Virtual Banks in Hong Kong Pursue Web3 Growth Amid Regulatory Challenges
Hong Kong’s virtual banks are reportedly at a pivotal point, as they currently capture only a small slice of the financial market, holding just 0.3% of the total assets of all retail banks in the region.
According to a report by the South China Morning Post (SCMP), Hong Kong legislator Johnny Ng Kit-chong, a strong advocate for cryptocurrencies, believes that virtual banks have a significant opportunity to better serve Web3 companies:
"Over the past few years, the government has put in significant effort to develop virtual banks and improve their services. Now is a crucial time for the city to play a larger role in the Web 3.0 sector over the next two years."
However, one of the main challenges confronting Hong Kong’s virtual banks is the difficulty they face in opening accounts for companies involved in cryptocurrencies, non-fungible tokens (NFTs), and blockchain technology.
SCMP's report highlighted that a recent survey found that 40% of these companies describe the process of opening accounts as “extremely difficult,” with challenges stemming from stringent regulatory standards and the geographical location of the banks.
These obstacles have reportedly led some businesses to relocate to regions with more favorable conditions for digital innovation—a trend that could potentially hinder Hong Kong's progress in the digital finance sector.
Despite these challenges, Ng remains optimistic. He reportedly emphasized the “tremendous” potential for virtual banks if the government provides a clear and supportive blueprint for Web3 development.
In a notable move, Mox Bank, owned by Standard Chartered, became the first virtual bank in Hong Kong to launch a crypto exchange-traded fund (ETF), enabling transactions in spot Bitcoin (BTC) and Ether (ETH) ETFs.
Barbaros Uygun, the CEO of Mox Bank, has indicated that the bank plans to expand further into emerging sectors and introduce new digital investment opportunities for its customers.
On July 28, Ng announced plans to collaborate with stakeholders to evaluate the potential benefits of incorporating Bitcoin (BTC) into Hong Kong’s financial reserves.
In a post on X (formerly Twitter), Ng underscored the importance of considering Bitcoin integration into the region's strategic reserves, suggesting that this move could strengthen Hong Kong's economic framework under appropriate regulatory conditions.
Often referred to as “digital gold,” Bitcoin’s potential as a hedge against inflation is becoming increasingly recognized globally, and Ng emphasized the growing importance of this asset as its value continues to be acknowledged.
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