Crypto-friendly ZA Bank Considers Physical Branches in Hong Kong

ZA Bank, the largest digital bank in Hong Kong and a trailblazer in crypto-friendly financial services, is reportedly exploring establishing physical branches.

According to a South China Morning Post report, the Hong Kong Monetary Authority (HKMA) has permitted digital banks to operate limited physical locations.

ZA Bank Can Now Establish A Physical Branch: What Does This Mean For Hong Kong Crypto Users?

This latest HKMA decision now allows digital banks to set up physical branches.

Since granting eight virtual bank licenses in 2019, the authority has been improving the virtual assets sector.

According to the HKMA, this change is driven by industry feedback on improving transaction processes and customer experience.

A spokesperson said in the SCMP report,

“Giving flexibility to digital banks to conduct business through non-electronic channels in a limited manner will help improve their transaction processes and enhance customer experience.”

However, the HKMA emphasized that it would carefully evaluate applications to ensure that any physical branches align with the banks’ stated objectives and effectively serve customer needs.

Several digital banks have expressed interest in the opportunity, with ZA Bank, Mox Bank, and WeLab Bank among those considering the move.

Mox Bank CEO Barbaros Uygun highlighted the benefits of this shift, noting that a physical presence would:

“enhances the competitiveness of digital banks and customer trust, fosters greater financial inclusion, and accelerates the growth of the industry.”

Similarly, WeLab Bank CEO Tat Lee expressed an open attitude toward offline channels, even encouraging:

“It is important that the offline channels utilise diverse methods to interact with the public and enhance awareness of the digital banking services.”.

ZA Bank, the first virtual bank to declare profit, welcomed the regulatory change.

The bank sees physical branches as a way to address complex customer issues more effectively and enhance overall satisfaction.

A spokesperson stated,

“Face-to-face interactions can significantly improve the resolution process, further enhancing the overall customer experience.”

Hong Kong’s Growing Crypto Sector

As one of the few crypto-friendly financial institutions in the city, ZA Bank’s potential expansion into physical locations could provide much-needed support for the local web3 and blockchain industries.

Hong Kong’s crypto startups have long struggled to secure financial services.

Many of these firms were subjected to onerous requirements, such as multiple in-person shareholder visits, mandatory fixed deposits, and prolonged processing times.

ZA Bank’s initiative to establish physical branches could mitigate some of these challenges by providing a more accessible and transparent onboarding process for crypto startups.

This development also coincides with broader trends in Hong Kong’s crypto sector.

The HKMA has recently launched the “Supervisory Incubator for Distributed Ledger Technology” (DLT) to assist banks in safely adopting blockchain-based solutions.

🏦 The HKMA has unveiled the "Supervisory Incubator for Distributed Ledger Technology" to help banks adopt blockchain-based solutions.#HongKong #Blockchainhttps://t.co/yctuQMvpRg

— Cryptonews.com (@cryptonews) January 9, 2025

The program includes two key components: direct support for banks through advisory teams to test risk management systems, initially focusing on tokenized deposits, and industry-wide collaboration to share best practices and streamline DLT integration.

Simultaneously, Hong Kong legislator Wu Jiexhuang has also proposed integrating Bitcoin into the city’s national reserves under the “one country, two systems” framework to bolster financial stability.

He suggests using Bitcoin exchange-traded funds (ETFs) as a gateway, citing global trends such as the adoption of Bitcoin by El Salvador and Bhutan and the support of U.S. President-elect Donald Trump for classifying Bitcoin as a strategic reserve asset.

Moreover, Hong Kong has committed to adopting the OECD’s Crypto-Asset Reporting Framework (CARF) to enhance international tax transparency and combat cross-border tax evasion.