Eric Larcheveque, ceo of Ledger, refers to 2018 as a record-breaking year for crypto exchange hacks. In all, the estimated US$865 million lost to hacking – about three-times that of 2017 – has not really stifled interest by entrepreneurs and adventurous executives on the potential of the technology to transform the business – and naturally their wallets.
All hackings aside, experiments on the cryptocurrencies in improving transparency, operational efficiency, and reducing the cost of doing business continues to drive the ambitions and desires of many business entrepreneurs and startups.
So the keywords to bear in mind as one delves in crypto are cheaper, better, and faster. These are the same three words that organizations aiming to mine as they look to compete in the digital economy.
Arguably payment is one of the early recipients of cryptocurrency. Remittance or money transfer – to be specific – has been around for much longer than the founding of Western Union (1851). But its only in the digital economy that we’ve started to see what may be transformational-level innovations in and around money transfers. And we have cryptocurrencies to thank for that.
One startup, based in Hong Kong, may have successfully commercialized cryptocurrency to help its customers – remittance companies – achieve the desired goals of cheaper, better, and faster.
Despite all claims to the contrary, certain business types will find Hong Kong an inhospitable place to start doing business. Yes, it is easy to register a business in Hong Kong but one area that any company will find a challenge is opening a bank account – at least if your business is one that banks, under the guidance of the local regulator, find potentially risky. Good luck!
But necessity is the mother of invention. So enterprising entrepreneurs, such as George Harrap, ceo and co-founder of Hong Kong-based Bitspark, saw an opportunity to capitalize on the desires of remittance companies to target consumers and business that need to send or receive money to and from Hong Kong.
While remittance companies have legitimately operated for many years in Hong Kong, in recent years, de-risking strategies by banks have forced many to look for alternatives to continue operating – albeit within the bounds of KYC and ALM compliance laws.
He refers to a phenomenon called de-risking whereby the money transfer companies are losing their bank accounts – i.e., banks are forcibly closing these businesses’ bank accounts. Harrap said they [remittance companies] may have operated fine for the last two decades, but banks are now saying: “we just don’t want to service this industry anymore.”
During a question and answer session with the Hong Kong Legislative Council on May 30, 2018, acting secretary for Financial Services and the Treasury, Joseph Chan said:
“To address the problem that quite a number of enterprises have encountered difficulties in opening and maintaining bank accounts, the Hong Kong Monetary Authority (HKMA) issued in September 2016 a circular entitled "De-risking and Financial Inclusion" to authorized institutions, emphasizing that the customer due diligence (CDD) measures adopted by banks should be proportionate to the risk level, and that they were not required to implement overly stringent CDD processes. In addition, the HKMA issued a circular entitled "Guideline on Anti-Money Laundering and Counter-Terrorist Financing - Address Verification Requirements" in October 2017 to inform banks that the address verification requirements set out in the "Guideline on Anti-Money Laundering and Counter-Terrorist Financing (for Authorized Institutions)" would be formally removed, and thereafter banks would only be required to collect the address information of the customers.”
Despite these responses, it remains difficult for certain business sectors to open a company bank account in Hong Kong.
“We provide is a solution for remittance companies to continue doing business, keep sending money using cryptocurrency instead of FIAT currency. With our solution, they don’t need a bank,” explained Harrap.
Watch this exclusive interview with Fintech Innovation and listen to Harrap explain how cryptocurrency is helping solve the operational challenges of not only money transfer as well as other businesses.