Major digital asset exchanges founded by individuals of Chinese origin are making significant adjustments to their operations after regulators in China criminalized crypto transactions and services last week. China-based users are being dropped by crypto service providers, while some firms have shifted their operational headquarters to locations with friendlier regulatory climates, like Singapore.
On Friday evening, the People’s Bank of China (PBOC) and nine regulatory organs announced new restrictions on crypto trading and mining activities. China’s top court, foreign exchange regulator, and the Ministry of Public Security said they will root out all cryptocurrency-related activities, and specifically called out overseas exchanges that provide services to Chinese users.
This is a continuation of crypto-related regulation in China. Similar but lighter bans were put in place in 2013 and 2016, when PBOC prohibited banks and payment companies from providing services that utilized bitcoin. The central bank’s announcement on Friday broadens the scope of China’s crypto ban.
In June, the PBOC summoned the country’s major commercial banks and Alipay, warning them not to provide any crypto-related services. Mining operations were then outlawed, and miners’ power supplies were cut, sending bitcoin prices to a low point in the same month.
Even though there was a broader recovery in the prices of major cryptocurrencies, the latest ban may be an existential threat to a sizable pool of crypto users and traders. “The regulatory pressure in China this time may be very high. The exchange began to react,” Chinese crypto journalist Colin Wu tweeted on Saturday.
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Two major centralized exchanges, Huobi and Binance, have already halted registration of new users in mainland China. Huobi announced on its website on Sunday that the company will retire its existing Chinese users by the end of this year.
Meanwhile, Huobi still offers Hong Kong and Taiwan as location options for new signups. Chinese users can still register accounts on Binance using their email addresses instead of phone numbers. Additionally, decentralized exchanges collect little to no information about their users.
Analysts believe Huobi will exit the Chinese market and turn to Singapore and Hong Kong, Caixin reported.
Faced with an increasingly hostile regulatory environment, some major crypto companies of Chinese origin or their founders have relocated to other countries. Singapore is a favored destination.
The outspoken founder of Binance, Zhao Changpeng, also known as CZ, reportedly resides in Singapore. The same goes for He Yi, the founder of Okcoin, an exchange. Bitdeer, one of the world’s largest mining service providers, is now also based in the city-state.
It remains a national goal for China to become a leader in blockchain technology, as President Xi Jinping stated in October 2019. This is evident in the country’s preparation to roll out its own central bank digital currency. According to a whitepaper released by the PBOC in July, there were more than 20.87 million personal wallets for the digital yuan as of the end of June. In all, 70.75 million transactions have taken place, transferring RMB 34.5 billion (USD 5.34 billion) in value.
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