What does Bitcoin mean to startups in Hong Kong?
Leonhard Weese, president of the Bitcoin Association of Hong Kong makes ‘cents’ of the e-currency
As Bitcoin’s adoption is increasing and more startups are finding uses for the new currency – especially for small and instant money transfers – regulators are also picking up on the potentially disruptive payment technology.
Countries that have chosen a strict ban on cryptocurrencies, like Vietnam, Russia and Bangladesh, are not known as havens for startups. But states in the U.S. like New York and California and places like United Kingdom and Hong Kong all have differing approaches to this technology.
Bitcoin is divisive because the network itself is impossible to control and regulate. Cryptocurrencies don’t fall into a specific category, all with different regulatory requirements.
So what implications does this have in Hong Kong?
In Hong Kong, the existing, non-Bitcoin specific legislation fits startups well. Taxation is simple, and issues like capital gains or VAT don’t apply in the first place.
Startups use Bitcoin in a very different way in Hong Kong. For some, it is a payment option for customers who don’t have credit cards. Other times, the company wants to avoid the exorbitant fees that payment processors like Paypal impose. Shelling out 4 to 8 percent of your revenue simply for payments processing is understandably a deterrence for small businesses.
When traveling to neighboring China, Bitcoin proves helpful. For example, train tickets are difficult to get for those without Chinese banking cards. Train tickets, hotels and everything on Taobao can be sourced through Wesecretary. Even your prepaid phone can be topped up with BTCTele. One week of VPN service costs just $1 USD with BCVPN.
Compared to other emerging Bitcoin hubs in the world, Hong Kong is thus doing quite well. While the government has taken a more passive stance on the issue, this has fostered rather than harmed innovation in this field.
Banks however, have been far more dismissive of the technology, refusing bank accounts to those who even display Bitcoin prominently on their websites.
But in the absence of a clear legal definition and the clarification of KYC/AML rules, startups often operate in legally confusing territory.
While that might not matter much to founders and entrepreneurs, it matters to the investors who might be reluctant to put their money into a Hong Kong Bitcoin startup, compared to ones based in New York, where regulation is more strict and expensive.
To learn more about about Bitcoin means in Hong Kong and what benefits and consequences it may entail for your startup, join the TusPark Bitcoin Panel Series June 23, 29 and July 7 at Tuspark HK Innovation Hub, 118 Wai Yip Street, Kwun Tong. Register here.
We asked Leonhard Weese to share five legal issues with Bitcoin in Hong Kong that startups should be aware of:
1. Don’t immediately dismiss traditional modes of banking.
“Don’t brag to your bank manager about how you won’t need them. You’ll likely get put into a high risk category or even have your accounts closed!”
2. Don’t look away when you see something suspicious.
“That tattooed guy with a mask who just dropped a bag full of cash at your door in search of Bitcoins? Politely say no. You might even be required to file a report. On that note, don’t make large payments to anonymous usernames, you never know where that money will end up in. Unless we are talking about really small sums, verify a phone number or email address at the least.”
4. Pay taxes.
“Paying taxes on Bitcoin income works exactly like with any other income. But don’t think that Bitcoin is anonymous and they can’t find out. It’s not.”
4. For some things, ask an expert.
“Bitcoin lets you do things that other payment channels never would. A lot of that is legally complicated, and just because you use Bitcoin, the law still applies to you.”
5. Connect with the community.
“Bitcoin has a great and active community. You will find plenty of people who are willing to help you out with questions, spread the word and test your products.”
This interview was condensed by Hannah Leung of EntrepreneurHK (EHK).