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Hong Kong After the Implementation of the National Security Law: Stablecoin Trading Volume Doubles, Surge in Downloads of VPN, Signal, and other Privacy Apps

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Hong Kong After the Implementation of the National Security Law: Stablecoin Trading Volume Doubles, Surge in Downloads of VPN, Signal, and other Privacy Apps

On June 30th, all members of the Standing Committee of the National People's Congress of the Communist Party of China passed the "National Security Law of Hong Kong" with 162 votes, which was officially implemented on July 1st. This move is seen as the end of the "one country, two systems" principle, rendering the previous anti-extradition law amendment protests ineffective. With the increased possibility of extradition to China, Hong Kong citizens are turning to cryptocurrency and encrypted communication to combat surveillance and internet censorship. Following the official implementation of the National Security Law of Hong Kong, its jurisdiction extends globally, prompting travel warnings from the governments of Taiwan, the United Kingdom, Canada, and Australia. The Australian Department of Foreign Affairs emphasized, "Due to the vague definition of national security, the risk of being detained may increase. You may inadvertently violate the law. If you are concerned about the new law, please reconsider whether it is necessary to stay in Hong Kong." In addition to significantly expanding the powers of the central and Hong Kong governments, the new law includes offenses such as "secession," "subversion," "terrorism," and "collusion with foreign or external forces to endanger national security," covering almost all means of protest used in the anti-extradition law amendment activities. Article 41 specifically states, "If it is not suitable for public trial due to involving state secrets, public order, etc., the news media and the public are prohibited from attending all or part of the trial proceedings, but the judgment results should be publicly announced uniformly." This indirectly allows for secret trials to take place. In addition to freedom of speech and personal liberty being directly impacted, the Hong Kong financial system is now under stricter control. As a result, many plans have emerged among Hong Kong citizens to resist internet censorship, protect personal data privacy, and circumvent the banking system.

Stablecoin Trading Volume Soars

Articles 28 and 43 of the law stipulate that the Hong Kong government can prosecute and freeze assets related to any form of terrorist activities, as well as assets used or intended for crimes. In addition, HSBC Bank blocked the bank account of a crowdfunding fund supporting the Hong Kong protests last November, indicating an increasing usage of stablecoins among Hong Kong citizens.

CoinDesk data shows that the seven-day trading volume of USDT to HKD on Hong Kong fiat exchanges (yellow line in the chart) surged both at the end of May when China imposed the Hong Kong version of the national security law and at the end of June when it was officially implemented.

Tidebit USDT / HKD Trading Volume (Source: coindesk)

In addition to obtaining USDT through cryptocurrency exchanges, one of the businesses of the Singapore-based crypto firm QCP Capital is over-the-counter trading. Founder Darius Sit mentioned in September last year:

The adoption of stablecoins in Asia, such as China and Hong Kong, is mostly conducted under the table. If you want to exchange USDT in Hong Kong, it is mostly done through face-to-face transactions. Although in Western countries, over-the-counter trading may consist of 80% in Bitcoin and Ethereum, stablecoins only make up 20%. However, in Asia, you will see the opposite, with a large volume of stablecoin trading.

"Signal" Encrypted Messaging App with Automatic Photo Blur Feature

Looking back at the previous anti-extradition bill protests in Hong Kong, the encrypted messaging app "Telegram" played a significant role at that time due to its privacy features, becoming the protesters' preferred choice, resulting in a surge in downloads. After the enactment of the Hong Kong version of the national security law, the marketing director of Telegram stated to the Hong Kong Free Press (HKFP):

We understand the importance of protecting the privacy of Hong Kong users under the current circumstances. Therefore, Telegram does not intend to handle any data requests related to Hong Kong users until international consensus is reached.

During the "I Can't Breathe" movement that swept the United States, many individuals and organizations used the open-source encrypted messaging app "Signal" as a communication channel during protests, drawing attention from Hong Kong citizens. The Hong Kong Economic Journal reported that after the implementation of the national security law, Signal became the most downloaded app in Hong Kong.

Even former CIA agent Edward Joseph Snowden and Twitter's founder Jack Dorsey have endorsed this app. However, some users discovered that Signal's terms of service state that they may disclose user data upon request from government law enforcement agencies. In light of sensitive times, Signal also issued a statement on Twitter:

Similar to Telegram, we hereby announce that we will not hand over user data to the Hong Kong police, and Signal does not have any stored user data to provide.

Signal Official Statement (Source: @signalapp)

It is understood that Signal will publicly disclose the data logs submitted to the government on their website. According to the data provided to the US Virgin Islands government, Signal only provided the user's registration date and last online time, emphasizing their end-to-end encryption technology, which even prevents the authorities from accessing any user communication records. However, some users believe that Signal requires phone registration, potentially exposing the user's phone number.

Resisting Large-Scale Internet Censorship

In addition to messaging apps, VPN downloads have significantly increased in Hong Kong. According to Bloomberg's report, VPN provider NordVPN stated that their downloads increased by 120 times within a day after the introduction of the national security law at the end of May. Another provider, Surfshark VPN, reported a 700% surge in downloads in Hong Kong.

Note: A Virtual Private Network (VPN) connects users to remote servers provided by third parties, hiding the user's IP address and encrypting all actions (data transmission and reception), making intercepted data unreadable due to encryption.

Due to uncertainties about the extent of jurisdiction of the national security law, major tech giants are currently awaiting the impact of the law's implementation. Companies such as Microsoft, Facebook, Google, Twitter, and LinkedIn have all announced temporary suspensions of sharing user data with the Hong Kong authorities.

According to the law, the Hong Kong government can intervene in discussions related to the Chinese Communist Party and political issues in Hong Kong involving "all humans." Therefore, under the national security law, if companies like Google and Facebook refuse data requests, they may face penalties such as fines, employee arrests, and even confiscation of the company's related equipment by the police.

The New York Times announced on the 15th that digital journalists stationed in Hong Kong will gradually move to Seoul, and several international media outlets are considering relocating some personnel from Hong Kong or formulating contingency plans to move to other countries when necessary.

Compared to the aforementioned tech companies, the Chinese-owned TikTok is in a dilemma. On one hand, it faces pressure from the Chinese Communist Party, while on the other hand, it strives to distance itself to establish a foothold in the international market. Ultimately, TikTok has chosen to exit the small market of Hong Kong.

The future of human rights in Hong Kong remains uncertain. Surprisingly, the stablecoin USDT, which has been associated with many negative impressions such as centralization, insufficient reserves, and market manipulation, quietly played a role in this globally watched democratic movement.

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