Fri. Dec 3rd, 2021

China’s ban on private digital assets will wipe out nearly a third of the revenue for Huobi Global, one of the world’s largest cryptocurrency exchanges, forcing it to look elsewhere for growth, the co-founder said.

Huobi is forced to cut off its customers in China and give up 30 percent of its revenue due to the country’s repression of cryptocurrencies. To compensate for that loss, the exchange plans to seek clients in other financial centers, underscoring the global impact. of China’s decision.

“Between the end of September and 31 December, we are stopping serving all our Chinese users. There will be no Chinese users on the platform. . . so our income from [these clients] is going to go to zero, ”Du Jun, the 33-year-old co-founder of the stock exchange, said in an interview with the Financial Times.

Huobi is one of the handful of exchanges that have benefited from bitcoin hitting mainstream markets as the price of the digital currency has risen to a series of all-time highs since March last year. This has changed Huobi, FTX, Coinbase and a few other start-ups into billion-dollar companies.

Jun emphasized that 70 per cent of the company’s revenue was already overseas, but said it was accelerating efforts to expand globally and quadrupling its global workforce from the current 1,000.

“We are very comfortable in Asia and we are the leader here, but we need a new emphasis, we have to go worldwide,” said the boss of the Seychelles-based exchange. He would not provide revenue or profit figures for the business.

Until 2018, China enjoyed an overwhelming dominance in bitcoin markets as it was home to most mining and trading activities. But over the past four years, a series of crackdowns have erupted on Beijing’s ban on all digital assets this October. The US has already surpassed China as the largest mining hub.

The shifting regulatory wind is forcing Huobi, which is China’s largest stock exchange and has enjoyed close ties with political elites, to aggressively scale up its global operations and target nations and regions such as Russia, Turkey and Latin America for retail customers and Europe and the US target for large investors active in professional markets.

In October, digital assets worth $ 211 billion exchanged on the platform, down 74 percent since the ban in May, according to data specialist CryptoCompare.

Leon Li, co-founder of Huobi
Leon Li, co-founder of Huobi, who proposed the idea of ​​the exchange to Jun © Simon Song / South China Morning Post / Getty

Jun co-founded the exchange with his business partner, Leon Li, a former Oracle computer engineer, in September 2013, despite Jun’s first thinking that bitcoin’s value was growing too fast to be anything but a scam.

“Leon suggested: what of us does not buy the asset, but we just do something like an exchange?” he said.

After their conversation, they discussed the two existing crypto exchanges in China, the now dissolved Mt Gox and BTC China. They estimate that the platforms earn $ 500,000 every month. They therefore responded to the idea, choosing a name meaning “firearm” and luring traders with no transaction fees.

The exchange is a private company and says it has no “direct relationship” with Hong Kong-listed Huobi Technology, which also manages an asset management arm that offers crypto-related funds, although “it shares a key shareholder and founder” in Leon Li .

Despite declining revenues in China, Huobi is celebrating its eighth year of existence by giving away “millions” in crypto, sending a user still selected to space and pursuing peer FTX in court for approval of known.

Jun, who runs the company from Singapore, wants to make half of his workforce international. Yet the exchange has no plans for a global headquarters, preferring its current “decentralized structure”, with employees spread around the world.

It is also strengthening its compliance department, as regulatory issues may arise in the coming years as the platform continues to venture into key financial hubs.

Huobi has more than $ 2 billion worth of controversial stablecoin binder in custody and offers 55 percent of the proceeds in bonds to investors who deposit euros or sterling on the exchange. It could also put the platform in the sights of regulators in the US, UK and Europe as they tighten their oversight of crypto activities.

A study by the National Bureau of Economic Research said Huobi and Binance served as “a gateway to money laundering and other gray activities” due to a lack of knowledge of your client (KYC) checks. A spokesman for the exchange said users should undergo “strict” KYC processes to trade above a certain amount and to be able to convert currencies to digital currencies.

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