Hong Kong’s ZA Bank, the largest virtual bank in the city, is making a significant move into the cryptocurrency market by offering transfers between crypto and fiat currencies and providing account services for the rapidly growing digital asset sector.

The move comes as Hong Kong seeks to position itself as a global cryptocurrency finance hub, capitalizing on the increasing demand for digital assets. 

ZA Bank, founded by Chinese billionaire Ou Yaping among others, will offer token-to-fiat currency conversions over licensed exchanges, enabling clients to convert cryptocurrencies into traditional currencies such as Hong Kong Dollars (HKD), Chinese Renminbi (RMB), and US Dollars (USD). Ronald Iu, ZA Bank’s CEO, said in an interview that the bank will act as a settlement bank, allowing clients to withdraw funds in these currencies after depositing crypto tokens with exchanges. 

Currently, ZA Bank is working with the only two licensed crypto exchanges in Hong Kong, HashKey and OSL. The bank plans to extend its services to other exchanges as they become licensed. By providing these services, ZA Bank aims to address the concerns of interested firms, big or small, from abroad and local, who are looking for a path to make things work in the digital asset space. 

Hong Kong is going against the current trend, opening up to the beleaguered sector as it seeks to revive its status as a financial center following years of Covid restrictions and political upheaval. Access to banking has been a significant hurdle for the city’s ambitions, prompting the city’s banking and securities regulators to host a roundtable later this month for crypto players and bankers to share experiences and perspectives on banking services. 

As part of its push to become a crypto finance center, Hong Kong plans to roll out a revamped virtual asset exchanges framework as of June 1. The new framework will allow exchange operators to open their doors to retail investors, further expanding the reach of digital assets in the city. 

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 due to strict know-your-customer (KYC) and anti-money laundering (AML) rules. ZA Bank is addressing this issue by offering online account opening for local Web3 startups and small-medium enterprises. The bank has already completed a trial in a regulatory sandbox that onboarded around 100 firms. 

To facilitate the account opening process, ZA Bank has linked up with the city’s company registry data, allowing for minimal information input and cross-checking. According to Devon Sin, alternate chief executive of ZA Bank, the bank currently only plans to engage with licensed exchanges and will conduct AML scrutiny against the usual checklists to satisfy the regulatory requirements. Sin noted that no AML issues have arisen during the recent months of work. 

Despite the push into the crypto sector, ZA Bank does not offer services for clients from mainland China due to 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 of last year. 

Iu remarked that it is too early to determine the revenue model for the bank’s expansion into the crypto market. However, he said that “more clients, more deposits, and more business opportunities are always great for the bank.” 

As it stands, the virtual lender does not expect it will need to boost its headcount to handle the influx of crypto clients. ZA Bank’s push into the digital asset space is a significant step towards solidifying Hong Kong’s status as a leading crypto finance center, providing much-needed banking services to the burgeoning market.