The largest fully digital bank in Hong Kong and one of the first to support crypto, ZA Bank is considering opening physical branches. This follows the Hong Kong Monetary Authority’s (HKMA) allowing digital banks to open physical branches to a certain extent, a new development in the city’s financial landscape.
This decision, first reported by the South China Morning Post (SCMP) is the HKMA’s latest move to improve the transaction process in the virtual banking space for customers.
Regulatory Green Light for Physical Branches
Since the eight virtual bank licenses were issued in 2019, the HKMA has been fine-tuning its policy to support the virtual assets sector. Under the latest tweak, digital banks can open physical premises if certain conditions are met.
“Giving flexibility to digital banks to operate through non-electronic channels to a limited extent will help improve their transaction processes and customer experience,” an HKMA spokesperson explained.
The HKMA emphasized that applications for physical branches will be thoroughly reviewed to ensure that such moves align with each bank’s stated goals and their ability to serve customers’ needs.
ZA Bank’s View on Physical Branches
As the first virtual bank in Hong Kong to be profitable, reports say ZA Bank is pleased with the regulatory change. A bank spokesperson reportedly said,
“Face-to-face interaction can speed up the resolution process, further improving the overall customer experience.”
Opening physical branches aims to help ZA Bank better serve complex customer needs, build trust and have a closer relationship with customers.
Other virtual banks, such as Mox Bank and WeLab Bank, have also jumped on the bandwagon. Mox Bank CEO Barbaros Uygun said,
“A physical presence makes digital banks more competitive and customers more trusting for higher financial inclusion and faster industry growth.” WeLab Bank CEO Tat Lee also reportedly added, “It is important that the offline channels utilize diverse methods to interact with the public and enhance awareness of digital banking services.”
Boost for Hong Kong’s Crypto
This could really impact Hong Kong’s crypto space: the city has been known for its forward-thinking regulations on blockchain and crypto, but many local startups allegedly struggle to get financial services.
Crypto firms in Hong Kong have historically faced strict requirements for in-person shareholder meetings, fixed deposits, and long processing times for account setup and transaction.
ZA Bank’s further physical expansion might eliminate some of these hurdles and make onboarding smoother with more visibility for crypto startups.
HKMA’s Blockchain and Crypto Inclusion
HKMA’s support for physical branches aligns with its broader efforts to adopt blockchain in the financial world. Recently, it launched the “Supervisory Incubator for Distributed Ledger Technology” (DLT) to help banks adopt blockchain solutions.
Officials say the program will include Direct advisory support to banks in testing risk management systems, starting with tokenized deposits, as well as Industry-wide collaboration for sharing best practices to drive frictionless DLT integration.
Hong Kong lawmaker Wu Jiexhuang has also allegedly proposed to include Bitcoin in Hong Kong’s national reserves under the principle of “one country, two systems”. Wu suggested using Bitcoin ETFs as a way to enhance monetary stability by following global examples like Bitcoin adoption by El Salvador and Bhutan and Bitcoin as a strategic reserve asset by U.S. President-elect Donald Trump.
Besides promoting blockchain innovation, Hong Kong has committed to implementing the OECD’s Crypto-Asset Reporting Framework (CARF). It’s to achieve global tax standards and combat cross-border tax evasion on crypto-assets.
By implementing CARF, the Hong Kong government sets a regulatory benchmark and allows Hong Kong to grow its crypto ecosystem sustainably.
What This Means for the Future
ZA Bank’s physical branches, backed by HKMA, marks a new chapter for the financial and crypto space in Hong Kong. The benefits are:
- More Access: Physical branches make financial institutions more accessible to crypto startups and people.
- More Trust: Face-to-face interaction builds better relationships with clients, and they are more trusting of digital banks.
- Smoother Process: Delegating minimal bureaucracy to crypto startups might attract more blockchain companies to Hong Kong.
ZA Bank’s move aligns with the city’s ambition to be a global hub for Web3 and blockchain.
Conclusion
ZA Bank’s physical branches, backed by HKMA’s regulatory relief, is a big step forward for Hong Kong’s financial development. This is expected to improve customer experience, strengthen trust in digital banking and support the city’s crypto space.
Hong Kong keeps working on its regulatory framework and promoting blockchain adoption to lay the ground for long term growth and innovation in both traditional and crypto-friendly financial services.
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FAQs
1. Why does ZA Bank want to have physical branches?
ZA Bank wants to have physical branches to cater to customers’ complex needs and increase satisfaction and trust through face-to-face interaction.
2. What does HKMA’s approval mean for digital banks?
HKMA now allows digital banks to have limited physical presence to improve transaction process and customer experience.
3. What is the impact on Hong Kong’s crypto space?
ZA Bank’s physical branches could help onboard crypto startups, reducing processing time and paperwork.
4. What is the DLT Supervisory Incubator?
The HKMA’s DLT Supervisory Incubator is a program meant to support banks in finding ways into blockchain solutions, with high consideration for risk management and tokenized deposits.
5. What is CARF from the OECD and why is it so important?
CARF is a framework to improve global tax transparency around crypto-assets in efforts to combat cross-border tax evasion.
