Virtual Commodity or Legal Tender? What Is Hong Kong’s Stand on Cryptocurrencies
After the bans of cryptocurrencies trading in mainland China in September, will Hong Kong follow?
Are cryptos legal tender in Hong Kong?
Cryptos are considered virtual commodities in Hong Kong since there are no laws that directly regulate the use of cryptos. Currently, the Organised and Serious Crimes Ordinance and other legislation provide legal sanctions against unlawful acts such as fraud or money laundering through the use of cryptos.
Crypto are best described as “barter” if a willing buyer wants to exchange a product or service for them, rather than commonly accepted legal tender.
Businesses and people are free to accept and pay by cryptos.
Will cryptos become commonly accepted legal tender in Hong Kong?
Will Hong Kong businesses accept cryptos rather than fiat money immediately? No, they do not.
According to basic economic theory, a widely accepted currency has to be both a medium of exchange and universally valued. It means a good currency is easily transferable, divisible, and able to store its value in a foreseeable course of time.
Crypto has proven to be a pretty good medium of exchange, it’s value has fluctuated over its brief history. As decentralized currencies, cryptos lack central authorities to stabilize its values. The businesses take the risk of accepting and storing their wealth in cryptos, so as the consumers who save cryptos to preserve their purchasing power.
Will Hong Kong government support the use of cryptos?
The most important source of income of a every government is tax. Nevertheless, monetary and banking stability are the foundation of Hong Kong being a international financial centre.
Hong Kong government demands for tax from income sourced in Hong Kong, and fights against criminal activities. Transactions which are made via government-controlled fiat money are meant to be traced in financial institutions which are regulated by laws.
Abandoning fiat money for cryptos will never hold this same benefit to governments and its administration. The government are right to be skeptical of the nature of uncontrolled currencies.