Hong Kong, one of the world’s leading financial centers, has played an important role in the development of cryptocurrencies. For example, some of the most successful crypto companies to date have been born in China, including crypto derivatives exchange FTX along with digital asset platform Crypto.com.
However, since trillions of dollars are regularly traded through crypto exchanges in Hong Kong, Vertical City also has many physical OTC cryptocurrency stores. Anri Arslanian, chairman of cryptocurrency firm PwC and former president of the Hong Kong Fintech Association, told Cointelegraph that the number of traditional OTC cryptocurrency brokers in Hong Kong definitely stands out. “These are literally brick-and-mortar retail stores,” he said.
An anonymous source told Cointelegraph that while traveling around Hong Kong, he couldn’t help but notice the huge rise in OTC cryptocurrencies, some of which even provide access to crypto ATMs.
Photo of an over-the-counter store in Hong Kong taken by an anonymous viewer.
OTC stores forge cryptocurrency in Hong Kong
Compared to regions like the United States or Europe, where it is very easy to buy and sell cryptocurrency on regulated exchanges, physical cryptocurrency stores in Hong Kong are a unique brand that gives people a different way to access cryptocurrency.
Calvin Young, CEO and founder of the Hong Kong Digital Asset (HKD) exchange, sheds some light on this issue. Jung told Cointelegraph that the cryptocurrency exchange HKD was founded in 2019, and opened a physical store in January of this year, and that they employ more than 30 employees to serve customers.
Image source: HKD
Jung also noted that the HKD Store operates in the same way as a traditional bank, giving customers the opportunity to gain a hands-on approach to buying cryptocurrency as well as access to personalized advisory services. As such, he believes that retail stores have the potential to become a global trend in the future with the proliferation of cryptocurrency:
“As more and more investors and institutional investors enter the industry and digital currency becomes mainstream, there will be a trend towards opening physical stores alongside online platforms.”
Young added that he believes more customer trust is being created between HKD and its user base due to its physical presence. “Our users are mostly between the ages of 40 and 70. The older customer base is important to ensure regular adoption because many of these people still have fiat currencies and rely solely on traditional financial systems.
Interestingly, it is not only the older generation who buy cryptocurrency in these physical locations. Priscilla Ng, founder of Coiner HK, another over-the-counter retail exchange based in Hong Kong, told Cointelegraph that CoinerHK was launched in early 2020 to focus on the women’s market: “We wanted to create a market for women because we wanted to promote the idea that women could be financially independent and make investing. self.”
Thus, Ng shared that CoinerHK clients are mostly women between the ages of 20 and 50, and about 70% of them exchange cash for cryptocurrency. Ng also noted that CoinerHK has two physical stores in Hong Kong’s Gold District.
Image source: CoinerHK
In response, Yenga Ng added that having physical over-the-counter exchanges can give shoppers more choices: “We treat them like friends when they shop and give our customers confidence in us because we have a physical location.” Ng also noted that CoinerHK’s Wanchai website also serves as a non-fungible token art gallery (NFT).
Regulation can crowd out physical over-the-counter exchanges
While physical OTC exchanges such as HKD and CoinerHK appear to provide broader access to cryptocurrencies across Hong Kong, there are a number of regulatory risks associated with this type of business.
Arslanian, for example, explained that, in addition to regular customers, tourists from mainland China were the target customers of these establishments. He noted that many of these stores are located in tourist areas to attract users, but are especially attractive to Chinese tourists due to the ban on cryptocurrency in China: “It can be assumed that if tourists from mainland China visit Hong Kong, nothing will stop them. … of Buy cryptocurrencies from these OTC stores.”
With this in mind, Arslanyan believes that the number of OTC retail centers may increase in Hong Kong due to the influx of Chinese tourists interested in buying cryptocurrency. On the other hand, Arslanian mentioned that Hong Kong’s future rules for cryptocurrency exchanges may lead to a complete shutdown of these rules.