Cash Rules Threaten Hong Kong’s Diamond Trade

The halls of the Hong Kong shows used to generate a different sound, according to Philippe Barsamian, an Antwerp-based diamantaire with 50 years of experience in the business.

“Twenty years ago, you heard the [money-]counting machines working,” the owner of small-diamond supplier Barsamian Diamonds said at the Hong Kong International Diamond, Gem & Pearl Show earlier this month. “Today, you don’t have that anymore. I don’t think there are a lot of cash transactions. Like everywhere in the world, [authorities] became more and more strict.”

Now, transactions are by wire transfer or check. Exhibitors have regulators’ certifications on their walls. This year’s diamond halls featured booths staffed by representatives of Hong Kong’s Customs and Excise Department reminding visitors about the municipality’s cash rules.

It’s those regulations that have had a fundamental impact on the diamond trade. As of two years ago, dealers in Hong Kong can no longer buy and sell freely in paper money. This has cut off important sources of revenue and shaken the city’s status as a cash market, which was traditionally one of its main appeals. The outcome is an even tougher situation for the industry, which is also suffering from weak Chinese diamond demand.

As a result, Hong Kong is reflecting on its role…