Chinese Users To Be Kicked Out of Crypto Exchanges
Beijing’s unprecedented blanket ban on all cryptocurrency trading and mining, the largest ever imposed by a major economy, has crypto exchanges and service providers scrambling to cut links with mainland Chinese customers.
The ban, which closes gaps created in past regulatory crackdowns on the sector, sent shares of a number of Chinese crypto-related companies plunging. Many corporations, meanwhile, have already relocated important parts of their operations outside of China, according to industry officials.
In a joint statement issued on Friday, ten strong Chinese government entities stated foreign exchanges would no longer be allowed to provide services to mainland investors through the internet, a previously gray area, and committed to jointly seek out “illegal” cryptocurrency activity.
As a result, Huobi Global and Binance, two of the world’s largest exchanges and popular among Chinese users, have suspended new account registrations from mainland customers. Huobi also stated that existing ones would be cleaned up before the end of the year.
“We started taking corrective actions the day we saw the warning,” Du Jun, Huobi Group co-founder, said in a statement to Reuters.
Du did not disclose how many of Huobi’s users would be affected, only that the company has long pursued a worldwide expansion plan and had witnessed consistent growth in Southeast Asia and Europe.
In a note to clients, TokenPocket, a major crypto wallet service provider, also stated that it would terminate services to mainland Chinese clients who risked breaking Chinese policies and that it would “actively embrace” regulation.
Although China is home to some of the world’s largest crypto exchanges, Chinese authorities have come to regard cryptocurrencies as speculative instruments with no intrinsic value, prone to extreme price swings, and a means of evading capital regulations. Instead, the Chinese government has thrown its support behind the creation of an official digital currency.
The restriction, which comes amid a slew of regulatory steps affecting everything from gaming to tech to for-profit tutoring, makes it extremely difficult for mainland Chinese investors to buy or sell the assets unless they leave the country. It does not, however, go so far as to proclaim cryptocurrency ownership to be unlawful.
In contrast, while bitcoin companies are being scrutinized more widely around the world, outright bans are uncommon.
“I don’t think China’s approach will establish a precedent for how other countries regulate this field,” said John Wu, president of the blockchain startup Ava Labs.
Huobi Global affiliate Huobi Tech (1611.HK) fell 22%, while OKG Technology Holdings Ltd (1499. HK), a fintech company majority-owned by Xu Mingxing, the founder of cryptoexchange OKcoin, down 19%.
Canaan Inc (CAN.O) and Ebang International (EBON.O), both Nasdaq-listed Chinese crypto mining machine manufacturers, fell 21% and 7%, respectively, on Friday.
After China, previously the world’s largest bitcoin trading and mining center forbade such platforms from converting legal money into cryptocurrencies and vice versa, several Chinese crypto exchanges shut down or went offshore in 2017. Then, in May of this year, China’s State Council declared that bitcoin trading and mining would be prohibited.
Other sorts of Chinese crypto companies have been relocating out of China in recent months as a result of the crackdown, according to Flex Yang, founder, and CEO of Babel Finance, who added that the impact of the latest legislation will be “minimal.”
This month, the Chinese crypto financial services firm opened a new office in Singapore. Cobo, a cryptocurrency asset management and custodial platform, also relocated its headquarters from Beijing to Singapore lately.
Many Chinese exchanges appeared to have experienced money outflows as a result of previous crackdowns. According to consultant PeckShield, $28.3 billion in cash flowed out of Chinese crypto exchanges such as OKEx, Huobi, and Binance to international exchanges in the first half of 2021, a 62 percent increase over outflows for the entire year of 2020.
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