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Betting big on bitcoin

Published on Friday, 24 Jan 2014
Illustration: iStockphoto

Love it or hate it, there’s no shortage of attention focused on bitcoin, the digital pseudocurrency taking the world by storm – at least as its backers have been claiming. But does it really offer some form of salvation for moribund banking careers?

Despite being panned by Hong Kong officials and investment professionals alike – with both Financial Secretary John Tsang Chun-wah and Secretary for Financial Services and the Treasury KC Chan giving it the cold shoulder – a small, but dedicated, industry has sprung up to take advantage of the city’s status as an international financial centre, in the hope of building it into one of the world’s key bitcoin centres.

Asia’s richest man, Li Ka-shing, set the investment community chattering excitedly in December when it was revealed that he had bought a stake in the US-based bitcoin digital payments startup BitPay.

Meanwhile, local entrepreneurs have also been quick to seize potential business opportunities. They include Digimex, which is expected to launch a bitcoin crowd-funding platform called CryptoMex before the end of January. Another Hong Kong-based bitcoin startup is Gatecoin, an Asian digital currency exchange co-founded by Aurelien Menant, a former investment banker with Societe Generale.

David Shin, one of the co-founders of Digimex, says that while Hong Kong’s bitcoin industry is currently “bitty” – one can count the total number of start-ups on one hand – it is poised for fast growth off a low base. Currently, most start-ups are bitcoin exchanges that allow people to swap the virtual currency with hard currencies – be it Hong Kong dollars, US dollars or other G10 denominations. Many are small operations, such as Japan’s Mt. Gox – one of the earliest players which probably currently employs no more than 20 people.

“I think it’s going to be the industry outside of banking that people would want to be in over the next two or three years,” Shin says, adding that he expects more start-ups to launch in Hong Kong.

“The main reason is the uplift in China in terms of bitcoin volumes in the past three months, and that’s put a lot of attention around Asia,” he adds.

“But in December, a lot of noise came out of China as the government tried to slow down the volumes, and people have looked at Hong Kong as a very good substitute, as you can open up a renminbi account here and exchange for bitcoin, which [Beijing] isn’t going to allow to happen in China.”

Shin says that demand for jobs will be in the form of software developers, technologists and people who specialise in hardware, as new start-ups are founded in Hong Kong to conduct bitcoin mining. “Over the next two or three years, everyone in banking is going to try and get in on this. Traditional banking has become saturated and opportunities are just not there anymore. Bitcoin enables people to naturally fall into something that has a financial backbone, but with a new asset twist to it,” Shin says.

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