Web3 challenges lead Hong Kong official to push for virtual bank expansion

Hong Kong lawmaker Johnny Ng has called for the expansion of virtual banking services to overcome hurdles faced by web3 startups in the territory.

Hong Kong Legislative Council member Johnny Ng said in a post on X on August 9 that Hong Kong should adopt a crypto-friendly approach by expanding its virtual banking services due to the persistent obstacles web3 startups face in accessing financial services.

香港金融管理局早前發表虛擬銀行報告。我對於過去特區政府幾年支持銀行業服務升級和虛擬銀行發展表示讚賞,但同時我的團隊做了一個Web3公司對香港銀行服務的意見,調查表示,Web3公司出現開户難情況,導致不能有效地發展In other words:

1.… picture.twitter.com/srDiDOhvwC

— Johnny Ng (@Johnny_nkc) August 9, 2024

Ng stressed that virtual banks need to diversify their services and suggested setting up dedicated crypto-focused banks, citing a report by the Hong Kong Monetary Authority that highlighted the ongoing difficulties web3 companies face when trying to open bank accounts in the region. “The survey showed that web3 companies have difficulty opening accounts, which leads to inefficiency in developing business locally,” Ng said.

Ng’s recommendations stated that virtual banks should focus more on the needs of web3 companies and accelerate the development of Hong Kong’s digital ecosystem, while “virtual asset policies have become a focal point of global government discussions.”

Web3 firms grapple with banking challenges in Hong Kong

Web3 startups in Hong Kong face challenges opening bank accounts due to strict regulatory requirements and traditional financial institutions’ conservative approach to the crypto space.

According to the HKMA report, of the more than 120 web3 firms with a presence in Hong Kong in 2022, about 95% had difficulty opening accounts with virtual banks. Moreover, 70% of these firms required shareholders or directors to visit Hong Kong multiple times, while 60% were asked to hold fixed deposits. Additionally, 54% of firms took six months or more to open accounts, about 20% took between two and five months, and 3% were rejected altogether.

Ng called on Hong Kong authorities to further their efforts focused on web3 adoption, saying the city should “encourage the development of the entire chain and ecosystem as soon as possible” if it wants to become a web3 hub.