Cryptocurrency/China: loophole closure is bad for exchanges

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What is the value of a currency that cannot be traded or used?Beijing is in the most extreme place Still banned About crypto trading. It is far from the era when China produced the world’s largest crypto trading volume and the largest supply of Bitcoin.

Cryptocurrency exchanges and other service providers are already technically banned. The loophole allowed locals to trade through offshore accounts. China’s cryptocurrency exchange went abroad to continue trading — for example Huobi moved to Seychelles.

China currently bans crypto trading Regardless Where the exchange and account are based. Regulators are set to enforce bans, including cryptocurrency mining, with the full support of the Supreme Court, police and central banks. The world’s largest exchanges, Binance and Huobi, have suspended user registration in mainland China. Huobi will close existing mainland user accounts this year.

Huobi’s outlook is bleak. It relies on China’s customer base for most of its profits. In the six months to March, sales more than doubled and gross profit margin almost tripled to more than 50%. Companies trading blockchain-based assets and the like accounted for about 40 percent of the total group. Other divisions, such as technology solutions and software, are also very profitable. However, they also rely on cryptocurrency trading, offering platform technology, data centers and cloud services tailored to investors in virtual assets.

Due to soaring Bitcoin prices, Huobi’s Hong Kong-listed stock has more than seven-fold in the year leading up to its April peak. Even after a sharp fall following Beijing’s previous cryptocurrency crackdown, stocks are more than double last year’s level and are trading at 83 times steep futures earnings. That’s more than double the rating of other companies in the industry, such as low-risk US-based Coinbase.

As the number of Chinese investors declines, a significant source of liquidity for crypto trading will be lost. Soaring demand elsewhere can quickly make up for it. However, China-focused Huobi cannot be expected to completely offset client losses.