executives of the lenders also confessed that they were torn between wanting “to ensure the development of that industry if it’s a policy of the Hong Kong government” and worrying that they might be “taken to task on anti-money laundering or know-your-customer” issues.

HSBC, Standard Chartered, and Bank of China have a unique role in Hong Kong as currency issuers and hold important positions within the Hong Kong Association of Banks lobby group.

Standard Chartered stated that it maintains regular discussions with regulators on various topics, while HSBC expressed its active involvement in the policies and developments of the emerging industry in Hong Kong. Bank of China chose not to provide a comment.