Assignment 1

Due date: 11 March 2021

Weighting: 25% of the total marks for this course

Question 1 (100 marks)

Read the article of “Hong Kong retailers to accept bitcoin payments with Indonesian start-up PundiX POS device”.

Hong Kong retailers to accept bitcoin paymentswith Indonesian start-up Pundi X POS device

Pundi X, an Indonesian start-up that is looking to build an offline cryptocurrency sales network inthe region, has completed a trial of its point-of-sale (POS) device putting it on track to deploy someof the 5,500 units in Hong Kong by the end of August.

Its move to broaden the use of bitcoin and other cryptocurrencies for retail payment at the city’scafes and restaurants effectively challenges the position of the Hong Kong Monetary Authority,which has said bitcoin does not qualify as a means of payment or electronic money.

Pundi X, which wants to establish itself as the “Wal-Mart or 7-Eleven of cryptocurrency”, isattempting to build a payment network in the city to enable consumers to pay with variouscryptocurrencies through its Pundi X POS device.

A POS terminal is an electronic device used to process card or electronic payments at retaillocations. The device can be used together with a cryptocurrency payment card that can be toppedup with cryptocurrencies such as bitcoin and ethereum.

Pundi X POS is also linked with other mobile wallets and electronic payment options such as ApplePay, Visa and MasterCard.

“Hong Kong is the perfect place for us to do a test drive before a large scale roll-out as there aremany tourists, expats, and early tech adaptors,” said Zac Cheah, co-founder and CEO of Pundi X.

He said that by deploying 5,500 POS devices globally by next month, its network of cryptocurrencysales device will surpass that of bitcoin ATM globally.

A bitcoin ATM looks like a bank ATM but actually connects to a cryptocurrency exchange ratherthan to a bank account, selling bitcoin for cash.

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But a bitcoin ATM does not yet directly allow a purchaser to use cryptocurrencies as a means ofpayment, something which central banks, such as Bank Indonesia, have already banned.

In Indonesia, company executives say the cryptocurrency payment option will not be activated untilit is legally permissible to do so.

The Hong Kong Monetary Authority said in 2015 that bitcoin is not a legal tender but a virtual“commodity”. It said as bitcoin does not have any backing – either in physical form or from theissuer – and its pricing is highly volatile, it does not qualify as a means of payment or electronicmoney. It also said it does not regulate cryptocurrencies.

The HKMA told the Post that existing legal framework, under the Payment Systems and StoredValue Facilities Ordinance, which provides for the regulation of stored value facilities and thedesignation of retail payment systems in Hong Kong, does not apply to cryptocurrencies.

It also said it does not comment on individual cases.

Outside Hong Kong, Pundi X wants to install up to 100,000 POS to build up its blockchain-connected payment network in Southeast Asia by 2021.

But by targeting the unbanked population in countries such as Indonesia where up to 80 per cent ofthe population do not have a bank account, it remains unclear how many of them are prepared totake an informed risk of cryptocurrencies’ volatility, when making daily purchases of everydayitems such as sugar and rice.

Source: South China Morning POst, July 16, 2018, https://www.scmp.com/business/banking-finance/article/2155365/hong-kong-retailers-accept-bitcoin-payments-indonesian

Answer the following question.

It seems that an increasing number of companies are accepting Bitcoin as a payment currency. Doyou think Bitcoin will become a major currency in 5 years? Justify your stance. (word limit: 1000words)

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