Will Hong Kong-based crypto companies flee to Australia? (Micky)
Fears over Hong Kong’s proposed extradition law could cause the region’s crypto companies to flee to Australia and other friendlier countries.
Millions of local citizens have taken to the streets in Hong Kong to protest the newly proposed extradition law that will allow Mainland Chinese authorities to arrest and take “criminals” from Hong Kong to the mainland and hold them over for trial.
In September 2017, China banned ICOs and crypto exchanges from operating within its borders, though it stopped short of actually punishing holders of cryptocurrencies.
As a result, Hong Kong, which enjoys a substantial degree of autonomy from its mother country, has established itself as the main crypto hub of the Far East as it does not prohibit the usage of virtual currencies within its territory.
Given China’s hardline stance on crypto, the potential for the intervention of the Chinese Communist Party (CCP) into Hong Kong business affairs is making crypto companies nervous, prompting them to draw up contingency plans for relocation to friendlier climes.
Why is it an issue for crypto companies?
If the extradition law is passed, the concern is that it will be Mainland China’s first step toward bringing Hong Kong back into the fold.
When Great Britain returned Hong Kong to China in 1997, it was under the agreement that its capitalist economy and common law system would remain untouched for fifty years – a period that will end in 2047.
In anticipation of the extradition law, many Hong Kongers will likely start flocking to their local crypto companies in the hopes of keeping their identities – and their assets – safe in the digital financial world.
By adding safety and removing the geo restrictions that will follow the extradition law, cryptocurrencies could help Hong Kongers retain their ability to access the global markets.
Where will they go?
Despite the fact that the crypto landscape in the Far East seems much more developed compared to western countries, it is still quite difficult to establish a profitable crypto venture in most eastern countries.
Crypto companies in Hong Kong are currently evaluating their options in the event that relocation becomes necessary.
Each comes with its own advantages and disadvantages, however, out of all of the countries being considered, Australia seems to be the best fit.
Let’s take a look at the benefits and shortcomings of some of the more obvious relocation options.
In many respects, Australia is the ideal choice for crypto businesses fleeing from Hong Kong.
Crypto adoption is on the rise and regulations are in place that require crypto exchanges, wallet services, and custody service providers to obtain the proper authorizations and/or licenses.
The downside is that, due to the crypto scam epidemic that plagued Australia last year – as well as the increase in crypto-related fraud and tax crimes, the government is looking to introduce much stricter guidelines for local crypto businesses.
Furthermore, the country’s government is planning to issue restrictions on entertainment industries such as crypto sports betting activities, online casinos, and wagering websites.
Admittedly, the uncertainty of how new regulations will impact the Australian crypto market is a drawback for Hong Kong companies, but nothing compared to those of some of the other options in the region.
Although Taiwan encourages the usage of cryptocurrencies within its borders, it needs to be considered that the country has implemented stringent regulations regarding their sale and use as well.
Taiwan’s ongoing political dispute with Mainland China won’t endear the country to businesses looking to avoid the overreaching arm of the CCP either.
If China succeeds in bringing Hong Kong back into the fold, it is highly likely that Taiwan will be its next target.
South Korea is also quite adept at cryptocurrencies, however, it has quite a unique way of dealing with them. The restrictions in SK are more stringent than seen anywhere else.
In fact, the country has completely banned any and all anonymous transactions from the country, officially rendering the anonymity of the blockchain completely useless.
The only feature local investors can use now is the relatively better speed and volatility of the coins.
Furthermore, a crypto startup in South Korea would not be able to survive due to the country’s ban on ICO activities. Overall, the cost and restrictions do not make South Korea the best of options.
Although Japan may seem like one of the best destinations in terms of cryptocurrency companies, it needs to be considered just how strict the country with its tax laws.
Currently, Japan is enforcing a 55% income tax on all crypto profits, which includes not only local citizens but also locally registered businesses.
Although crypto companies would have access to an extremely blockchain-literate local customer base, they would also be giving up more than half of their revenues.
Should Australia expect an influx of crypto companies?
Currently, nearly 1/3 of Hong Kong’s population – nearly 2 million people – are on the streets protesting the new law, which should give local crypto companies at least some hope of dodging the bullet this time.
The CCP is nothing if not persistent, though, and even if this law does not pass, it is likely just a matter of time before it tries again.
At this point, it’s much healthier for the crypto companies in Hong Kong to at least have a plan of escape should the law actually pass.
In this regard, Australia should expect quite a lot of applications for crypto trading licenses and maybe small subsidiaries opening up in places like Sydney just as a backup plan for the future.
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