ZA Bank, the biggest virtual bank in Hong Kong, is making a bold move into the crypto market as it aims to become a bridge between digital assets and fiat currencies. The digital bank, launched in 2020, plans to offer transfers and conversions between crypto and fiat currencies, as well as provide account services for Hong Kong’s rapidly expanding crypto sector.
According to CEO Ronald Iu, ZA Bank will offer token-to-fiat currency conversions over licensed exchanges and act as a “settlement bank for clients to allow withdrawals in Hong Kong, China, and US currencies after they deposit crypto tokens with exchanges.” The bank will be cooperating with HashKey and OSL, the only two currently licensed digital asset exchanges in Hong Kong, to facilitate these services for interested firms, both local and international.
ZA Bank has also been actively engaging with the local crypto and Web3 startups, offering online accounts and conducting trials in a regulatory sandbox that onboarded around 100 firms. The bank has linked up to the city’s company registry data to streamline the onboarding process with minimal information input and cross-checking, ensuring compliance with regulatory requirements, including anti-money laundering (AML) procedures.
However, ZA Bank has made it clear that it will only engage with licensed exchanges and will not be offering crypto services to mainland Chinese retail customers due to regulatory restrictions. This comes as Hong Kong aims to become a regional crypto hub by rolling out a regulatory framework in June, albeit with highly restrictive measures such as background checks on issuers and developers of listed tokens and barring licensed exchanges from market-making activities without insurance coverage for potential risks. The Hong Kong Security and Futures Commission has also recently stated that DeFi projects would need to be fully regulated.
The move by ZA Bank and Hong Kong’s push for Web3 adoption have significant implications for the metaverse and the broader crypto sector. Web3 technologies, which are built on decentralized networks, have the potential to disrupt traditional financial systems and enable new forms of innovation and collaboration. Proper regulation will be crucial in ensuring the security and stability of the market, while fostering an environment that encourages responsible innovation.
While Hong Kong strives to position itself as a global fintech hub by embracing cutting-edge technologies and implementing regulatory frameworks, the lack of clear regulations in the U.S. has created increased contempt for the crypto industry. The divergent approaches between Hong Kong and the U.S. highlight the varying attitudes towards cryptocurrencies and their potential impact on the future of finance.
As the upcoming Digital Economy Summit in Hong Kong approaches, the region’s commitment to Web3 adoption and proper regulation signals its determination to lead the way in the digital economy. The intersection of fintech and crypto in Hong Kong presents opportunities for growth and development, with potential repercussions on the metaverse and the broader crypto sector.