Cryptocurrency exchanges scramble to drop Chinese users after Beijing's ban (updated)

Bitfire group

27/09/2021 10:12

(Recasts and writes through with industry comment)
    By Samuel Shen and Andrew Galbraith
    SHANGHAI, Sept 27 (Reuters) - Beijing's new blanket ban on
all cryptocurrency trading and mining - the broadest yet by a
major economy - has sent crypto exchanges and service providers
scrambling to sever business ties with mainland Chinese clients.
    Shares in a range of Chinese crypto-related firms plunged on
the ban which closes off loopholes left in previous regulatory
crackdowns on the sector. Industry executives noted, however,
that many companies had already shifted key portions of their
business outside China.
    Ten powerful Chinese government bodies said in a joint
statement on Friday that overseas exchanges were barred from
providing services to mainland investors via the internet - a
previously grey area - and vowed to jointly root out "illegal"
cryptocurrency activities.
    In response, Huobi Global and Binance, two of the largest
exchanges globally and popular with Chinese users, stopped new
registrations of accounts by mainland customers. Huobi also said
it would clean up existing ones by the end of the year. 
    "On the very day we saw the notice, we started to take
corrective measures," Du Jun, Huobi Group co-founder said in a
statement to Reuters.
    Du did not give an estimate of how many of its users would
be affected, saying only that Huobi had embarked on a global
expansion strategy many years ago and seen steady growth in
Southeast Asia and Europe. 
    TokenPocket, a popular service provider of crypto wallets,
also said in a notice to clients that it would terminate
services to mainland Chinese clients that risk violating Chinese
policies and would "actively embrace" regulation.
    Some of the world's biggest crypto exchanges originated in
China but Chinese authorities have come to see cryptocurrencies
as speculative instruments lacking in intrinsic value, prone to
acute price moves and a means to circumvent capital controls.
Chinese authorities have instead thrown their weight behind the
development of an official digital currency.
    The ban, which comes amid a swath of regulatory actions that
have hit a range of sectors from gaming to tech to for
profit-tutoring, makes it very hard for Chinese mainland
investors to buy or sell the assets unless they leave the
country. It does not, however, go so far as to declare ownership
of cryptocurrencies as illegal.
    In contrast, while elsewhere in the world cryptocurrency
firms are facing increased oversight, outright bans are rare.
    "I don't believe China's approach will set a standard for
how other countries approach regulating this space," said John
Wu, president of Ava Labs, a blockchain company.
    Shares that took a beating include Huobi Global affiliate
Huobi Tech  1611.HK , which plunged 22% and OKG Technology
Holdings Ltd  1499.HK , a fintech company majority-owned by Xu
Mingxing, the founder of cryptoexchange OKcoin, which lost 19%.
    On Friday, Nasdaq-listed Chinese cryptomining machine makers
Canaan Inc  CAN.O  and Ebang International  EBON.O  tumbled 21%
and 7% respectively.
    Many Chinese crypto exchanges shut down or moved offshore in
2017, after China, once the world's biggest bitcoin trading and
mining centre, banned such platforms from converting legal
tender into cryptocurrencies and vice versa. Then in May this
year, China's State Council vowed to ban bitcoin trading and
mining.
    Amid the crackdown, other types of Chinese crypto companies
have been moving out of China over the past few months, said
Flex Yang, founder and CEO of Babel Finance, adding that the
impact from the latest policy would be "limited". 
    The Chinese crypto financial services provider this month
opened new business headquarters in Singapore. Cobo, a crypto
asset management and custodian platform, also recently moved its
headquarters from Beijing to Singapore.
    Earlier crackdowns appeared to have led to capital outflows
for many Chinese exchanges. Some $28.3 billion worth of capital
flowed out from crypto exchanges of Chinese origin such as OKEx,
Huobi and Binance to foreign exchanges in the first half of
2021, a jump of 62% compared to outflows for all of 2020,
according to consultancy PeckShield.

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EXPLAINER-What's new in China's crackdown on crypto?   
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 (Reporting by Samuel Shen and Andrew Galbraith; Additional
reporting by Alun John in Hong Kong; Editing by Edwina Gibbs)
 ((samuel.shen@thomsonreuters.com;  +86 21 20830018; Reuters
Messaging: samuel.shen.thomsonreuters.com@reuters.net))