Crypto Markets Survive and Thrive Amidst China’s Ban

In September 2017, the People’s Bank of China (PBoC) announced the banning of initial coin offerings (ICOs). There was an upheaval in the Chinese cryptocurrency sector when it was decided that all domestic crypto markets should quit operating inside the nation specifically in trades that involved the PBoC’s official currency, the renminbi. It seems that the restrictions stemmed from inquiries into some exchange companies, considerably affecting the nation’s crypto markets.

PBoC officials started making rounds on the offices of the biggest crypto markets in the nation months prior. The said officials were from the bank’s Shanghai and Beijing financial regulation bureaus. They met with the exchanges’ executives, stating that their main purpose is to inspect the exchanges’ adherence to the anti-money laundering and capital control regulations. Robin Zhu, the chief operating officer at Huobi definitely saw that the regulators had an ulterior motive for their visit. But his initial guess on the PBoC’s motives was incorrect.

The officials requested for information regarding the crypto markets’ operation. This includes the number of customers and their trading volume at any provided time. Zhu believed that the PBoC was essentially gathering information and facts in order to create a framework for market regulations. Huobi volunteered to submit data and reports about government policies on cryptocurrency around the globe. Zhu believed that he was somehow assisting the PBoC in the complete understanding of the crypto market.

The Rise of OTC Trading Platforms

The new regulation saw the crackdown of several crypto markets along with other crypto providers. It was during this time that over-the-counter (OTC) trading platforms shot to popularity with Chinese investors. This manner of trading resembles eBay bidding as opposed to standard trading. Even with the 10-20 percent markup on fees, Chinese citizens still patronize OTC trading platforms, even going behind the government’s back by using payment platforms like Alipay to purchase Bitcoins. The most current statistical data reveals that the OTC trading marketplaces remains robust in China. Just in the previous week, day-to-day trading volumes skyrocketed up to 4 times the typical volume.

OTC trading platforms have similarities to domestic exchanges in the sense that they have higher amounts of trading volumes in comparison to international exchanges. Huobi, Okex, and OTCBTC are merely three of a handful of firms that provide OTC trading platforms to potential investors. Huobi and OKCoin, happen to be currently among China’s biggest cryptocurrency exchange platforms way before the ban. They’ve got offerings that rank well within the worldwide top 10 when it comes to trading volume. These offerings are Huobi Pro and OKEx, respectively – exchange platforms that now exclusively trade cryptocurrencies.

Curiously, many exchanges that formerly operated inside the Chinese mainland, have given that relocated to areas like Hong Kong, Japan, and South Korea, proceeded in offering OTC trading alternatives to investors.

In an interview with Coindesk, Zhu revealed that the Huobi Group gained over 400 new staff since September – more than doubling its manpower. A prominent seller on Huobi also claimed that he had witnessed over 10,000 unique Bitcoin exchanges in the platform within last 30 days. OTBTC’s OTC trading platform is primarily based in Taiwan. OTBTC claimed that inside the initial 50 days in the company’s operation, they’ve been handling about US$100 million worth of Bitcoin exchanges.

But even with the success of these platforms, Chinese investors are warned to approach such investments with caution especially if bank transfers are involved. Numerous OTC trading platforms warn Chinese investors to refrain from mentioning the cryptocurrency market while they conduct funds transfers.

Trying to find Greener Pastures

Whilst waiting for the stress to subside, Huobi decided to pursue overseas expansions. During the last month or two, the cryptocurrency exchange platform has opened offices in Hong Kong, Singapore, South Korea along with the U.S. Huobi is looking to have its new exchanges in Japan and South Korea to become operational by March this year. The company’s new office in San Francisco, on the other hand, is concentrating on analysis and cultivating excellent relations with blockchain technology startups. The employment of compliance professionals somehow hints that Huobi will probably launch its cryptocurrency solutions within the US.

Although Zhu insists that Huobi’s overseas expansion had always been a part of the company’s growth strategy, but the timing seems to indicate that the ban placed immense stress on the company. It was a pivotal moment for the company and they had no choice but to make the most of it. “If you’ve got assets in an exchange and now you will be prohibited from accessing it by means of a standard course of action, you undoubtedly will rack your brain to acquire in there,” described Zhu. Right now, less than a half of Huobi Pro’s three million customers are from mainland China.

Newcomers Adapted Right Away

PBoC’s ruling somehow inadvertently paved the way for new crypto markets to flourish. Binance was launched just two months before the PBoC ruling was released. The crypto exchange’s founders have been former OKCoin executives, Zhao Changpeng and He Yi. Its initial funding was from two Chinese venture capital firms, Blackhole and Funcity.

But Binance got fortunate. It’s being primarily based in Hong Kong was a boon for them in particular. Investors in the mainland had been overwhelmed with the uncertainty that they shifted their crypto assets to overseas cryptocurrency exchange platforms. Binance timing was fantastic.

Binance has lately evolved into a high-performing cryptocurrency exchange platform reaching to a peak of US$2 billion in day-to-day trading volume. “Although Huobi currently launched Huobi Pro at the time, we did not have as lots of tokens out there for trading as Binance did,” Zhu pointed out. Zhu also does not think that Binance can completely limit user access from mainland China. He believes that it will not be beyond customers to work with Virtual Private Networks (VPNs) to trade in Binance.

In the same interview with Coindesk, Zhu stated that “Whatever the policy may very well be, we’re going to comply with all the guidelines and are right here to say. The [bitcoin] trend is irresistible. And down the road, it can be really almost certainly China will lift its ban on cryptocurrency trading.”

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