Hong Kong Citizens Seek Safe Haven in Stablecoins

More citizens in Hong Kong choose investing in crypto assets, not least stablecoins.

According to data analysed by Coindesk, citizens of Hong Kong are increasingly turning to stablecoins.

In the meantime, the value of these stablecoins is pegged to fiat currencies.

The analysis shows a surge in trading volume between Hong Kong dollars and US dollar pegged stablecoin USDT.

Based on the Coindesk analysis, the surge came in early June. Specifically, on TideBit, a fiat-crypto trading platform.

New national security law

The increased appetite towards stablecoins seems closely linked to new national security law adopted by Hong Kong, on 30 June.

It may reflect local citizens’ desire to protect their assets, the Coindesk reported.

Here, stablecoins seem a tool local citizens use to keep their wealth outside a government-controlled banking system.

According to Coindesk, the law allows Hong Kong to freeze and confiscate assets owned by entities suspected of national security crimes.

Protests stimulate stablecoins

Notably, the Coindesk analysis supports a previous analysis by Forbes.

In August 2019, Forbes reported increasing demand for cryptocurrency in Hong Kong.

Interestingly, the rising demand coincided with growing protests in Hong Kong.

Protests erupted in mid-June last year against new legislations that change the relationship between the city and the mainland China.

Cryptocurrency offers anonymity

According to Forbes, anonymity is the main attraction of cryptocurrency in Hong Kong.

Cryptocurrency provide citizens of Hong Kong with a convenient tool to evade centralised control and surveillance.

At the same time, many cryptocurrencies are moving towards enabling transactional anonymity, Forbes reported.

An Old Trend

Yet, the trend may not be confined to Hong Kong.

Even before the enactment of the new law, stablecoins seemed a preferred way to avoid government controls over capital flows.

Coindesk speculate that citizens from mainland China might use stablecoins in Hong Kong to make money transfers that exceed $50,000.

However, the People’s Bank of China imposes a yearly capital limit of $50,000.

Moreover, on 26 February, Hong Kong announced strengthening its Anti-Money Laundering (ALM) and Counter-Terror Financing (CTF) rules related to cryptocurrency, as reported by Cointelegraph.

The amendments are meant to address recommendations made by the Financial Action Task Force (FATF).  

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Marwa Sabry 10 Articles
A Journalist and translator with keen interest in exploring new innovative forms of economy.