Devil’s Advocate: Hong Kong Should Make Bank Accounts Obsolete

By Joseph Wang

For the last several years, the economic development of Hong Kong has been hampered by the inability of small businesses, particularly in high technology and fintech, to receive and
maintain bank accounts. Despite the best efforts of the Hong Kong Monetary Authority to address this issue, very little progress has been made, and it is time for the Hong Kong
government to give up on the old approach of encourage banks to open accounts, but instead use technology to allow Hong Kong businesses to function without traditional bank accounts.

The traditional approach has failed because the major banks are under pressure from regulators and agencies outside of Hong Kong to derisk bank accounts, and from the limited powers of the Hong Kong government to impose measures against the banks for not opening bank accounts. These limitations explain why no progress has been made on this issue over the last few years, and why little progress is likely to be made in the future.

Instead of looking to the past, Hong Kong should look to the future. Traditional bank accounts can be replaced by new financial innovations such as stored value facilities, virtual
bank accounts, and cryptocurrencies. In order to encourage the use of these new technologies, the Hong Kong government should first adopt a policy that governmental services such as grant issuance, fee payment can be performed without a traditional bank

In addition, the government should actively insure that processes such as investment visa issuance, governmental licensing, and business audit requirements can all be performed
using new technology rather than traditional bank accounts. Finally, the HKMA should adopt regulatory policies that allow stored value facilities, virtual banks, and cryptocurrency
vendors to cater to businesses unable to obtain traditional bank accounts.

The difficulties in small startups in obtaining bank accounts is holding back the economic development of Hong Kong. Rather than attempting to resolve the problems through traditional methods, the Hong Kong government should encourage the development of
alternatives that replace bank accounts, and use the originality of the market to develop new solutions that make bank accounts unnecessary.

The author is the chief science officer at HK-based blockchain startup Bitquant Research Laboratories. He formerly worked for JP Morgan in quantitative analytics and equity derivatives. Devil’s Advocate brings articles that goes against the grain of conventional thinking.