Hong Kong Is Bullish on Crypto. Its Banks Aren’t So Sure.
Crypto firms used to talk about disrupting the financial system. Now some of them are struggling to find traditional banks that will take their money. That is so even in Hong Kong, where government officials and regulators have launched a charm offensive to win crypto business.
Their efforts have included scrapping a yearslong ban on cryptocurrency trading by small investors and launching a new licensing regime for crypto exchanges. The one snag: Crypto still makes a lot of banks in Hong Kong nervous. At least two global banks with operations in the city have ruled out any activity directly linked to crypto trading, according to bankers.
Many banks have also resisted opening accounts that will hold the money of crypto exchanges’ clients, leading to a direct approach by government officials eager to help these exchanges get started. Hong Kong regulators’ difficulties are a sign of how tough life has become for a group of firms that were once convinced they would change the nature of finance. When Sam Bankman-Fried, founder and then-chief executive of cryptocurrency exchange FTX, spoke via videolink at a Hong Kong fintech conference last October, one of the topics was “how to identify and balance the risk of emerging technologies that will truly disrupt the financial industry." Since then, FTX has collapsed, Bankman-Fried has been arrested and U.S.
regulators have sued Binance and Coinbase, two other big exchanges, as well as crypto lender Celsius. In January, a group of U.S. regulators including the Federal Reserve said that issuing or holding cryptocurrencies “is highly likely to be inconsistent with safe and sound banking practices." One fear for banks in Hong Kong is that cryptocurrencies will be used to launder
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