New to cryptocurrency in Hong Kong? Don't worry, some of us were just as confused as you were when the doge became more than a meme.
Cryptocurrency is a term that’s been floating around a lot nowadays, but what exactly is it? Whether you’re a fresh grad curious about the world of finance (well done for going beyond paying the bills, honestly), or a Hongkonger concerned about the recent rise of crypto-related crimes, we’ve done the hard work for you here so that you can whiz through the basics of cryptocurrency and understand why it matters to you. Don’t forget to check out our guide to virtual banks and our personal hacks for living in the 852 to make the best out of your time (and money) in Hong Kong!
Cryptocurrency 101: A quick guide to digital assets in Hong Kong
What is cryptocurrency?
Broken down, the term cryptocurrency means coded currency – a digital asset that is secured by strong cryptography. It doesn’t exist in physical forms, such as paper money; instead, it exists in a virtual form and its value comes from speculative interest. Sounds too complicated already? Think of cryptocurrency as the digital version of arcade tokens or casino chips – it’s something you can have in exchange for real-world currencies.
Why do people use cryptocurrency in Hong Kong?
Since cryptocurrency isn’t issued by a central authority like the government (i.e. it’s decentralised), it’s very volatile in value, and it isn’t strictly regulated either (not until very recently, anyway). This isn’t just the case in Hong Kong, but around the world – after all, the digital world knows almost no geographical boundaries. And with little regulation, you can imagine the risk – and potential profit – as its valuation is driven by speculative investment. The more people who want cryptocurrency, the more cryptocurrency is worth.
Another appeal of cryptocurrency lies in the fact that it’s, well, encrypted. Transactions of cryptocurrency occur on a peer-to-peer basis via a distributed ledger, which is a database that contains a series of blockchain – block after block of coded and duplicated systematic information – designed to protect records of ownership and verify coin transfers. Not only does blockchain remove intermediaries (such as banks and notaries public), thus eliminating transaction fees, but it also preserves anonymity for those purchasing products or services with cryptocurrency. Sounds good, but do you see how the latter can be potentially problematic? We’ll talk about that in a sec.
What are the most common forms of cryptocurrency in Hong Kong?
While cryptocurrency is virtual, and therefore knows no bounds, Hongkongers are generally more familiar with Bitcoin, Ethereum, and Dogecoin, among around 10,000 other cryptocurrencies around the world (yep, there are that many).
First released in 2009, Bitcoin (BTC) is the first decentralised cryptocurrency. One Bitcoin was only worth a fraction of a cent (USD 0.003) back in March 2010, yet now (as of 4 August 2021), it’s valued at over USD 37,800 (almost HKD 300,000).
Moving on to Ethereum (ETH). This is the second-largest cryptocurrency by market capitalisation (just after Bitcoin) and is one of the most actively used blockchain in the world. Initially released in 2015, one Ether is currently worth around USD 2,400 (HKD 19,000). Mind, these values are likely to wobble a lot over the next many months, but they’re still pretty big numbers, aren’t they?
And finally we have Dogecoin (DOGE). Compared to the previous two cryptocurrencies, Dogecoin is much friendlier – just like the adorable meme itself. This payment system was created as a joke to begin with in late 2013. Since then, one Dogecoin has yet to hit USD 1, but it may well be worth investing – at least for the meme! (Don’t count on us though!)
The dark side of cryptocurrency
While cryptocurrency is widely used and has many advantages, the anonymous nature of crypto transactions is a double-edged sword that can threaten cybersecurity and even encourage criminal activity. This is particularly rampant in the dark web marketplace, where some users employ cryptocurrencies to buy and sell weapons illegally, launder money, trade drugs, and even hire hitmen. That said, cryptocurrency is generally legal and is worth looking into. Just make sure you stay tuned to us as we speak to experts about tips for investing in cryptocurrency in Hong Kong!