Many cryptocurrency exchanges left China after the fall of 2017, when the Chinese government launched a market-moving crackdown on domestic crypto trading platforms.
Since then, many such companies moved abroad, but some exchanges stayed — or at least used various workarounds to stay open to Chinese users. In some cases, those firms that left opened up offices nearby the Asian superpower, or in other cases inside the country itself, all the while tip-toeing under the seemingly renewed tolerance of the Chinese Communist Party for a time.
The stakes have ratcheted up again this year, however.
The shifting tides come as China’s digital yuan plans have recently been accelerating and after Chinese President Xi Jinping announced back in October that blockchain and related innovations were to become “core” technology in China.
China’s House, Government’s Rules
Unsurprisingly, the government’s embrace of the blockchain arena would only come on its own terms. Not long after Jinping’s pivotal blockchain remarks, various financial authorities throughout China — including regional arms of the People’s Bank of China (PBoC) — have started working to root out local crypto exchanges that have run afoul of the powers that be.
Apparently as part of this new wave of regulatory flexes, Binance reportedly shuttered an office it had in Shanghai last month (an office the exchange disputes existed, though which considerable evidence indicates otherwise) after being visited by local authorities.
Accordingly, Sino Global Capital CEO Matthew Green commented on December 2nd that while Binance and other exchanges now looked acutely “iced out” of China, there were two major exchanges that, to the contrary, were seemingly rising in the good graces of President Jinping’s government: Huobi and OKEx.
OKEx on China state TV tonight (CCTV1) pic.twitter.com/lXmcu9A0Gm
— Matthew Graham (@mg0314a) December 2, 2019
It’s no real secret why, either.
“It’s been well understood for some time that Huobi and OKEx have substantially better relationships with Chinese government than Binance,” Green later said.
Those productive relationships have allowed Huobi and OKEx to escape the ire of China’s leadership and its pervasive, even if at times implicit or indirect reach.
For example, last month Binance’s account was kicked off popular Chinese social media platform Weibo after the service said the exchange had transgressed “laws and regulations and the relevant provisions” of the company’s community rules. Conversely, Huobi’s and OKEx’s Weibo accounts were not moved against.
Concurring with the Sino Global Capital’s Green, Larry Cermak, research director at The Block, also suggested on Twitter it appeared no small coincidence as to the disparity of treatment Binance was receiving from the government compared to its main Chinese competitors.
“Binance getting pushed out of China while Huobi and OKEx are allowed to operate is the story to watch right now,” Cermak said.
With the Kingmaker
In recent times, Huobi has been doubling down on making its operations in China work through a goodwill campaign and close relations with authorities.
Last spring, the exchange launched a fund worth $1 billion USD dedicated to accelerating Chinese blockchain startups. As part of the effort, Huobi committed both to building out a “Global Cultural and Creative Blockchain Lab” and to moving its headquarters to Hainan, a region Chinese President Xi Jinping has turned into his country’s largest special economic zone.
“Against the background of the new era of Chinese socialist characteristics, we have given [Hainan] a new mission of economic reformation,” Huobi said at the time.
Then, last fall Huobi was the first cryptocurrency exchange in China to form its own in-house Communist Party committee, a move that marked a direct embrace of the government’s leadership.
Fast forward to this week, and the exchange announced it had joined the Blockchain Services Network (BSN) alongside several other major Chinese companies including state-backed firms like China Telecom and China Mobile.