Guide to opening an account for a cryptocurrency exchange in Hong Kong How to identify two types of bank accounts

Guide to opening a cryptocurrency exchange account in Hong Kong and identifying two types of bank accounts

The Hong Kong government is actively promoting the vision of creating a global digital asset center. Since early August, more and more cryptocurrency exchanges have obtained or been granted regulatory licenses. One of the biggest challenges they face is opening bank accounts, as this is a key step for cryptocurrency exchanges to legally deposit and withdraw funds. This article will help clarify the types of bank accounts in Hong Kong and the differences between them, allowing cryptocurrency exchanges to apply as needed.

First, Bitkoala will summarize the relevant information on cryptocurrency institution license applications in the Hong Kong market so far:

• On August 3, HashKey Group announced on its official website that HashKey Exchange 1 and 7 had officially obtained regulatory approval, becoming the first licensed trading platform in Hong Kong for retail users.

• Also on August 3, BC Technology Group announced that its wholly-owned subsidiary OSL Digital Securities Limited had been approved by the Hong Kong Securities and Futures Commission to upgrade its existing license, officially providing digital asset trading services for mainstream coins such as Bitcoin and Ethereum to retail investors.

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• On August 11, the Hong Kong Virtual Asset Exchange HKVAX announced that it had received a principle approval notice from the Hong Kong Securities and Futures Commission (SFC), allowing it to engage in regulated activities of Type 1 and Type 7. It will become the third licensed virtual asset trading platform in Hong Kong.

• On August 24, OKX Global Chief Business Officer Andy Cheung stated that OKX Hong Kong had largely completed the preliminary preparations for the Virtual Asset Trading Platform (VATP) license and was rapidly approaching the stage of submitting formal applications and providing external evaluation reports.

• On August 30, SEBA Bank Hong Kong branch, which supports cryptocurrencies, announced that it had obtained a principle approval from the Hong Kong Securities and Futures Commission (SFC), allowing it to engage in virtual asset trading, operate over-the-counter derivatives and other cryptographic products, provide advice on virtual assets, and manage assets for fully delegated accounts of virtual assets.

• On the same day, August 30, Hong Kong trust service provider LianGuaindo Trust Limited announced that it had obtained the Hong Kong TCSP and Trustee licenses on August 29, 2023, and would be able to engage in more fund management businesses in the future.

• On September 4, OKX Global Chief Business Officer Andy Cheung stated that the preparation for OKX HK’s compliance license application in Hong Kong had entered its final stage, hoping to obtain the license in June next year. In the first year after that, it may be able to attract 100,000 to 200,000 Hong Kong retail users.

To be frank, under this major trend, many local banks in Hong Kong have also begun to change their attitudes and are willing to communicate with virtual asset institutions. Many banks are also establishing cooperative relationships with cryptocurrency companies. This raises a question: how can cryptocurrency exchanges choose different accounts in Hong Kong banks? Let’s continue to read on—

Two types of key bank accounts need to be clarified, application errors may affect license applications

In fact, Hong Kong banks generally provide two types of accounts for cryptocurrency exchanges:

One is the operating account: This account cannot handle customer assets, but can be used for expenses, rent, utilities, processing company capital, etc., to facilitate the establishment of teams in Hong Kong, hiring business and risk department employees, and applying for SFC licenses.

The other is the settlement account: This account mainly handles customer assets and is initially temporarily closed. When the company obtains a “principle approval” license, it will require more anti-money laundering (AML) information, and then open the settlement account for testing the deposit and withdrawal processes; when the company obtains an official license, it will formally open the account and provide fiat currency deposit and withdrawal settlement services.

According to Bitkoala’s understanding, based on relevant information disclosures, the number of Web3 companies consulting on opening bank accounts in Hong Kong has significantly increased in the past two months. However, it should be noted that banks, as compliance institutions, have strict reviews, and whether the account can be successfully opened also involves many other factors, such as the ultimate owner of the company, company capital, company structure, etc.

Summary

The speed at which Hong Kong actively regulates the cryptocurrency market is continuously accelerating. For Web3 companies, it is crucial to obtain local bank accounts in compliance with the law. Therefore, extra caution is needed when applying. As a new piece of the “global digital financial center” puzzle, local financial institutions in Hong Kong are also actively embracing new technologies and trends, accelerating the development and transformation process of Web 3.0.

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