Why I’m optimistic about Hong Kong
I’ve been in so many “Hong Kong is doomed” conversations, that sometimes I feel weird because I happen to believe that Hong Kong is not only not doomed, but I happen to believe that Hong Kong will lead the world in crypto.
The reason for this is the Basic Law of Hong Kong. Hong Kong is the *ONLY* place in the world where free trade, free enterprise, and the free flow of money is not merely a good thing, but it’s a constitutional right.
Article 110
The monetary and financial systems of the Hong Kong Special Administrative Region shall be prescribed by law.
The Government of the Hong Kong Special Administrative Region shall, on its own, formulate monetary and financial policies, safeguard the free operation of financial business and financial markets, and regulate and supervise them in accordance with law.
Article 112
No foreign exchange control policies shall be applied in the Hong Kong Special Administrative Region. The Hong Kong dollar shall be freely convertible. Markets for foreign exchange, gold, securities, futures and the like shall continue.
The Government of the Hong Kong Special Administrative Region shall safeguard the free flow of capital within, into and out of the Region.
Article 114
The Hong Kong Special Administrative Region shall maintain the status of a free port and shall not impose any tariff unless otherwise prescribed by law.
Article 115
The Hong Kong Special Administrative Region shall pursue the policy of free trade and safeguard the free movement of goods, intangible assets and capital.
It turns out that these basic rights are not merely propaganda but they are judicially enforceable. You can take a suitcase of full of paper cash come to Hong Kong, exchange it for bitcoin and leave. This is not merely legal, but you have a *constitutional right* do to so.
But you might ask, what about the terrorists? What about money laundering? What about criminal activity. And that is what makes Hong Kong different from every other place on the planet. In every other jurisdiction, a politician can just talk about terrorists and that would be the end of the story.
In Hong Kong, cracking down on cash is like shutting down a newspaper or raiding a church. Yes, you might be able to do it, but you’d better have a damned good reason. In the case of Hong Kong, because moving money is a constitutional right, if the HK government wants to impose restrictions of moving money, then they have to first get the legislature to pass a law, and second you have to be prepared to defend the measure in court. If the Hong Kong government wanted people to not handle cash, then they would have to convince a judge that 1) there is a public interest in doing so and 2) the measures that they are putting in place are proportionate to that public interest.
So what that means this that it’s not enough for the government to merely talk about terrorists, they have to prove in court that the measures they are putting in place actually reduce terrorism. And you run into the problem that they don’t. It turns out that most terrorist groups and drug runners are surprisingly open about where they get their money from (ISIS has a nice brochure), and once you look at it it’s not mainly from foreign donations.
One thing that I’m amazed about is why Hong Kong isn’t louder about this, and I think a lot of this has to do with peer pressure. All of the cool kids are passing counter-terrorist legislation, and the Hong Kong regulators just want to be one of the “in crowd” rather than to do something different and original. One thing that I find funny is that at the highest levels of world finance and politics, a lot of it feels like high school, in which you have the “popular crowd” and everyone else wants to fit in. Once the “in-crowd” wears a certain type of jewelry or passes counter-terrorism legislation, then everyone else wants to do it. People are people.
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