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Hong Kong Legislative Council member Johnny Ng has urged the government to relax the stringent banking restrictions faced by crypto and Web3 firms. Ng, who has been a prominent advocate for transforming Hong Kong into a global crypto hub, expressed alarm over the barriers these businesses encounter when trying to access essential banking services, highlighting that these challenges could negatively affect the industry’s growth.
Banking Challenges for Crypto Firms in Hong Kong
Recent challenges persist for crypto firms attempting to establish local bank accounts, with Ng revealing alarming statistics from a survey conducted by his team. The survey included responses from over 120 crypto and Web3 firms that have set up operations in Hong Kong since 2022. The findings indicate that approximately 95% of these companies sought to open local bank accounts, but only 20% succeeded within a span of two to five months. More troubling is the fact that over half of the firms reported that the account-opening process exceeded six months, often requiring shareholders or directors to make multiple trips to Hong Kong to complete the necessary formalities.
Proposed Solutions to Enhance Banking Access
To address these challenges, Ng has proposed a series of initiatives, including the establishment of a specialised “virtual asset/digital asset bank” and the creation of a more adaptable banking framework that can coexist with traditional banking institutions. He emphasised the urgency of developing Hong Kong’s Web3 ecosystem, stating, “Currently, virtual asset policies have become the focus of global government discussions. If we want to become the Hong Kong Web3 centre, we should promote the development of the entire chain and ecosystem as soon as possible.”
Calls to Include Bitcoin in Financial Reserves
In a related development, earlier in July, Ng suggested that the government include Bitcoin in Hong Kong’s financial reserves, reinforcing his commitment to enhancing the region’s cryptocurrency landscape.
Ng’s concerns resonate with other lawmakers, including Duncan Chiu, who have criticized the excessively strict regulatory environment for crypto exchanges. Chiu highlighted that such rigorous regulations have driven notable global exchanges away from Hong Kong, thereby limiting the region’s potential to emerge as a leading crypto hub in Asia.
The challenges faced by crypto firms largely stem from the implementation of a licensing framework by the Securities and Futures Commission (SFC) of Hong Kong, which was introduced for centralised cryptocurrency exchanges in 2023. This regulatory framework obligates exchanges to obtain a licence and comply with stringent requirements, including anti-money laundering (AML) protocols and consumer protection measures. Consequently, several prominent global exchanges such as OKX and HKX have ceased their operations in Hong Kong due to the stringent nature of these regulations.
In a further indication of the challenges within the crypto sector, the SFC issued warnings in July against several cryptocurrency trading platforms, including Taurusemex, Yomaex, Bitones.org, BTEPRO, CEG, XTCQT, and Bstorest. These platforms were flagged for conducting business without the requisite licences in the region, underscoring the regulatory burden faced by legitimate crypto businesses.
Law Enforcement’s Crackdown on Illicit Crypto Activities
The strict banking environment in Hong Kong is contrasted by recent law enforcement actions targeting illicit activities in the crypto space. Hong Kong customs authorities recently dismantled a sophisticated money-laundering syndicate that had processed more than HK$1.5 billion (approximately $192 million) through cryptocurrency transactions, utilising over 200 bank accounts. Sources from the South China Morning Post reported that this operation, allegedly run by a family, involved nearly four dozen bank accounts associated with six shell companies designed to collect and launder suspicious funds believed to originate from South Korea.
Over a two-year timeframe spanning from August 2020 to August 2022, these accounts facilitated over 2,000 transactions, all intended to obscure the illicit origins of the funds involved. Inspector Poon Yip-kan from the customs’ financial investigation bureau noted that the syndicate was adept at swiftly moving funds through the shell company accounts before dispersing them into 180 third-party bank accounts to further conceal their trail.
Among those arrested in connection with the scheme was a taxi driver who allegedly laundered an astonishing $38.4 million through overseas crypto platforms, reportedly earning around $9,000 a month for his participation in the operation. Law enforcement officials managed to freeze $280,000 in associated accounts, although the total amount of frozen assets is still being assessed. The suspects have since been released on bail as investigations continue, suggesting the potential for further arrests as authorities trace the flow of these illegal funds.Stay tuned for more updates on this evolving story on the Turkish NY Radio.
