The United States Senate has passed sanctions in response to Hong Kong’s new laws that gave the police immense powers. The proposed sanctions are likely to hurt crypto brokerage firms that operate in the city.
The Senate’s official communication say the bill dubbed “Hong Kong Autonomy Act” is supposed to dress-down China for grinding down the city’s autonomy. The new security law deeply curtails freedom of expression. The laws criminalize acts of sedition, collusion, terrorism, and subversion. This includes publicly criticizing any form of criticizing the Chinese Communist Party (CCP).
Weakening Hong Kong’s Autonomy
The bill urges the U.S. government should constrain foreign banks and subsidiaries of U.S. banks in Hong Kong. Financial institutions that conduct transactions with people or institutions that weaken Hong Kong’s autonomy will be denied access to the U.S dollar system for . The bill doesn’t mention any specific banks, there are no criteria to determine whether an institution deserves sanction. The bill allows the U.S. Secretary to determine what behavior should result in bans.
There is a feeling that this open proposal could easily hurt cryptocurrency firms in Hong Kong. Crypto brokerages highly depend on the U.S. dollar system for settling and clearing transactions. Hong Kong is a significant player in the Asian cryptocurrency industry.
Things Could Quickly Change
The leading China-based cryptocurrency exchanges like Huobi and OKCoin have large offices in Hong Kong. They take advantage of the relatively friendly crypto regulations offered in Hong Kong. The president and co-founder of the Bitcoin Association of Hong Kong Leo Weese is apprehensive. He fears the new security law doesn’t intend to change Hong Kong’s financial status, things could quickly change. He added:
“The most successful cryptocurrency companies here are dependent on their access to the U.S. dollar system […] they move money around, they are big brokers and if they somewhat lose that access they are in trouble.”
Crypto brokerages could have trouble wiring money from Hong Kong to the United States. Genesis Block Head Trader Charles Yang, the largest over-the-counter (OTC) desk offering cross-border brokerage services, expressed his fears:
“Even though you are in Asia, you still rely a lot on U.S. banking.”
Prolong Transaction Times
According to Yang, crypto brokerages may face difficulties wiring money from Hong Kong to the United States. If the U.S sanctions a bank, the companies that use the bank will not wire their money to the U.S. accounts. The increased scrutiny will prolong transaction times. He said:
“The banks would flag Hong Kong-related transactions more often. They would hold the transactions and do a compliance query, and that could take a few days to resolve, which means there will be a lot of friction.”