Businesses in Hong Kong Begin Accepting Bitcoin, but Could it be Risky?
Hong Kong is currently at the epicenter of a gargantuan political furor over personal lives being invaded by the government without the permission of the citizens. Demonstrations have been tumbling on for weeks, turning violent only very recently.
As the protests rumble on, more and more disputes arise, with protesters tearing down facial recognition towers all around the special administrative region (SAR). The entire SAR has been plunged into chaos, and businesses are starting to revolt against the machine.
Just last week we saw Cathay Pacific CEO, Rupert Hogg, refuse to give the details of any Cathay Pacific employees taking part in the protests, giving only his name in a display of defiance against the Chinese imperialistic government. Since then, other businesses are taking a stand against the government, throwing out the Hong Kong Dollar in favor of Bitcoin in protest.
A Potentially Risky Move
More and more businesses in the SAR are looking to join the protests, causing crypto experts to shudder at the potential dangers to which these businesses and shoppers are exposing themselves.. While Bitcoin acceptance and adoption is an incredible thing — and seeing it so widespread in Hong Kong is thrilling — it carries a huge risk for both merchants and consumers: it’s only pseudonymous at best.
As we saw with Silk Road and other dark web marketplaces that accepted Bitcoin in exchange for illegal goods and services, the government can track the Bitcoin used back to exchange wallets and therefore back to the individual in question. This is exactly how Silk Road founder, Ross Ulbricht, was caught, along with many of his companions. Without obfuscating key details from transactions, they can be traced in a far simpler way than fiat currencies. Unfortunately, Bitcoin has none of these obfuscation features built in.
Opening Themselves to Unparalleled Tracking
Bitcoin was designed in an ingenious way, it removed the middlemen and any fees or data mining they require as part of their service. Two people could finally interact financially without needing KYC (know your customer) processes. The breakdown with Bitcoin came when 3rd party services like exchanges became part of the transaction.
Bitcoin is a public ledger that allows anyone to track transactions. Every wallet has a unique ID and when you buy Bitcoins at a fiat on-ramp, such as a crypto exchange, you are assigning your pseudonymous Bitcoin wallet address to your personal ID thanks to the KYC processes in place.
Once you have completed KYC at a single exchange, authorities can track every transaction made from that address and link it back to you. Therefore, the businesses and people opting to switch to Bitcoin in protest of the government are inadvertently allowing the government to track their purchases and activity in a far simpler and easier way.
Two Options: Cash and Privacy-Focused Cryptocurrencies
If the protesters in Hong Kong really wish to protest and prove to the government that they have no power over their choices, then they’re left with two options when it comes to spending – fiat cash and privacy-focused cryptocurrencies. Unfortunately, fiat cash can still be traced to some degree, matching up serial numbers on bills with CCTV footage that the government can acquire by law. This leaves privacy-focused cryptocurrencies as the standout option if protesters really want to throw a spanner in the works for the government.
Picking the Right Privacy-Focused Cryptocurrency for the Job
There are a number of privacy-focused cryptocurrencies floating around out there, but picking the right one for use in Hong Kong can be a long and arduous task. Each one has its own benefits and drawbacks. Let’s take Monero for example. It’s one of the most well-known privacy-focused cryptocurrencies around, but a number of exchanges, especially those in countries with civil unrest, are pulling Monero trading pairs to prevent this from happening. We’ve seen multiple top exchanges, including changeangel, pull support for Monero in recent weeks as numerous licenses for fiat on-ramps don’t allow for the privacy-focused cryptocurrency to be listed, meaning that it could quickly become difficult to acquire in the SAR. Despite these exchanges enjoying the partnership with the Monero community and token, regulators are forcing them to cut ties.
After a particular privacy-focused cryptocurrency has been selected by protestors for use in the SAR, there is the small matter of acceptance. Some merchants and businesses don’t have the technical expertise to put crypto payment gateways into place, leaving merchants to figure out prices on the spot. This is both tedious and long-winded, allowing police to swoop in and break up the crypto party.
What if There Was a Decentralized, Privacy-Focused Marketplace?
If we cast our minds back to Silk Road, it was able to operate and function thanks to being on the dark web, well out of the control of the government. However, the currency of choice ended up leading to its downfall. Now, there are multiple fully decentralized marketplaces, and some that are highly focused on privacy.
Let’s take Particl for example. It’s a peer-to-peer, privacy-focused marketplace, utilizing its own native cryptocurrency, PART, that further obfuscates transactional data. By not collecting any data from user transactions, whether it’s merchants listing products for sale or consumers buying products, Particl stands out as the perfect solution for people looking to keep their data and identity safe and secure. Not only this, but Particl’s native token is built using the Bitcoin codebase, meaning atomic swaps are possible. This then rules out the need for exchanges with burdensome KYC processes or fears of being delisted due to regulatory issues.
“While it’s generally positive for the crypto industry, it is risky right now for Hong Kong businesses to accelerate their acceptance of Bitcoin because they could face fines, arrests and other punitive measures from Beijing,” said Paul Schmitzer, Director of Project Strategy at Particl. “A safer, more secure and more private alternative for businesses would be to use a decentralized marketplace, which delivers more value at a lower cost to buyers and sellers without middlemen being able to collect, control or share any user data.”
Following data leaks and personal data profiteering from Facebook, Amazon and eBay, merchants and consumers have been shifting towards these privacy-focused marketplaces in a bid to recover their personal freedom. Thanks to having no middlemen and by not harvesting any user data at all, these types of privacy-focused marketplaces are truly testing our common belief that centralization is good, proving that decentralization is safer and more secure for everyone involved. This in turn makes these privacy-focused marketplaces the perfect battle-tested marketplaces for use on the ground in Hong Kong.
Other Options Available
It’s not just Particl looking to shake up the privacy-focused marketplace space.OpenBazaar is yet another blockchain marketplace, allowing merchants to sell any item they wish and consumers can purchase away from the mainstream internet. Unlike Particl, OpenBazaar uses a variety of blockchains, so we end up circling back to the same issues that we will have with Bitcoin in the SAR. Without the use of features such as RingCT and private markets, as well as by using middlemen as escrow agents, there are multiple areas where government officials could easily step in and prevent you from buying the necessities you need to live, should the government in Hong Kong wish to take things that far.
However, OB1, OpenBazaar’s parent company, recently released a mobile companion for their users called Haven. It only links to OpenBazaar servers, but is a step in the right direction to reach more online shoppers who are increasingly using their phones for everything.
Exciting Items Already for Sale
Both Particl and OpenBazaar already have a wide range of products and consumers browsing the respective platforms on a daily basis. We’ve already seen Casascius Series 2 Brass Bitcoins and a Tesla Model S P100D L listed on Particl, showing that no item is too grand to feature. Meanwhile, on OpenBazaar we’ve seen listings such as artwork, clothing and music go on sale, proving that these marketplaces are popular with all types of consumers – exactly what merchants in Hong Kong want.
What’s Next for Hong Kong?
The chaos and civil unrest in Hong Kong is showing no signs of coming to a close. If merchants in the SAR can start adopting a privacy-focused marketplace, then both merchants and consumers could avoid further police brutality or punitive actions from Beijing. These marketplaces might not be the silver bullet that Hong Kong so desperately needs, but they certainly do have the power to tip the tides of favor towards the protestors and remove power from the government.
By Elizabeth Levine