Hong Kong’s ZA Bank offers crypto conversions, accounts in city’s push

HONG KONG – Hong Kong’s biggest virtual bank is pushing into transfers of crypto and fiat currencies and to provide account services for the city’s burgeoning digital asset sector.

Founded by Chinese billionaire Ou Yaping among others, ZA Bank will offer token-to-fiat currency conversions over licensed exchanges, Mr Ronald Iu, the lender’s chief executive, said in an interview on Tuesday.

ZA will act as a settlement bank for clients to allow withdrawals in Hong Kong, Chinese and United States currencies after they deposit crypto tokens with exchanges, Mr Iu said.

The business model is already in operation with HashKey and OSL, the only two currently licensed crypto exchanges in Hong Kong, Mr Iu said.

ZA Bank will also provide the same service to other exchanges as they become licensed.

“For the dozens of interested firms, big or small, from abroad and local, at the top of their concerns is having a path to make things work,” said Mr Iu.

Hong Kong is going against the current in opening up to the beleaguered sector as it seeks to revive its status as a financial centre following years of Covid-19 restrictions and political upheaval.

But access to banking has been a major hurdle for the city’s ambitions.

The city’s banking and securities regulators will host a round-table for crypto players and bankers to share experiences and perspectives on banking services later in April. 

Hong Kong is planning to roll out a revamped virtual asset exchanges framework by June 1 that allows exchange operators to open to retail investors. 

The recent collapse of Silicon Valley Bank has further eroded banking access for many crypto firms, as traditional banks have been reluctant to provide services because of strict know-your-customer and anti-money laundering (AML) rules. 

ZA Bank is offering online account opening for local Web3 start-ups and small and medium-sized enterprises, following a trial in a regulatory sandbox that onboarded about 100 companies.

The bank has linked up to the city’s company registry data, allowing for minimal information input and cross-checking, according to Mr Devon Sin, alternate chief executive of ZA Bank. 

ZA Bank currently plans to engage only licensed exchanges and conducts AML scrutiny against the usual checklists to satisfy regulatory requirements.

No AML issues have popped up over the recent months of work, Mr Sin said. 

Mr Iu said the lender does not offer services for clients from mainland China, given the restrictions in place there.

Launched officially in March 2020, ZA Bank is one of Hong Kong’s eight licensed virtual banks and had amassed the most in terms of net assets while remaining unprofitable as at 2022. 

“It’s too early to say what the revenue model is here,” said Mr Iu. “More clients, more deposit, more business opportunity is always great for the bank.” 

The virtual lender does not expect it will need to boost its headcount to handle the the crypto client push, Mr Iu said. BLOOMBERG