Hong Kong’s biggest virtual bank is pushing into transfers of crypto and fiat currencies and will provide account services for the city’s burgeoning digital asset sector.
ZA Bank, which was founded by Chinese billionaire Ou Yaping among others, will offer token-to-fiat currency conversions through licensed exchanges, according to Ronald Lu, the lender’s chief executive officer, in an interview Tuesday. After depositing crypto tokens with exchanges, ZA will act as a settlement bank for clients, allowing withdrawals in Hong Kong, China, and US currencies, according to Lu.
HashKey and OSL, the only two crypto exchanges in Hong Kong that are currently licensed, are using the business model already, according to Iu. In the event that additional exchanges obtain licenses, ZA Bank will also offer the same service to them. “For the dozen of interested firms, big or small, from abroad and local, top of their concern is to have a path to make things work,” said Lu.
In an effort to restore its reputation as a financial hub after years of Covid restrictions and political unrest, Hong Kong is going against the grain by opening up to the disadvantaged sector. The city’s goals, however, have been significantly hampered by access to banking. Later this month, the city’s banking and securities regulators will host a round table for cryptocurrency users and bankers to discuss their experiences with and views on banking services.
A new framework for virtual asset exchanges that permits exchange operators to accept retail investors will be put into place by Hong Kong as of June 1. Traditional banks have been reluctant to provide services due to strict know-your-customer and anti-money-laundering regulations, which has further eroded banking access for many crypto firms in the wake of Silicon Valley Bank’s recent collapse.
ZA Bank is now offering online account opening for regional Web3 start-ups and small-medium enterprises after a trial in a regulatory sandbox that onboarded about 100 firms. The bank connected to the city’s company registry data, allowing for minimal information input and cross-checking, according to Devon Sin, the bank’s acting chief executive.
To comply with regulatory requirements, ZA Bank is only planning to work with licensed exchanges and performs AML scrutiny using the standard checklists. The last few months of work have not revealed any AML issues, according to Sin.
Due to the restrictions in place in mainland China, the lender does not provide services to customers from that country, according to Iu. One of Hong Kong’s eight licensed virtual banks, ZA Bank was officially launched in March 2020 and had accumulated the most net assets while remaining unprofitable as of the previous year.