Banks and financial firms in Hong Kong face a dilemma over how to comply with both the national security law and the US sanctions imposed on Friday on 12 Hong Kong and mainland officials, including Hong Kong's Chief Executive Carrie Lam.
The sanctions were in response to Beijing's imposition of a national security law on the SAR, which the US has described as Orwellian.
"This executive order means that companies in Hong Kong - US companies, including banks - can't provide funds, or goods, or services to any of those individuals," said Peter Lewis, the host of RTHK's "Money Talk" programme. "So that presumably means they can't provide bank accounts, they can't accept deposits from them, they can't provide any other sort of service to them."
"Now this is a dilemma for US companies because, if they go and apply those sanctions, under the national security law - which has just been passed in Hong Kong - it is illegal to apply sanctions against Hong Kong officials or Chinese officials," he said.
Earlier Hong Kong's market watchdog said financial intermediaries needed to assess the risks they may be exposed to, following the announcement of the US sanctions. The Security and Futures Commission said it would expect any response to the sanctions to be necessary and fair - and have best regard to the interest of clients.
Lewis said, as the targeted officials didn't appear to hold any US assets, the sanctions were largely symbolic. However, he cautioned that if the US were to bring in stricter financial sanctions then the situation could worsen dramatically.
"The fear is this is just another step in an escalating series of tensions between the US and China and the next step could well be financial sanctions," he said.
"They could impose sanctions on Chinese banks in Hong Kong that tend to want to access dollars through the US dollar clearing system. And that could well provoke a financial crisis, not just in Hong Kong but in the US, and elsewhere in the world, as well."
In addition to the Chief Executive Carrie Lam, others hit with sanctions include Police Commissioner Chris Tang, his predecessor Stephen Lo, Justice Secretary Teresa Cheng, Security Secretary John Lee, Hong Kong and Macau Affairs Office director Xia Baolong, his deputy Zhang Xiaoming, and liaison office chief Luo Huining.
Also on the list are director of the new Office for Safeguarding National Security Zheng Yanxiong, the secretary general of the Committee for Safeguarding National Security and CE office head Eric Chan, and Secretary for Constitutional and Mainland Affairs Erick Tsang.