Timing and encouragement from Hong Kong regulators could help Chinese investments in the cryptocurrency market resume.
As the semi-autonomous city of Hong Kong opens its doors to the crypto industry, Chinese state-owned banks are offering support. Banks such as Bank of Communications, Bank of China and Shanghai Pudong Development Bank have started to offer banking services or have made inquiries to local crypto companies, according to a report by Bloomberg.
The involvement of Chinese banks comes at an opportune time as US tech banks such as Silicon Valley Bank, Silvergate Capital and Signature Bank face failures. Despite the ban on crypto trading in mainland China, Beijing appears to support Hong Kong’s push to become a major hub for digital assets.
Crypto companies have always struggled with banking due to the nature of digital assets. Traditional banks often require strict know-the-customer procedures for regulatory compliance, and the process of obtaining a corporate bank account can take three months for crypto-focused businesses, compared to one month for non-crypto businesses.
Hong Kong’s banking regulator issued guidance in January 2022 for banks to conduct proper risk assessments for preventing money laundering and terrorist financing when dealing with virtual asset service providers.
City banks are well-positioned to capitalize on inflows following US bank failures, but questions remain over the willingness of non-Asian projects to partner with Chinese banks due to geopolitical concerns.