With Freedom at Stake, More Hongkongers See Bitcoin’s Unique Value
Leo Weese is President of the Bitcoin Association of Hong Kong.
From June to November 2019, Hong Kong saw its worst civil unrest in 50 years. What began with peaceful marches with up to two million participants (about one fourth of the territory’s population) escalated into more and more violent clashes between protesters, police and triads. More than 2,500 people have been injured so far, and at least 7,000 arrested. Vandalism was targeted at Chinese banks, government buildings, the subway system and stores appearing to be connected to criminal organizations and the Chinese government.
Hong Kong is a key financial center in Asia. Its access to the international banking system, the liquid stock market and large concentration of wealth has made it significant not only for the People’s Republic of China, but also the international bitcoin community.
Multiple cryptocurrency exchanges, token funds, advisory firms and crypto events have made Hong Kong their home and profit from the city’s easy taxation regime and lack of capital controls. There are at least 50 ATMs around the city where people can exchange their cash for bitcoin, ether or tether without sign-up or identification.
Before the protests, explaining the value proposition of bitcoin had been difficult. People privileged convenience over abstract ideas like "censorship resistance," and anonymity was seen as something only criminals desired. As the protest movement grew, what makes bitcoin unique and valuable became more and more obvious.
The mass protests of 2014 ended with mass arrests. Leading figures were jailed, and those who served their time continue to be harassed by authorities. In 2019 few were willing to step up as organizers and figures. The movement learned quickly to coordinate without central leadership. The goals are formed by consensus, the strategies are created spontaneously. Messages are spread on message boards and group chats. The Hong Kong protest movement was the first decentralized civil movement, and its tactics have been replicated from Beirut to Santiago.
As authorities began withholding or even withdrawing their approval for scheduled protest marches, locals suddenly risked long jail sentences for “unauthorized assembly” or even “rioting” (ten years), while others feared for their jobs. Those showing support for the movement were sometimes fired and violently attacked. People began to wear masks to disguise their faces.
In fear of being recorded digitally of having travelled to and from a protest location,protesters began abandoning their electronic stored value tickets, the Octopus card, in favor of cash. They even left change by subway ticketing machines so other passengers could safeguard their privacy. This was a good idea, as police used electronic payment records to determine who had participated in a protest.
Those holding bank accounts weren’t spared trouble. In December, police raided an organization that had crowdfunded money to defend arrested protesters, seizing $9 million and arresting four individuals for money laundering. HSBC, with which the Spark Alliance group had been banking, found itself in the highly controversial position of complying with laws and being targeted with vandalism. Its corporate symbols, “Stephen” and “Stitt,” had to be jailed in a wooden cage following an arson attack.
The most prominent Hong Kong groups that were using bitcoin at the height of the protests include HK Map Live. The tool, which had its iOS app banned from the App Store, was used to learn about street barricades, locations of police lines and special equipment like water cannons and armored vehicles. The data is crowdsourced and appreciated both by those seeking to support and avoid the protests, but the heavy traffic load was a big financial burden for the group. To cover these costs while preserving anonymity, the organizers mainly use bitcoin, gift cards, affiliate commissions for Amazon and donations made through Brave, the privacy-enhancing browser.
Hong Kong Free Press, after a difficult attempt to move funds out of Bitpay, shifted to the open source payment processor BTCPay and raised almost 2 BTC in just a few weeks. Funds not immediately needed to keep one of the last remaining free media organizations running are not converted to fiat to avoid a similar fate of Spark Alliance.
A Telegram channel for protesters whose name roughly translates to “Hong Kong School of Magic” also raised funds with bitcoin, while educating their 30,000 followers on how to buy masks on Amazon with bitcoin or buying and selling bitcoin in Hong Kong.
Capital flight out of Hong Kong was widely anticipated during this crisis, especially since the controversial extradition bill at the center of it would have also allowed for assets to be more easily reprimanded to Mainland China, but there is no evidence bitcoin played a role here. In a system without capital controls, a bank wire remains the easiest mechanism to send funds abroad. While some, including prominent speculator Kyle Bass, expected the peg to the U.S. dollar to be broken, the exchange rate remained stable.
Cash remains the most useful tool for Hong Kong protesters to retain anonymity, as most transactions happen in the physical world, and cash remains widely accepted. Most problems faced by protesters are not of financial nature either way. More pressing are the availability of legal support, anonymity of online messaging platforms, how to avoid arrests at assemblies or abuse at home.
2019 saw Hong Kong, with its usually highly reliable civil service, trusted judiciary and respected financial system, abandon faith in its institutions on a scale unprecedented for a modern rich society. The ripple effects will be felt by businesses and individuals for years to come, and a lot of the trust that the territory relied on will be hard to rebuild. Cryptocurrencies play only a small role in this for now, but those who have been able to make them work for them are doing well.