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The largest virtual bank in Hong Kong is pushing into fiat and crypto currency transfers and will offer account services to the city's expanding digital asset industry.
According to Ronald Iu, the lender's chief executive officer, ZA Bank would provide token-to-fiat currency conversions through authorized exchanges. The bank was founded by Chinese billionaire Ou Yaping among others. After clients deposit crypto tokens with exchanges, ZA will operate as a settlement bank to enable withdrawals in Hong Kong, Chinese, and US dollars, Iu said.
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 more 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 Iu.
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. However, the city's objectives have been severely hampered by access to finance. Later this month, the city's banking and securities regulators will conduct a round table for cryptocurrency users and bankers to discuss their experiences and views on banking services.
As of June 1, Hong Kong intends to implement a revised framework for virtual asset exchanges that enables exchange operators to open to retail investors.
Due to stringent know-your-customer and anti-money-laundering regulations, traditional banks have been unwilling to offer services, which has further decreased banking access for many crypto companies in the wake of Silicon Valley Bank's recent bankruptcy.
Following a pilot in a regulatory sandbox that onboarded about 100 organizations, ZA Bank is now providing online account opening for local Web3 start-ups and small-medium enterprises. According to Devon Sin, substitute chief executive of ZA Bank, the bank connected to the city's company register data, allowing for little information entry and cross-checking.
To comply with regulatory requirements, ZA Bank is only planning to work with licensed exchanges and performs AML examination using the standard checklists. The last few months of work have not shown any AML issues, according to Sin.
Due to the restrictions in place in mainland China, the lender does not provide services to customers from there, according to Iu.
One of Hong Kong's eight licensed virtual banks, ZA Bank was officially launched in March 2020 and had accumulated the largest net assets while being unprofitable as of the previous year.
Iu remarked, "It’s too early to say what the revenue model is here. More clients, more deposit, more business opportunity is always great for the bank."
According to Iu, the virtual lender does not anticipate needing to increase staff in order to accommodate the surge in crypto clientele.
By fLEXI tEAM