Virtual Banks in Hong Kong Advised to Embrace Web 3.0 Opportunities

• Hong Kong’s virtual banks are encouraged to support Web 3.0 companies to capture the digital asset market and remain competitive.
• Legislator Johnny Ng emphasizes the critical two-year period for Hong Kong’s Web 3.0 sector to achieve significant growth.
• According to a recent survey, challenges in opening accounts with virtual banks hinder the growth of blockchain companies in Hong Kong.

Hong Kong’s virtual banks are urged to enhance their services to support Web 3.0 companies better. This move aims to help them capture a larger share of the digital asset market and remain competitive with traditional banks. 

Legislator Johnny Ng Kit-Chong, known for his advocacy of cryptocurrencies, stressed the importance of this initiative. He highlighted the next two years as crucial for Hong Kong to contribute significantly to the Web 3.0 sector.

 His comments followed the Hong Kong Monetary Authority’s (HKMA) decision to pause the issuance of new licenses for virtual banks. This decision allows the city’s eight existing operators to solidify their positions in the market.

Virtual banks in Hong Kong were initially established to promote financial technology (fintech), foster innovation, and increase competition in the banking industry. These banks operate without physical branches, leading to significant cost savings. 

However, despite these advantages, Hong Kong’s virtual banks have not achieved profitability. Ng remains optimistic, predicting that these banks could break even by 2026, especially if they seize opportunities in the Web 3.0 space.

Ng pointed out that a key growth area for these banks lies in addressing the needs of Web 3.0 companies. These include companies involved in cryptocurrencies, non-fungible tokens (NFTs), and blockchain technology. He noted that many of these companies need help opening accounts with virtual banks.

 A survey conducted by Ng’s office in August indicated that 40% of companies in the blockchain sector find it extremely challenging to open accounts with virtual banks. The survey suggested that issues often arise from requirements such as the need for company executives to be physically present in Hong Kong and strict conditions attached to fixed-term deposits.

According to Ng, these challenges have negatively impacted the development of the Web 3.0 sector in Hong Kong. Some companies have even relocated to more favorable environments. Ng suggested that the government should develop a comprehensive strategy for Web 3.0 development, which he believes Chief Executive John Lee Chiu could address in his upcoming policy speech.