The U.S. crypto industry is still reeling from last week’s Securities and Exchange Commission lawsuits against Binance and Coinbase, but in Hong Kong, the country’s banking regulator is pressuring banks to accept crypto exchanges as clients.
Some traditional banks have been wary of adding crypto exchanges as clients, especially considering FTX’s failure last year and the recent regulatory actions in the U.S. But the Hong Kong Monetary Authority has recently questioned several banks about not accepting crypto clients, and tried to make it clear they shouldn’t be afraid, the Financial Times reported on Wednesday.
The FT viewed an April letter sent to banks, including Bank of China, HSBC, and Standard Chartered, in which the HKMA said due diligence should not “create undue burden” to accepting crypto exchanges as clients, especially if a company is setting up an office in Hong Kong.
On Thursday, the Hong Kong banking regulator owned up to the pressure campaign, saying that it had asked lenders to try to meet the business needs of licensed crypto exchanges, Reuters reported.
Hong Kong’s increasingly warm stance toward crypto stands in marked contrast to that of the U.S., where last week two of the biggest crypto exchanges, Binance and Coinbase, were hit with lawsuits by the SEC.
Hong Kong, in trying to position itself as an attractive destination for crypto firms, on June 1 reinstated retail crypto trading through select exchanges, with some speculating that its friendliness toward the sector could precede a thawing of China’s crypto ban.
According to a Twitter thread by Columbia Business School adjunct professor Omid Malekan, China never really banned crypto, but merely looked to assert control over the industry.
“…there were still anecdotal reports about a thriving crypto industry in China, including mining,” Malekan wrote. “Today China is widely believed to be #2 in mining with ~20% of global hashrate.”
While U.S. regulators and some politicians have tried to severely limit or eradicate crypto, many see China using Hong Kong as a sort of proxy.
“The more America cracks down,” Malekin wrote, “the stronger the incentive for everyone else to adopt, particularly geopolitical rivals.”