Chinese Banks Ride the Cryptocurrency Wave in Hong Kong

Market players appear to be taking a bold step by working with crypto firms in mainland China. This move comes despite the fact that the Chinese government has not announced any plans to lift its ban on cryptocurrency trading, which has been in place for over a year.

According to anonymous sources cited by Bloomberg, banks such as the Bank of Communications, the Bank of China, and Shanghai Pudong Development Bank are either already providing services to local crypto firms or actively studying the market. Representatives from one bank have even visited crypto company offices to explore potential collaborations.

Working with Hong Kong-based crypto companies could be seen as a sign of tacit approval from Beijing. With American tech banks such as Silicon Valley Bank, Silvergate, and Signature Bank exiting the market, Chinese companies now have an opportunity to fill the gap. This is also aided by the current policy of US financial regulators, which is suppressing the industry.

Providing banking services to crypto firms remains challenging due to traditional banks' concerns about anonymity and compliance with Know Your Customer procedures. It may take up to three months for cryptocurrency companies to obtain a corporate bank account, and even then, transactions involving digital assets are often flagged as suspicious, and accounts may be unexpectedly blocked. However, this situation could change in the near future.

Despite the positive trend of cryptocurrency adoption in Hong Kong, geopolitical issues cannot be ignored. China's relationship with the US is currently strained, and its position on the war in Ukraine is unclear. Therefore, foreign projects that have taken refuge in Hong Kong may not be willing or able to cooperate with Chinese banks. This would be a wise decision on their part if China continues to align with the aggressor country.