China’s Exchanges Scene after the 2017 Crackdown

In the brief history of the cryptocurrency domain, the Chinese crackdown on its exchanges is probably one of the most famous and notorious events. It began with the officials from the PBoC (People’s Bank of China) stepping into the crypto market – at first, this included meetings with the executives of the exchanges.

Then, in January 2017, during the sit-downs in the bureaus of regulators in Beijing and Shanghai, the officials shared with the executives that they wanted to employ anti-money laundering regulation. Additionally, they wanted to make sure that the capital control mandates were not ignored.

However, at least one of the executives, Robin Zhu, Huobi’s COO, the regulators were after something completely different in those meetings – they wanted information. In particular, they wanted to understand the way bitcoin worked, along with other cryptocurrencies. They were determined to find out where the money comes from and where does it go, but also how is it attained or lost. Finally, they wanted to know how big was the cryptocurrency trading in China.

This is why the PBoC asked for info on the trading volumes and the user numbers of these exchanges. As this took place, Huobi was diligently submitting this info, along with the information from the international crypto market so that the PBoC could get a picture of the industry. However, like many others, Zhu believed that something else was going on with the visible activity of the regulators.

The Start of the Crackdown

To Zhu and others like him, it seemed that the regulatory authorities were gathering information that would be used to create a framework. It would be then used to regulate the industry. Exchanges were not particularly worried about this being that the regulation would also provide them with a level of legal and financial protection.

However, in September an announcement of PBoC that it is banning the ICOs in the country came as a huge surprise. The authorities also banned the domestic trading that utilized domestic fiat-to-crypto process.

At that moment, it became clear that the earlier inquiries were only paving the way for the big clampdown, which later made a substantial negative impact on the exchanges.

However, in spite of this, the domestic Chinese exchange not only continued to exist but also found a way to thrive. According to Zhu, this is the direct result of the fact that the bitcoin trend is simply irresistible for so many people. The cryptocurrency is used for online purchases, investment, BTC betting and many more activities.

Routes for Expansion

Two biggest Chinese exchanges, OKCoin and Huobi were at the time of the clampdown already at the top 10 list. The Huobi Group has since then doubled its staff to over 400 and trade in cryptocurrencies exclusively.

Now, in spite of the domestic pressure, the company is pursuing an aggressive plan for expansion. In recent months, the company opened up offices in Singapore, Hong Kong, South Korea and the US. In Japan, the company has created a partnership with SBI Group and also made another unnamed partner in South Korea.

All of these will result in new exchanges in the same countries that will be up and running by March 2018. In the US and the company’s San Francisco office, Huobi staff will work on R&D that could improve the blockchain systems used not only by them, but everyone else as well.

For blockchain, like eSports and any other fast-developing technology, innovations are not a bonus but a definite necessity. Yet, the company also hinted the possible exchange services for the US customers are more than possible in the future.

Catering to Loyal Customers

Huobi is not only determined to make sure its services can reach new customers, but also that their existing ones get new features. That is why they launched HT, their own token that uses the ethereum blockchain.

The purpose of it is to create a higher level of user loyalty which would, in turn, boost the profits. HT are not provided through an ICO but are given away for free to users that purchase their service packages. Once announced, HT provided excellent results because it was able to bring in over $300 million from purchases of pre-paid services.

Later, customers will be able to use the company’s custom exchange called HADAX. Here, with the use of HT tokens, the customer will have their say in votes about which new cryptocurrency should the platform start listing.

These moves are not limited to Huobi and it appears that most Chinese exchanges are taking these options very seriously. With the innovative use of blockchain tech, things like the HT token can be easily developed and provided to the intended users.

Planning Ahead

As the Huobi example shows, working inside of China as an exchange is more than possible. The restrictions set in place by PBoC are still there, but there is also a sense that this will not last forever. Instead, the Chinese government will sooner or later change the ban once a regulatory framework is set in place.

All of the executives are certain of this, but at the same time, they are working hard on establishing their foundations outside of the country. From loyalty programs to the flexible planning of future exchange listings, these companies are using the power of innovation to build better businesses.

The fate of ICOs might be more uncertain in China, but for the exchanges, this does not make a whole lot of difference. They are already willing to move towards all sources of revenue, even those which are located not just outside of China but also in very competitive markets.

The US is a great example of its because its market is a big battleground for a range of companies. Yet, for the Huobi, they are still a valid target for growth and expansion. This is a mindset that the very capitalistic government of China will not ignore.
The success of the exchanges will instead serve as a direct proof that they work well. At the same time, they also do a good and clean job with their exchange procedures, showing the domestic regulators that they have nothing to fear. With all of this going for the Chinese exchanges, the crackdown of 2017 clearly only pushed most of them to become even more effective.

Source: CoinDesk