Chinese Exchanges Roar Back to Life After Government Ban

In August 2017, the People’s Bank of China (PBoC) visited all the major Chinese exchanges under the pretext of determining if Bitcoin and other cryptocurrencies were being used to launder money.

According to Robin Zhu, the director of the Huobi exchange, the questions they asked showed that the officials had little idea of how cryptocurrencies actually worked, who their customers were and what motivated them and their trades.

Yet it as clear the regulators were going to enact some kind of ban.

Nevertheless, Zhu and the other exchange directors were caught by surprise when the PBoC announced a complete ban on initial coin offerings, all fiat-to-crypto trading and trading by expatriates living in China.

The initial response was a total disaster for the exchanges. As by Nov. 1, 2017, total trades were only 5% of what they were on Sept. 15, the last day before the ban on trading.

The worldwide consensus was the Chinese exchanges would close their doors and that exchanges in South Korea, Japan, and the United States would take their clients.

Less than four months later, two of China’s largest exchanges, including Huobi and OKCoin, have regained their positions among the top ten exchanges in terms of volume with their new platforms: Huobi Pro and OKEx.

Huobi Group has doubled their staff to over 400. “The shift to over-the-counter trading is an unexpected pivot to us. We had never anticipated that to be one of our business strategies,” said Zhu.

“We are also expanding into other markets including Hong Kong, Singapore, South Korea and even the U.S. with brick-and-mortar offices.”

In San Francisco, the company’s new office is focusing on research and fostering blockchain startups and is researching a possible crypto exchange launch in 2018.

“Once we have fully understood the legal issue in the U.S., opening a new exchange remains to be the next phase of the plan,” Zhu said.

Overseas expansion

The Chinese ban might have been the spur to expand overseas. Huobi Pro now has about 3 million users. Less than half of them are from mainland China.

The company has expanded its services to attract clients in new markets including it own token HT, which runs on the Ethereum blockchain, and giving them away as a gift to new users.

Over the course of 14 days, the announcement of the HT tokens resulted in investors rushing to buy some $300 million as pre-paid service fees, which Huobi Pro is able to collect in advance.

Following the launch of its own token, Huobi Pro announced a new exchange named HADAX, which allows investors to vote with HT on which new cryptocurrency assets they want listed for trading on the platform.

“We can’t evaluate every new cryptocurrency because there are simply too many of them,” Zhu explained. “HADAX gives investors the choice to vote for tokens they believe are worth trading.”

According to Huobi’s data, as of Feb. 24 the HADAX platform has collected 8.5 million HT from 104,308 users who have cast a total of 85 million votes for 75 crypto assets.

“In the long term, we think crypto-to-crypto trading has more potential than fiat currencies because of the large number of trading choices that can be available,” Zhu said.