Hong Kong’s foremost digital bank, ZA Bank, is reportedly poised to extend its virtual services to include crypto accounts and enable conversions between crypto and fiat currencies. This development comes as Hong Kong authorities endeavor to transform the area into a crypto and blockchain hub.
In its capacity as a settlement bank, ZA Bank will allow tokens deposited at licensed exchanges to be withdrawn in Hong Kong dollars, Chinese yuan, and United States dollars.
Additionally, the bank will provide account services to local crypto firms following a fruitful trial that involved approximately 100 firms participating in a regulatory sandbox.
ZA Bank’s CEO, Ronald Iu, disclosed that currently, only the two licensed crypto exchanges in Hong Kong, HashKey and OSL, are offering currency conversions. He added that ZA Bank would provide the same service at other exchanges after they become licensed.
However, due to China’s stringent regulations, clients from mainland China will not have access to this service.
Hong Kong’s push to be a crypto hub
ZA Bank’s move could be the much-needed solution for U.S.-based crypto firms struggling to find banking partners following the collapse of crypto-friendly banks such as Silicon Valley Bank, Silvergate Bank, and Signature Bank.
The crypto community sees Hong Kong’s welcoming approach, as opposed to U.S. regulators’ hostility, as key to its success in becoming a crypto hub.
Hong Kong’s government proposed a new licensing framework for virtual asset service providers (VASPs) to regulate and oversee crypto exchanges and related businesses in November 2021.
Under the framework, VASPs must obtain a license from the Hong Kong securities and futures commission (SFC) and adhere to various operational, financial, and security standards.
These new regulations provide a clear legal framework for crypto businesses to operate in Hong Kong, potentially luring more blockchain and cryptocurrency companies to the region and fostering innovation and investment.
As a result, Hong Kong’s potential as a crypto hub is set to surge, making it a surrogate market for Chinese entities eager to explore crypto’s potential but cannot do so legally in their home country.