In May, the HKMA announced that it would change the name of Hong Kong’s online lenders to “licensed digital bank” to increase the public’s confidence in them. The HKMA noted that the Chinese term for “virtual” (the previous name for the banks) can mean “fictional.”
To be sure, the term “virtual bank” is odd, and “digital bank” is better. However, it is unlikely that the terminology is a serious problem here. The problem is that there are too many offshoots of big banks and tech companies offering similar products, without any distinct value proposition.
The one exception is WeLab Bank, which did begin as a startup backed by venture capital. WeLab Bank’s management told Hong Kong media in late June that it expects to be profitable in 2025. As of June, its customer deposits had tripled year-on-year to HK$6 billion. Tat Lee Ka-tat, WeLab’s CEO, says that the digital lender expects significant additional deposit growth this year, with a target of HK$8 billion by year-end.
That the city’s digital banks are being encouraged to focus on Web3 – an overhyped, poorly defined concept for which funding has plummeted – suggests that they are in trouble. Hong Kong might be intent on turning itself into a cryptocurrency hub, but for digital banks that are struggling and have to convince customers that they can be trusted, it is not the best sector to bet on. Crypto remains mercurial and prone to malfeasance.
That said, it is true that Mox Bank, which is owned by Standard Chartered, started a cryptocurrency exchange-traded fund (ETF) last week. Mox is the first virtual bank in Hong Kong to offer transactions in spot bitcoin and ether ETFs.
Additionally, about 100 Web3 companies operating in Hong Kong’s Cyberport have opened accounts with ZA Bank. The Zhong An Insurance-backed lender also provides functional support for the two licensed virtual asset trading platforms in Hong Kong.
Time will tell if these efforts come to fruition.