Hong Kong banks reminded they may engage with virtual asset entities: central bank

There have been more comments from foreign firms on the difficulties of opening a bank account.

Hong Kong’s central bank has reminded its financial institutions that they are not prohibited from providing banking services to virtual asset entities.

The Hong Kong Monetary Authority (HKMA) has issued a circular to clarify the “possible misinterpretations” by banks in respect of CDD. It has also conducted a roundtable with the banking industry and virtual asset service providers (VASPs) to exchange views son account opening, HKMA deputy chief executive Arthur Yuen said in a written statement published on the HKMA official site.

This follows after HKMA reportedly noted an uptick of comments from foreign companies regarding the difficulty of opening an account. Some reportedly cited that banks would reject their applications due to anti-money laundering (AML) reasons and perceived high risks.

“To this end, in recent months we have actively discussed with banks and reminded them that there is no legal and regulatory requirement prohibiting banks in Hong Kong from providing banking services to virtual assets (VA) related entities,” Yuen wrote, adding that they have advised banks to adhere to a “risk-based approach” when conducting customer due diligence, not a one-size-fits all approach.

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Yuen cited the Simple Bank Account (SBA) arrangement, as an example of a “risk-based approach.”

SBAs refer to a tier of accounts that focus on the provision of basic banking services–deposits, withdrawals, local and cross-boundary remittances–to eligible corporates based on their actual operational needs.  These has enabled banks to apply less extensive CDD measures, the HKMA said.

Since the launch of the SBA arrangement in 2019, about 13,000 of such accounts have been opened by banks, with an average of about 3,000 accounts opened each year, according to the central bank.

The HKMA deputy chief’s statement is in line with the government’s moves in late 2022, which saw it promote the development of the virtual asset sector in the city.

Last December, the Legislative Council also amended the relevant legislation for the establishment of a comprehensive and balanced regulatory framework for VA activities to protect investors. 

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With the implementation of the regulatory regime for VA activities in Hong Kong and the strengthening of supervisory regimes in different jurisdictions according to the international standards—and as the banking industry develops a better understanding of the VA industry over time—HKMA said that it expects regulated virtual asset service providers (VASPs) will be able to successfully apply for a bank account "through a reasonable process."