Bitcoin could serve as a hedge in protest? Hong Kong protesters withdraw assets massively from banking system

In the recent "anti-extradition" protests in Hong Kong, protesters have adopted a new non-violent tactic of withdrawing large amounts of cash from ATMs and banks, and converting it into US dollars. This series of actions also suggests that Bitcoin may have a new role to play.

According to Business Insider, on August 16, Hong Kong protesters announced plans to withdraw cash from the banking system to protest against the overreach of power from mainland China. In the near future, Bitcoin may play a key role in these types of protest activities.

Organizers of the protests stated that the demonstrations aimed to protect people's wealth from potential devaluation following mainland military repression, while also reiterating the financial independence of Hong Kong's financial system.

Background of Hong Kong Protests

The protests were sparked by an extradition bill proposed by Hong Kong's Chief Executive Carrie Lam. The bill would allow for the extradition of fugitives on a case-by-case basis to jurisdictions without extradition treaties, including mainland China.

Including mainland China in the treaty was of particular concern to pro-independence activists, as there were fears that the Communist Party could abuse Hong Kong's judicial system through the extradition bill, potentially using it to eliminate political opponents and dissenting voices that were previously out of reach in Hong Kong.

These concerns were not unfounded. Since Xi Jinping took office in 2012, the number of dissenters has significantly decreased, and the number of forced "disappearances" has been on the rise, with the BBC noting that the Communist Party's control has become "tighter and more systematic."

Therefore, there is great concern that the extradition bill could lead to an overreach of power from the mainland.

Cash-Strapped Hong Kong

As law enforcement incidents escalate, protesters' strategies are becoming more diverse.

Now, protesters have adopted a new tactic: withdrawing cash from the local banking system. Photos on LIHKG, Hong Kong's equivalent of Reddit, show hundreds of people withdrawing cash from banks and ATMs. Some protesters even visited multiple ATMs to bypass the HK$20,000 (approximately US$2,500) limit per transaction.

There are currently no confirmed reports on the amount of funds being withdrawn, but Business Insider reports that at least 400 protesters have documented their withdrawals.

Reportedly, ATMs across the city are running out of cash. While the situation in Hong Kong banks is not dire at the moment, if enough people participate in such activities, it could disrupt the city's cash access and lead to bank runs.

Currency Control under China

Peaceful exits from the local currency system could foreshadow the power of Bitcoin. China currently enforces strict capital controls, artificially pegging the yuan to the dollar to stimulate exports.

Additionally, Chinese citizens are limited to moving a maximum of $50,000 worth of assets abroad annually, with these transactions being explicitly recorded and closely monitored. On the other hand, there are controls on domestic currency flow. For example, individuals traveling from Hong Kong to Shenzhen are restricted from bringing in more than $5,000 without a cumbersome declaration.

The systematic devaluation and management of the yuan mean that Chinese citizens are deprived of the real purchasing power of their currency. Due to these control measures, most Chinese people are unable to invest in safer and more profitable foreign assets. Furthermore, a weakened currency significantly reduces consumer purchasing power, decreasing consumption and furthering China's reliance on exports.

Moreover, as the trade war with the US escalates, China's foreign exchange reserves and financial controls will come under further pressure. Just two weeks ago, due to President Trump's sudden escalation of tariffs on Chinese goods, the yuan fell below the rate of 7 yuan per US dollar for the first time since 2008.

Given that the US dollar is the most stable and widely traded currency on Earth, it is not surprising that protesters are converting their assets to dollars as a form of protest.

However, if access to US dollars becomes unavailable in the city, what then?

Power of Choice in Currency Systems - Bitcoin

With the emergence of Bitcoin, people living under financial control systems, such as in China, have the opportunity to opt out of that system. People can buy BTC instead of enduring hidden wealth transfers through currency devaluation or inflation (which can be seen as another form of taxation).

Bitcoin serves as an ideal means of protest. Bitcoin can be stored in a way that is nearly impossible to confiscate and can facilitate the transfer of assets across borders without restriction.

As data shows, black markets are rapidly forming in countries with many financial restrictions (and sufficient internet penetration), with strong growth in peer-to-peer transaction volumes in countries like Venezuela and Belarus being evidence of this.

Most importantly, Bitcoin has the potential to make government asset operations more transparent and accountable to the people. If the trend of cryptocurrency adoption continues, countries like China should naturally be concerned.

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