CMB Subsidiary Launches Crypto Exchange in Hong Kong

CMB International Securities Limited, a subsidiary of the China Merchants Bank (CMB) — one of China’s top banks — has launched a cryptocurrency exchange in Hong Kong.

According to a Monday CMB WeChat announcement, the bank has started offering virtual asset trading services. The launch comes after the Hong Kong Securities and Futures Commission approved the bank’s application for a virtual asset service provider license in mid-July.

CMB’s Hong Kong-based crypto exchange allows for 24/7 trading of Bitcoin (BTC), Ether (ETH) and Tether’s USDt (USDT) for eligible investors. Documentation provided by the bank clarified that only professional investors are eligible for crypto trading services.

China Merchants Bank is one of the country’s largest banks, managing over $1.7 trillion worth of assets as of the end of March, according to Macrotrends data. The bank’s ordinary class A shares also have a market capitalization of $153.16 billion.

Related: China cracks down on stablecoin promotions, research and seminars

Mainland China’s ban on crypto persists

CMB said it is the first Chinese bank–affiliated broker in Hong Kong to secure licenses tied to virtual asset trading services. The bank also noted plans to further integrate traditional stock trading with digital assets and fintech applications.

Still, in Shenzhen, China — where the bank’s headquarters are located — such a service would be illegal. The Chinese government banned crypto trading in 2017, resulting in major sell-offs at the time.

Since then, Chinese authorities have continued to treat crypto trading as illegal in mainland China, leading some market participants to devise creative solutions. Still, Hong Kong operates under its own rules within China’s “one country, two systems” policy, and is increasingly emerging as a local crypto hub.

Related: Animoca and Standard Chartered form stablecoin venture in Hong Kong

Hong Kong: an emerging crypto hub

Hong Kong authorities appear to have made crypto regulation a high-priority element on their agenda. On the first day of this month, the Hong Kong Monetary Authority (HKMA) finalized its regulatory framework for stablecoin issuers.

The introduction of the new rules led to stablecoin companies operating in Hong Kong posting double-digit losses on Aug. 1 just after they came into force. Analysts at the time described the sell-off as a healthy correction, as the requirements for stablecoin issuers proved to be more stringent than expected.

The new rules will be rolled out in a six-month transition period starting from Aug. 1. The new Stablecoin Ordinance effectively criminalizes the offering or promotion of unlicensed fiat-referenced stablecoins to retail investors. Local authorities also launched a dedicated public license registry before the rules coming into effect.

The Hong Kong Securities and Futures Commission has warned that the introduction of the new local stablecoin regulatory framework has increased the risk of fraud. Last week, the SFC also issued immediate guidance on cryptocurrency custody standards, introducing sweeping security requirements and a ban on smart contracts in cold wallet implementations — a rule that conflicts with current practices at several leading firms.