ZA Bank’s Devon Sin on why Web3 is key to HK’s growth

The bank has expanded services to cater to stablecoin issuers and Web3 companies. 

Hong Kong’s ZA Bank has rolled out dedicated banking services for stablecoin issuers looking to do business in the city — positioning itself as one of the first banks in the market to specifically cater to this segment.

The move is part of ZA Bank’s widened scope of services, which has seen the virtual-only bank expand to offering business banking services especially for Web3 companies and start-ups, says Devon Sin, alternate chief executive for ZA Bank.

“For the Web3 agenda, we want to move faster because we are very optimistic about the rapid development of Hong Kong, and we believe that this is going to be one of the key drivers of potential growth engines for the Hong Kong economy,” Sin told Asian Banking & Finance in an exclusive interview.

“We put more resources there, but that doesn’t mean we are just doing that. We still support a lot of the start-ups doing the account opening, even though they’re not Web3 related — it can be restaurants, start-ups in e-commerce and in trade, all kinds of start-ups,” he added.

Sin played up two advantages that ZA Bank has over traditional lenders in servicing Web3 companies. First is their knowledge about Web3 itself. “We know the Web3 ecosystem players, we know how each of these players play their roles in this ecosystem,” he said.

Second is ZA Bank’s agile nature when it comes to technological integration with Web3 clients.

In this Asian Banking & Finance exclusive, Sin sheds light on many questions about the new service for stablecoin issuers and ZA Bank’s Web3 mandate.

Tell us more about the new service for stablecoin issuers.
As a bank, we offer custodian services. From the stable coin issuer, especially in the Hong Kong regulatory framework, that's supposed to be 100% asset-backed.

That means for the issuer, if they want to mint or issue $100 worth of stable coin, they have to have [to have] an equivalent $100 of assets. They can hold this in cash, time deposit, or like T-bills.
In the bank’s agenda, we help to facilitate putting [their] client’s money in a bank account. So we are called a reserve bank or custodian banks for the stablecoin issuer. This is one of the key services that we provide them.

The money they get from their clients for minting a stablecoin for whatever purpose they want, that money is going to be kept in the bank.

This… is a brand new service in Hong Kong. The first point is that stablecoin is a new thing. We have to work closely with the regulators on how the bank should support the stablecoin issuer on the asset arrangement. And the second point is how we have to provide transparency about, for example, this stablecoin issuer has indeed got 100% backed fiat or asset for their minted stable coins. That is something the banks will have to provide.
 
Has the Web3 client base always been a target of ZA Bank? In your view what makes ZA Bank the bank of choice for Web3 customers?
When we launched four years ago, we didn’t have any kind of business banking services. At first, we supported retail banking for the locals; that is what we launched in 2020.

After two years, we started the SME business. We were not just focusing on the Web3 industry… we were focused more on doing micro financing [and] SME loans products because these are also one of the underserved markets in Hong Kong. Even today, when many people say, ‘Oh, [ZA Bank] is going to be the go-to bank for the Web3 industry,’ we are not just handling Web3. We are still offering the other SME [services], the trading [and] the other government-backed loans. I will say we are still a more diversified business.

For the Web3 agenda, we want to move faster because we are very optimistic about the rapid development of Hong Kong, and we believe that this is going to be one of the key drivers of potential growth engines for the Hong Kong economy. We put more resources there, but that doesn’t mean we are just doing that. We still support a lot of the start-ups doing the account opening, even though they’re not Web3 related — it can be restaurants, start-ups in e-commerce and in trade, all kinds of start-ups.
 
What unique challenges do Web3 companies face that traditional financial service providers may not be able to meet?
I think [one] challenge is about the regulatory pacing. That means they need a licence to operate in Hong Kong properly. If those companies need to invest more in their Hong Kong operations, they need to have a clear licensing regime or actually get the licence.

Before they get a licence, they can’t form a very big team in Hong Kong. But as we see, after they get their regulatory licence in Hong Kong, they expand very fast.

That is very important for the business momentum or the economy momentum of Hong Kong. When the licences are there, those companies are going to invest, and they’re going to make more business opportunities. They think about how to do tech business here and in a proper way.
 
What made you the chosen financial service provider of Web3 clients? What unique advantages does ZA Bank offer?
We will say we have two advantages over the traditional banks. The first thing is we know what those guys are doing. We know the Web3 ecosystem players; we know how each of these players play their roles in this ecosystem. This is indeed very critical. For the due diligence part, the fundamental or the essence of [this] is about what you know about that company and what their business is, and how they interact with different ecosystem players in the industry. This is not easy because we actually spend months not only for the frontline; we also need to align with all players, the SEC, the compliance, the risk guys, to say, “Oh, when we provide service to our clients, we have to be more clear [about] this service, [it] has to solve what kind of problem.”

This is more a knowledge standard difference, [and we] have still a bit of an advantage over the traditional banks.

The second one is about tech key element costs. Most of our clients, especially the Web3 clients, they expect technical integration with the banks, like some APIs (application programming interface) within the internet banking; to provide some personalised service; and also some of them — because they have to handle a lot, mainly the licencing one, they have to handle a lot of the client money — they need us to have like segregated accounts.

Although I do think… [whilst] it’s not something much like rocket science or something very new, this is not [something] many traditional banks can provide in a very standardised way and [in] a very fast pacing. This is also how we can differentiate ourselves right now with the traditional banks.
 
What future services can we expect to see from ZA Bank?
The next stage — after [the client] gets their licence, and they can operate properly in Hong Kong in [an official manner] — we will provide more client money services to them. That is going to be the next phase of our products: maybe something around a virtual account service for them. That is something that is going to be happening in the coming months.

And for the retail banking side, we should have crypto trading services coming soon. This is one critical agenda for the bank. Right now we have more than 750,000 retail customers. These guys are mainly between the ages of 22 and 45. We do believe crypto trading is something that they need as an investment option.

In this case, if we can provide a proper channel, a very customer-centric channel for them to do the crypto trading. That’s going to be something that is maybe… we can “wow” the market. That’s going to be the next one; that is what we are thinking about in the coming quarters.