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Mainland Chinese banks, banned from crypto assets at home, weigh services in Hong Kong after policy change

  • Some mainland banks and family offices are considering starting or reactivating virtual asset projects in Hong Kong, Deloitte China’s digital asset leader said
  • Hong Kong’s new digital asset rules have generated buzz, but some investors say they want to see more detailed plans

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Visitors are seen at a booth of Digital Asset on the first day of FinTech Week 2022 in Hong Kong on October 31. Photo: AFP
Mainland Chinese financial institutions, strictly banned by Beijing from any involvement with cryptocurrency assets at home, are considering launching related businesses in Hong Kong, where new measures for boosting the city’s status as a crypto hub have drawn interest from the industry.

Some mainland Chinese banks, family offices and other financial service providers are considering kicking off or reactivating virtual asset projects in Hong Kong, including offering cryptocurrency services to their clients in the city, Robert Lui, Hong Kong Digital Asset Leader at Deloitte China, told the South China Morning Post on Tuesday at Hong Kong’s FinTech Week.

“I received calls from some of our friends in the mainland yesterday, and they were talking about ‘one country, two systems’ and whether their virtual asset businesses can come to Hong Kong,” Lui said.

Unlike Hong Kong, the mainland Chinese government regards cryptocurrency as a threat to financial stability and strictly prohibits banks from dealing with cryptocurrencies such as bitcoin. Last year, China’s central bank issued a notice clarifying that providing such services to Chinese citizens could also be illegal.
While some mainland financial institutions already have their own non-fungible token (NFT) and metaverse businesses in Hong Kong, progress on those projects has slowed in what the industry is calling the “crypto winter” this year, and because regulations in the city were not clear, according to Lui.

With the latest regulatory change, businesses are getting a clear signal that more virtual asset-related investment products, including security token offerings, are encouraged to come to Hong Kong, he added.

Amid Hong Kong’s drive to boost its competitiveness after rigid Covid-19 travel restrictions and the introduction of a Beijing-imposed national security law drove out business, the city has proposed a series of policy measures that it hopes will restore its status as a cryptocurrency hub.
The measures, announced by the government on Monday just ahead of its FinTech Week event, include a new licensing regime for virtual asset providers that will allow financial services to sell crypto-related assets to retail traders. The city will also study how to develop exchange-traded funds with exposure to cryptocurrencies, along with reviewing property rights for tokenised assets and the legality of smart contracts.
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