In a groundbreaking development in the world of finance, ZA Bank, a virtual bank in Hong Kong, has announced a new service that allows individual users to buy and sell Bitcoin and Ethereum directly using fiat currency. This move marks a significant milestone for the bank, making it the first financial institution in Asia to offer cryptocurrency trading services to retail customers. Currently, other cryptocurrencies are not supported, but the potential for expansion is evident.
With a minimum transaction amount set at $70 or 600 Hong Kong dollars, customers can partake in this emerging market with relatively low barriers to entry. Each transaction incurs a fee of $1.99 or 15 Hong Kong dollars, with an additional platform fee of 1.5% on the transaction value. However, to encourage user engagement, ZA Bank has proposed a promotional period lasting until the end of June 2025, during which it will waive transaction fees and reduce the platform fee to just 0.8%.
Under the leadership of Acting CEO Wu Zhonghao, this initiative is open to all residents of Hong Kong, provided they can demonstrate eligibility by presenting a qualifying Hong Kong identity card, proof of residency, and a phone number. To safeguard customer assets, there’s a limit in place, restricting the proportion of cryptocurrency holdings to 20% of their total investment assets. Such measures emphasize the importance of asset security in the volatile cryptocurrency market.
ZA Bank's foray into the cryptocurrency space has been made possible through a partnership with HashKey, a leading cryptocurrency exchange in Hong Kong. This collaboration not only aims to ensure compliance with regulatory standards but also seeks to bridge the traditional banking sector with the burgeoning cryptocurrency realm. HashKey representatives have expressed their commitment to continue working together with ZA Bank to advance the Web3 ecosystem and broaden the scope of financial services available to users.
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Recent surveys from the Hong Kong Banking Association reveal that nearly 70% of respondents believe that if banks provided virtual asset trading services, it would greatly simplify the process of buying and selling such assets. This sentiment underscores the growing acceptance and demand for cryptocurrency services within the traditional financial landscape.
In a broader context, ZA Bank represents a shift in the banking industry toward integrating digital solutions and enhancing customer convenience. The bank received its virtual banking license in 2019 and is now looking to further its influence in the digital banking sector. In April 2024, ZA Bank announced its intention to provide banking services for stablecoin issuers as the adoption rate of Web3 technologies rises across Hong Kong.
As part of this effort, ZA Bank is securing financial instruments that will serve as fiat reserves, which issuers can utilize to back digital assets. Additionally, services like fund transfers, payroll management, and various deposit options will also be available to stablecoin issuers, illustrating the bank's proactive approach to digital finance.
A notable aspect of the recent developments is the stance taken by the Hong Kong Monetary Authority (HKMA) towards stablecoins. On July 18, 2024, the HKMA announced the first batch of participants in its "Stablecoin Issuer Sandbox," which included several prominent companies such as JD Chain Technology (Hong Kong) and Standard Chartered Bank (HK). This initiative aims to pilot new solutions leveraging stablecoins in the financial ecosystem.
According to the HKMA, stablecoins are defined as virtual assets designed to maintain a stable value in relation to certain assets, commonly fiat currencies. This offers a bridge between traditional financial instruments and cryptocurrencies, making them a focal point for future banking innovations.
Airstar Bank, one of Hong Kong's licensed virtual banks, has likewise stepped into the stablecoin arena. They partnered with JD Chain Technology to explore new cross-border payment solutions based on stablecoins, emphasizing collaboration among different entities to drive innovation.
As one of the first virtual banks licensed in Hong Kong, Airstar Bank counts Xiaomi as its largest shareholder. This collaboration signifies an emerging synergy between major technology players aiming to capture the evolving stablecoin market.
Furthermore, Futu Securities, holding a significant stake in Airstar, has also launched direct trading services for Bitcoin and Ethereum, making it the first online brokerage in Hong Kong to offer cryptocurrency trading directly to retail investors, thus enhancing access to these digital assets for a wider audience.
The regulatory landscape is rapidly changing, with Hong Kong's government implementing various policies to foster a conducive environment for cryptocurrency trading. Since declaring its virtual asset market development policy, Hong Kong has since allowed retail cryptocurrency trading starting in August 2023, leading to a significant rise in interest and activity in this sphere.
Currently, three exchanges have received licenses from the Securities and Futures Commission (SFC) to operate, with OSL and HashKey obtaining their licenses in 2020 and 2022, respectively. The HKVAX received its license in October 2024. The SFC has expressed intentions to issue more licenses to cryptocurrency exchanges and digital asset companies operating in Hong Kong by the end of this year, indicating the growth trajectory of the sector.
As part of its partnership with ZA Bank, HashKey is providing asset custody, trading, and clearing support, enabling a secure environment for cryptocurrency transactions. This is an essential step in building trust within the market, which is often marred by concerns about security and regulatory compliance. The Chief Analyst of HashKey Exchange highlighted that discussions are underway with other major banks, brokers, and funds to expand these partnerships further.
Reflecting on the evolution of blockchain technology over the last decade, the chairman of HashKey Group, Xiao Feng, emphasized the construction of a new financial market system — the Crypto Financial Market. Unlike traditional financial systems that rely on fiat currencies for transactions and records, this new system operates on a decentralized ledger, where economic activities are logged in cryptocurrency.
Xiao Feng elaborated that while these two financial systems are distinct, there is a growing trend toward interoperability. He predicts a parallel development between the fiat-based and crypto-based financial systems, with interoperability expected to be achieved by 2025. This interconnectedness will be facilitated through various avenues.
The first avenue is stablecoins, which market predictions suggest could reach trading volumes of $6 trillion by 2024. The tokenization of fiat currency is seen as a primary pathway to bridge the gap between fiat and cryptocurrencies.
Secondly, cryptocurrency ETFs represent another significant development, allowing traditional investors to engage with digital assets without managing their private keys directly. Current holdings of Bitcoin ETFs in the U.S. amount to nearly $70 billion, showcasing the growing inclusion of crypto assets in conventional investment portfolios.
Another important method involves Real World Asset (RWA) tokenization—bringing traditional assets onto the blockchain and giving them a digital form.
Lastly, Security Token Offerings (STOs), which have been a topic of discussion over the past few years, are anticipated to gain traction. Many Web3-focused businesses are expected to utilize token mechanisms for financing and IPO processes, thereby diversifying funding routes beyond traditional methods.
Ultimately, Xiao Feng asserted that these pathways necessitate compliance with regulations and oversight from licensed financial institutions, positioning such entities as crucial intermediaries in bridging these two evolving financial markets.