Cryptocurrency exchanges and providers of crypto services are scrambling to sever business ties with mainland Chinese clients, after Beijing issued a blanket ban last Friday on all crypto trading and mining.
In a culmination of years of effort to rein in the sector, 10 powerful Chinese government bodies including the central bank, said 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.
Huobi Global and Binance, two of the world’s largest exchanges and popular with Chinese users, have 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.
Du did not give an estimate how many of its users would be affected, saying only that Huobi, once the world’s biggest crypto exchange, had embarked on a global expansion strategy many years ago and seen steady growth in Southeast Asia and Europe.
Shares in crypto-related firms tumbled on Monday with crypto asset manager and trading firm Huobi Tech plunging 23% and OKG Technology Holdings Ltd, a fintech company majority owned by Xu Mingxing, the founder of crypto exchange OKcoin, losing 12%.
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. It added it welcomes cooperation from China in blockchain technologies.
China’s central bank and regulatory officials are concerned about cryptocurrency speculation having an impact not only on financial stability, but social and criminal factors, BCA Research said in a note on Monday.
Cryptocurrencies “threaten governments’ monopoly on money” and countries’ economic sovereignty, it said.
“Moreover, cryptocurrency mining is a highly power-intensive process. It is dominated by coal-fired energy and produces substantial electronic waste. Thus, mining conflicts with global climate change ambitions. This consideration is especially true in China where energy production is dominated by coal and where 65% of global mining activity occurs.
“Thus, government regulation remains the key headwind to the cryptocurrency market. Central banks around the world will continue working towards establishing digital currencies which will diminish cryptocurrencies’ appeal as a medium of exchange.”
SHIFT TO SINGAPORE
Some Chinese crypto exchanges saw this reaction coming from Beijing years ago. Many shut down or moved offshore in 2017, after China, once the world’s biggest bitcoin trading and mining centre, banned platforms from converting legal tender into crypto 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.
• Reuters with additional editing by Jim Pollard