Dec 04, 2019 10:51 PM | Justin Cai

The recent protests in Hong Kong has drawn worldwide attention to this major financial gateway between China and the West. They have also raised questions about the usefulness of cryptocurrency in protest movements. 

Recently, banking giant HSBC reportedly will close a corporate account tied to Spark Alliance HK, a non-profit that helps cover medical and legal fees for protesters. 

Although HSBC cited the reason for the closing as being a disconnect between the bank account’s stated purpose at the time of application (corporate banking) and its actual use (crowdfunding), the closing drew criticism. It also raised questions about whether protesters might be tempted to turn to cryptocurrency to evade bank interference and to protect their anonymity. 

Some media outlets have proclaimed that crypto demand is on the rise in Hong Kong and that the protests are “turbocharging crypto adoption.” Other sources say crypto’s influence is more limited

Let’s take a closer look at crypto’s current status in Hong Kong, starting with the regulatory framework it exists within.

The Regulatory Status of Cryptocurrency in Hong Kong 

In 2018, Hong Kong’s Securities & Futures Commission (SFC) issued compliance guidance regarding both digital asset exchanges and portfolio management for digital assets. One year on, very few businesses have actually managed to enter the proposed sandbox regime, possibly due to how stringent those rules were perceived to be. 

SFC has also warned against futures trading of digital assets due to excessive leverage and high complexity, and said that it is unlikely to grant a licence there. 

SFC also announced a framework for security token offerings (STO) in March. Notably, it only allows “professional investors” with a minimum net worth of HK$8 million to invest in STOs. 

Crypto Adoption in Hong Kong

There has been no large scale survey tracking the crypto ownership statistics in Hong Kong. But Leonhard Weese, President of The Bitcoin Association of Hong Kong, told LongHash about the most popular ways people in Hong Kong are investing in crypto. 

How Hong Kongers trade Bitcoin depends very much on their planned trading volume, Weese said. With small amounts, people buy Bitcoins at Bitcoin ATMs located all over Hong Kong, or directly from friends. For medium volumes, i.e. thousands of US dollars, it is more convenient to make a wire transfer to a foreign exchange such as Bitstamp, Kraken, or Gemini. For larger amounts, people go to various over-the-counter (OTC) markets, but those might also require international wire transfers. 

Weese does not see a direct link between the protest movement and Hong Kong crypto adoption. “People don't see how crypto immediately helps them solve the problems they have,” he said. “So far, financial censorship isn't very common and money itself isn’t the issue. Cash works well in the offline world.”

What the Data Says

Suppose that the unrest in Hong Kong was leading to greater crypto adoption. Logically, we should be able to observe a number of things happening in the data. 

First, crypto traders in Hong Kong would likely avoid using crypto exchanges with close mainland China ties, out of fear that their activity be revealed to the Chinese authorities. Second, crypto traders in Hong Kong would frequently need to access BTC/HKD fiat gateways so that they could pay for goods and services. Third, crypto trading activities would see a significant uptick starting from June this year, when the first major protest took place. 

But when we analyze data on crypto usage in Hong Kong, none of these things appear to be happening. 

We accessed geographical distribution data for various crypto exchange web sites, courtesy of SimilarWeb. The ranking of number of visitors from Hong Kong is summarized below. Note that SimilarWeb also claims to be able to identify visitors from mainland China using VPN service overseas (given that those sites are blocked by the Great Firewall), so these results are not necessarily driven by mainland Chinese users using VPN service based in Hong Kong. 


We can see that exchanges that appear to have a large customer base in mainland China, including OKex, Huobi, MXC and Biki, are also more successful in the Hong Kong market (with the exception of Binance). This is the opposite of what we would expect to see if Hong Kong’s crypto trade was being driven by Hong Kong protestors, who would seem more likely to shun mainland Chinese exchanges. 

Surprisingly, Coinsuper, the only Hong Kong exchange in our sample, has very few customers from Hong Kong, despite the fact that it started offering HKD deposits in December 2018. This is also contrary to what we would expect to see if Hong Kong crypto traders were converting their holdings to HKD to support the protests.

Are Hong Kong’s crypto markets seeing an influx of HKD? We examined the trading volume for Hong Kong exchanges with fiat gateways. These include centralized exchanges such as Tidebit and Coinsuper. For comparison, we also looked at the BTC/HKD trading pair on LocalBitcoins, the largest OTC exchange. 


We see that for Tidebit, BTC/USD volume is much larger than BTC/HKD volume. This is consistent with our previous observation that Hong Kong exchanges actually do not have many Hong Kong users. Also, the USD volume is characterized by a few large spikes,  implying that USD volume might be driven by a few large whales. Notably, both fiat trading pairs have seen diminished volumes since June this year, contrary to what we would expect if crypto trading activity picked up during the unrest. 


For Coinsuper, we only have data on total trading volume. Here, we do see trading volume pick up significantly starting in September this year. However, given that most users on Coinsuper do not actually come from Hong Kong, there’s little evidence that this uptick is somehow linked to the unrest. 


In comparison, the BTC/HKD pair on LocalBitcoins is usually pretty smooth, excepting the spike in late 2015. Here, we see trading volume has actually dropped significantly since June this year. 

Since LocalBitcoins is usually perceived as a more privacy-preserving venue for crypto purchases, it might be favored by protesters over centralized exchanges as a fiat gateway. As with the other data we’ve looked at, the fall in trading volume here seems to suggest there’s no connection between the protests and any increase in crypto trading. 


As far as we can tell, Hong Kong users mainly access crypto through exchanges that are associated with mainland China. They tend not to use local Hong Kong exchanges, and trading volume on local exchanges with fiat gateways has extremely high variability, possibly caused by the dominance of a few whale traders. There has been no obvious uptick in BTC/HKD volumes on Hong Kong exchanges or in Hong Kong LocalBitcoins trading. 

These observations, combined with SFC’s relatively conservative approach to crypto-related regulations, suggest that the last six months of Hong Kong unrest have not led to a significant increase in crypto adoption there. 

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