27th March 2023 – (Hong Kong) China’s state-owned banks are offering support to crypto businesses in Hong Kong, a surprise development given the shunning of the sector by major banks. Bank of Communications, Bank of China and Shanghai Pudong Development Bank have been offering banking services or making inquiries. This is seen as particularly notable since crypto firms have faced difficulties in securing normal banking services and major banks have avoided the sector.
Traditional banks have been reluctant to support the anonymous nature of digital assets which are in breach of compliance measures. As a result, digital asset firms have had to resort to various workarounds to meet operational banking needs. The process of securing a corporate bank account can take up to three months for crypto-focused companies compared to just one month for non-crypto firms. Even with an account, banks have been known to suspend accounts after an initial warning call or flag transactions related to digital asset firms.
The reluctance of traditional banks has forced firms to look elsewhere, with some trying out more than a dozen lenders, including niche choices like Indian or Japanese banks or virtual banks like ZA Bank. Signature Bank was a popular alternative for many crypto firms until it was put into receivership. Those without bank accounts have had to become creative, such as setting up a separate Hong Kong company without a crypto link to apply for bank accounts or by outsourcing human resources and payroll to a third party.
PWith the failures of US tech banks, Silicon Valley Bank, Silvergate Capital and Signature Bank, Chinese lenders are stepping up and supporting Hong Kong’s push to become a major digital asset center. The move is encouraging for the sector as it is a sign of backing from Beijing despite trading of crypto being banned on the mainland for well over a year. Hong Kong banks are also well-positioned to tap the capital inflows following the banking failures in the US.