By
Tolu Ajiboye
April 23rd, 2024
Huobi plans to increase offerings in other countries to offset loss created from the crypto attack from the government in China.
Following the crackdown on crypto-related activities in China, crypto exchange Huobi is anticipating a 30% revenue plunge. This is according to the Seychelles-based company co-founder Du Jun, while speaking with Financial Times. Jun stated that Huobi intends to discontinue service provision to all its Chinese users by the end of 2021. This is simply because there will not be any more Chinese users left on the platform soon enough, translating to zero revenue for the company.
However, to make up for the loss of revenue from the Chinese market, Huobi is looking at expanding its service to other countries. Jun emphasized how prominent the Chinese-founded company is in Asia, but admitted that going global was key to sustained success. As the co-founder put it:
“We are very comfortable in Asia and we are the leader here, but we need a new emphasis, we need to go global.”
As part of efforts to spread its tentacles across the globe, Huobi intends to increase its workforce as much as fourfold. The company currently operates offices in Hong Kong, South Korea, Japan, and the United States.
Chinese Government Reasons for Banning Crypto
Earlier in the year, Beijing orchestrated a sweeping crackdown on China’s crypto industry. The exercise forced crypto miners to discontinue activities as regional authorities threatened punitive measures against defaulters. In addition, the Chinese State Council included Bitcoin mining as one of the country’s financial risks requiring monitoring.
In May, three of China’s transactional and financial associations doubled down on the nation’s central bank stance on digital currencies. Crypto-centric financial firms and individuals alike were told crypto trading was a ‘speculative activity’ and will not be condoned.
The Chinese government’s rationale behind the move was two-fold. First, Beijing believes that mining digital currencies was extremely energy-intensive and threatened China’s emissions reduction target. Secondly, the government also viewed crypto usage as an impediment to the digital yuan also known as DCEP. The DCEP is a centralized digital currency, which means it comes under the control of the People’s Bank of China. Digital currencies, by comparison, are decentralized and the lack of a central authority renders them a direct challenge to DCEP adoption.
Immediate Huobi Reaction to Crackdown in China
In light of the China ban, Huobi declared a few days later that its plans to suspend a slew of offerings. Examples include futures contracts, exchange-traded products, and leveraged investment products. According to the exchange, the suspension extended to new users in some countries and regions. Furthermore, Huobi also said that it would stop selling mining machines and similar services to new users in mainland China. This announcement preceded the order from the Chinese central bank for banks operating in China to desist from providing crypto-centric services. The mandate also extended to payment institutions and targeted services such as opening accounts, transactions, and settlements.
Many miners now operate overseas and subsequently boosted the hash rates of their new host nations. For instance, the US overtook China in October as the largest BTC mining market.