The share price of the Intercontinental Exchange-backed crypto services company Bakkt (BKKT) has surged as it unveiled two partnerships with major global payments firms.
On Monday, Oct. 25, Mastercard announced it would be working with digital asset platform Bakkt to allow its United States-based customers to buy, sell and hold digital assets through custodial wallets. On the same day, global payment provider Fiserv also announced a strategic collaboration with Bakkt to offer merchant-facing digital asset services.
The news drove a bullish day of trading for BKKT, with the stock rallying by more than 50% outside of regular trading hours from Friday, Oct. 22’s closing price of $9.15, before surging a further 120% to close out Monday, Oct. 25 at $30.60.
While Bakkt’s debut on the New York Stock Exchange saw its share price pull back by 6% to close out its first day of trading, BKKT has since rallied more than 236% from $9.09 to $30.60 over the past five days.
‘BKKT/USD:TradingView‘
Bakkt went public on Oct. 18 through a Special Purpose Acquisition Company deal that valued the company at $2.1 billion. Bakkt’s market capitalization currently sits at more than $4 billion.
Related:Mastercard plans to allow US partners to offer crypto loyalty rewards
In August 2018, Coinbase investor and New York Stock Exchange owner Intercontinental Exchange announced it would launch a digital asset platform dubbed Bakkt.
The following year, Bakkt launched its highly anticipated physically “deliverable” Bitcoin futures contracts for institutional investors.
After initially claiming to pioneer physically delivered Bitcoin futures contracts, the firm received criticism over their cash-settled product design. In response, Bakkt fully collateralized its daily futures contracts.
The firm launched a retail crypto asset payments app in April of this year, while its futures contracts posted record volume earlier this month.
Funded by crypto heavyweights, new crypto unicorn Worldcoin revealed its plan to let everyone claim free coins to accelerate global crypto adoption.
Providing the global population with free cryptocurrency sounds like a moonshot project, but $25 million in backing from Andreessen Horowitz, Coinbase Ventures, 1confirmation, Blockchange and Day One Ventures, and a valuation of $1 billion adds some weight to the Worldcoin project.
Co-founded by Alex Blania, Sam Altman and Max Novendstern, Worldcoin saw the participation of more than 100,000 people from around the world during its test period and aims to reach over a billion people within two years. For comparison, there are over 300 million crypto users worldwide as of 2021.
Speaking to Cointelegraph, Worldcoin co-founder and CEO Alex Blania said that the co-founders met in 2019 and started working on the project in early 2020. “Sam thought we could really change the world for the better if we could launch a new, collectively owned, globally distributed cryptocurrency,” he said.
Worldcoin is a cryptocurrency implemented as a layer two on top of the Ethereum blockchain where anybody can create accounts, submit transactions, and participate in the validation process. Its mainnet launch is expected next year.
The inclusive nature of its ecosystem, distribution of free coins and the incentives for new sign-ups are three levers to drive the adoption of crypto, Blania explained. Signing up for Worldcoin does not require any previous financial resources.
Worldcoin validates whether the person is real and has claimed their free share by scanning their irises with custom hardware named Orb. Independent entrepreneurs around the globe will operate these devices as “Orb operators.” Blania explained that those operators are rewarded for every user they sign up for Worldcoin, for example:
“An Orb operator in Indonesia partnered with one of the biggest food delivery companies in the country to sign up every driver, rented a whole storefront in a shopping mall to leverage high foot traffic, and was even invited by the chief of a nearby village to introduce the whole village to Worldcoin. His experience with this village was so successful that it resulted in eight other villages asking him to do the same.”
The mention of an eye scan immediately brings up Big Brother-esque concerns about user privacy. According to the announcement, the Orb will convert the scan of a person’s eye into a numeric code so the original image “does not need to be stored or uploaded.”
Related:MDT introduces blockchain oracle to accelerate DeFi adoption
The underlying system won’t link this numeric code to users’ wallets or transactions to preserve privacy. Users can also participate in the Worldcoin network without providing an eye scan, but they will not be able to claim free coins.
The team is developing a non-custodial mobile wallet app to ease the onboarding process. It would enable transactions between users and act as a navigator for finding nearby Orb operators. They aim for a fast scale-up with the distribution of 50,000 Orbs per year, possibly with the upcoming funding rounds over the coming months.
With venture capital funding seemingly prioritizing emerging technology, the blockchain industry experiences a significant influx of capital from corporate backers.
According to the Global Startup Ecosystem Report 2021 published on Wednesday, blockchain-based businesses account for 10% of startups worldwide.
The figure is part of a more significant trend that has seen emerging technology become a fast-growing sub-sector in terms of early-stage funding.
The report divides startups into growing, matured and declining sub-sectors. Unsurprisingly, blockchain technology is in the first group, where the average growth rate is 107%, along with agriculture technology (agtech) and new food, advanced manufacturing and robotics, artificial intelligence (AI) and big data, and fintech.
According to the report, blockchain is the second-fastest-growing sub-sector in terms of early-stage funding, with a 121% growth over the last five years. Exits among early-stage blockchain startups also grew by 52% within the same period.
Silicon Valley remains a leading source of blockchain funding, with investors like Andreessen Horowitz regularly among the pool of backers for decentralized ledger technology startups.
With blockchain among the major destination for early-stage VC funding, it is perhaps unsurprising to see Silicon Valley at the top of the ecosystem value creation rankings according to the report.
The Global Startup Ecosystem Report used survey data from more than 10,000 startup executives globally, its methodology page explains.
Related:VC funds bullish on crypto, increase investment in blockchain startups
While the GSER focuses on early-stage backing for startups, the report’s details are in keeping with the established bullish trend for blockchain among venture capital funds.
In April, Cointelegraph Consulting reported that VC firms had invested over $16 billion in blockchain equity since 2012.
In Q1 alone, VC firms invested about $2.6 billion in crypto and blockchain startups, a figure $300 million north of the total corporate investment in the sector for the whole of 2020.
The scale of the investment funds flowing into the blockchain space also serves as a counterargument to criticisms against the value proposition of the emerging technology.
With crypto and blockchain often drawing negative attention from policymakers, these multi-million investments could be vital in promoting the industry.
Chainalysis found that bitcoin usage surged in developing countries as citizens seek shelter from currency debasement.
Global adoption of bitcoin and cryptocurrency has skyrocketed in one year, up over 880%, new Chainalysis data found. The company’s Global Crypto Adoption Index was released yesterday with data from July 2020 to June 2021 to show how active countries worldwide are in Bitcoin.
The index weighs the data to prevent it from skewing to favor developed countries with large transaction volumes from professional and institutional players. Instead, the goal is to “highlight the countries with the greatest cryptocurrency adoption by ordinary people, and focus on use cases related to transactions and individual saving, rather than trading and speculation.”
Chainalysis found Vietnam to have the highest cryptocurrency adoption, leading the 154 countries analyzed and scored on a scale of 0 to 1. Second place India scored 0.37, followed by Pakistan, with a 0.36 score.
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The data analysis company uses three metrics to determine a countries score. On-chain value received, weighted by purchasing power parity (PPP) per capita, seeks to determine how significant total cryptocurrency activity volume in a country is compared to its wealth per resident.
A second metric, on-chain retail value transferred – also weighted by PPP per capita – aims to measure non-professional, individual users’ activity compared to the average person’s wealth.
The last metric measures peer-to-peer (P2P) exchange trade volume, weighting it by PPP per capita and the number of internet users in the country. The goal with the third metric is to try to highlight countries where more residents are putting a larger share of their wealth into P2P transactions.
Not only has the study found that global bitcoin adoption is skyrocketing, having grown by 2,300% since Q3 2019, but also how emerging markets are turning to bitcoin to preserve their savings in the face of severe national currency devaluation. In contrast, adoption in North America, Western Europe, and Eastern Asia has been powered mainly by institutional players.
While financially privileged investors in developing countries dismiss Bitcoin’s usage as a currency, those in Vietnam, Kenya, Nigeria, and Venezuela show how bitcoin is their best bet. Citizens of developing countries worldwide already opt to use bitcoin daily to store and exchange value. It is only a matter of time for such use cases to spread across the globe, triggering bitcoin’s usage as a unit of account.
Tokenized property remains niche, largely due to its relative novelty and remaining regulatory uncertainties. Yet a new report has noted that even if just 0.5% of the total global property market were to be tokenized in the next five years, it would be on track to become a $1.4 trillion market
In recent years, the total value of the global real estate market has hit a staggering $280 trillion, eclipsing most other major asset classes and on par with the value of total global debt accrued by 2020. Moore Global, a London-born international advisory and accountancy network, has published a report collating expert opinions worldwide on the potential of tokenization for this thriving, if traditionally illiquid, asset class.
For Dan Natale, Moore Global’s real estate and construction leader and a managing partner of Segal LLP in Toronto, blockchain’s key benefit to the sector is a boost to liquidity by providing efficient, disintermediated infrastructure to underpin new secondary markets. David Walker, a managing partner of Moore Cayman who works as an auditor specializing in digital assets, has for his part claimed that the transparency and security of the technology also offer evident advantages from an auditor’s perspective.
Until now, the expansion of real estate tokenization has fallen short of expectations, due in part to institutional investors’ hesitancy and the absence of established secondary markets for security token trading. This, however, may be gradually changing, with the United Kingdom’s Financial Conduct Authority granting an operational license to digital security exchange Archaz in August of last year. One year prior, Germany’s Federal Financial Supervisory Authority (BaFin) had approved its first blockchain-based real estate bond, issued on Ethereum.
Related:Tokenized Real Estate Hasn’t Lived Up to the Hype: Property Researcher
Andrew Baum, director of the Future of Real Estate Initiative at Oxford University’s Said Business School, thinks that tokenization in real estate could finally take off if there is evidence of investor demand for fractional ownership – something that advocates of tokenization have championed since 2017.
Last summer, a security token representing fractional ownership in the luxury St. Regis Aspen Resort in Colorado went live on Overstock’s regulated tZERO exchange, attracting record trading volumes. Within less than a month, however, with the token seeing a relatively flat performance amid the coronavirus slowdown, investors were being offered major discounts on their stays at the resort to help boost the token sales. tZERO has nonetheless recently struck a partnership to tokenize $18 million worth of shares in NYCE Group – a platform hyped as a potential “Robinhood of real estate investing.”
Authorities in Japan are contemplating tighter cryptocurrency regulations, according to the latest reports.
Japan Stepping up Crypto Regulatory Activities
US media outlet Reuters revealed that Japanese finance regulators had expressed their intentions to step up regulatory efforts on cryptocurrencies. Officials told the news agency that the rise of cryptocurrencies poses a threat to the financial structure in the country.
Japan is one of the countries that are relatively crypto-friendly and has relaxed rules on cryptocurrencies. However, pressure from other regulators in the G7 could lead to a rethink of existing policies.
Last week, Japan’s Financial Services Agency (FSA) launched a new section to oversee digital currency regulations as part of increased surveillance on crypto transactions. The unit will also oversee decentralized finance, a new form of finance that does not rely on third-party financial intermediaries.
The Ministry of Finance is also contemplating increasing its staff to increase its digital currency oversight and is expected to submit a budget request in August. In addition, the Bank of Japan (BoJ) has also stepped up efforts towards the development of a digital yen that is seen as an alternative to cryptocurrencies.
The apex bank had created a committee in March that brought together financial agencies and key stakeholders in the banking and finance sector to add their input on the digital yen. All these activities aim to ensure that the Asian nation can keep up with the growing world of crypto regulations.
Global Regulators Wary of Stablecoins
Although cryptocurrencies like Bitcoin and Ethereum are a source of problems to regulators, globally stablecoins pose the most threats to the banking system. Stablecoins are cryptocurrencies pegged to real-life assets and have increased in popularity in recent years.
Unlike traditional currencies like Bitcoin that are volatile, stablecoins represent an ideal coin for transactions due to their stable nature. However, global regulators quickly shut down the proposals by Facebook in 2019 for use on its platforms due to its potential to bypass existing financial systems.
Cryptocurrency has also received scrutiny as a useful tool for money laundering and tax evasion. As a result, it is understood that many regulators want to place a crypto framework that would prevent any cryptocurrency from disrupting existing financial systems.
Iran is trying to make crypto mining a source of income for the state, while cracking down on miners.
Iran, hit hard by international sanctions, lost revenue supplied by oil exports. Crypto might be a way to get some extra cash, so Iran has been toughening its grip on miners at home in an effort to better control this revenue stream. Since last year, Iran has also opened new opportunities for foreign mining firms.
Iran is a notable player on the bitcoin mining market, and during 2020 it contributed almost 4% of the global bitcoin hashpower, according to research by the University of Cambridge.
But Iran’s relationship with miners is best described as complicated.
On the one hand, Iran clearly sees crypto mining as a way to generate income for the state. Iran began requiring miners to register with the country’s Ministry of Industry, Mines and Trade and pay a higher tariff on electricity than retail or industrial users last year.
But Iran has also blamed bitcoin miners for recent power outages. Just this month, Iranian authorities reportedly shut down 1,620 unregistered mining farms and confiscated 45,000 mining devices.
CoinDesk takes a deep dive into Iranian mining.
Lights out
In January, Iran experienced a number of power outages. The authorities blamed the outages on bitcoin miners and went for a sweeping attack on miners, big and small.
Ziya Sadr, Iranian bitcoin advocate and blogger, insists that mining has nothing to do with outages and instead blames government mismanagement of the electricity grids. “They shut down miners, but we still have blackouts. So guess what? It’s nothing to do with the miners!” Sadr told CoinDesk.
To be sure, the government has said miners only consume 2% of Iran’s electricity, according to the Associated Press.
But the Iranian government has also claimed miners have made the country’s power grid “unstable” since 2019, Radio Free Europe reported. The publication cited Iran’s deputy energy minister, who said some mining farms were based in “schools and mosques” that receive electricity for free.
Iranian journalist Ehsan Norouzi wrote in 2019 that the list of entities running mining operations on free electricity might actually be much bigger: the country’s elite armed forces, the Islamic Revolutionary Guard Corps, control a broad network of religious schools, mosques and other entities that get electricity for free.
There is no proof all of them are mining crypto, Norouzi told CoinDesk via a call, but “if there is free electricity there will be a market for it,” he said. Back in 2019, Iranians were sharing photos on social networks of at least one mining farm in a mosque. The government asked the mullahs to declare fatwas against stealing electricity.
Chinese investors
Among the victims of the latest blackout-related shutdowns is a mining company that recently opened a big farm in one of the country’s special economic zones.
On Jan. 14, a couple days after a nation-wide power outage, Iranian authorities temporarily shut down a mining farm in Rafsanjan, Kerman province, citing the excessive burden on the power grid. The data center was certified by the authorities, according to the local new outlet Mehr News, but was taken offline “in order to manage [power] consumption in the current situation.”
The farm is operated by the Iran and China Investment Development Group. The organization’s website does not mention crypto mining, only saying that Iranian and Chinese investors are building a joint 1 million terabyte datacenter in the Rafsanjan special economic zone. The idea that the Chinese crypto miners were to blame for the blackout quickly spread on Twitter, prompting some anti-China sentiment, The Diplomat reported.
The Chinese investor is a company called RHY, according to Omid Alavi, head of Vira Miners, and Ziya Sadr. Two Iranian miners who wanted to stay anonymous also told CoinDesk that it was RHY’s farm that was shut down.
RHY boasts multiple mining sites, including some in the Middle East, without specifying where. On its website, RHY posted a video titled “175 MW Mine,” showing several hangars filled with ASICs. A car briefly appearing in the video has a license plate with Farsi lettering and a flag resembling the Iranian one.
According to the electricity bill, translated by The Diplomat, the mining farm consumed a little short of 60 megawatt of power during one month. BBC Persian reported a similar capacity for the farm in Rafsanjan.
RHY does not share the company’s contact information on its website, and a customer service chat operator declined to connect CoinDesk to RHY management or a PR representative. The operator also declined to discuss the firm’s Iran business. A request for comment sent via RHY’s Facebook page went unanswered.
The Rafsanjan farm shut down because after Iran introduced the new rules for miners, the electricity tariff went up sharply, Alavi believes.
“The Chinese came two years ago and they were looking for cheap electricity,” Alavi said. “They found some place in Kerman and started building a big farm. At that time, the Iranian government didn’t have any regulation in crypto, and they [the Chinese company] used the industrial tariff. After one year, the government started regulation and changed the tariff, so the company had to pay new bills.”
An Iranian Telegram channel dedicated to miners’ issues with authorities mentioned the story in a Jan. 14 post, writing that “any foreign investor will run away after seeing the treatment of the Chinese investor in Rafsanjan.”
The channel also posted a letter of Mohammad Hassan Ranjbar, chairman of the Board of Directors of Iran-China Investment Development Group. According to Ranjbar, the mining farm in Rafsanjan had been paying 4,000 rials per kilowatt, which is a high price.
“China is currently the only country that can invest in Iran due to sanctions,” Ranjbar said in that statement, also quoted by Aljazeera. “It is both rich and has technology, so we can help each other to invest and build more projects. But we can also send them away from Iran and become completely isolated and alone in the world.”
Foreign guests
RHY was not the only Chinese mining company in Iran – an array of firms have been active in the country for a couple of years. In August 2019, miner Liu Feng told the Chinese crypto media outlet 8btc he moved 3,000 of his ASICs to Iran to take advantage of the country’s cheap electricity, $0.006 per kilowatt-hour.
In August 2020, Chinese mining pool Lubian also told 8btc about building a mining farm in Iran. Lubian broke into the bitcoin hashrate competition last spring right after the latest bitcoin halving, immediately becoming one of the leading mining pools.
Talking to 8btc, Lubian co-founder Liu Ping said the mining pool established a good rapport with Iranian authorities.
“We have our own customs clearance channels as we have the experience of establishing the logistics company. And we have good local resources in Iran, and we have maintained good relations with the Ministry of Energy, the Ministry of Foreign Affairs and even the army in Iran,” he said.
It’s not only Chinese miners that are tapping into Iran’s energy market: In April 2020, Turkish mining firm iMiner reportedly received a license for a 6,000-ASIC farm in the city of Semnan.
Dmytro Ziablov, CEO of Ukrainian mining company BeeMiner, told CoinDesk the company is running a 2-megawatt mining facility in Iran and is planning to expand to 70 megawatts later this year. BeeMiner received hosting requests from Chinese companies, including Huobi Pool, Ziablov said: “The Chinese government gets not that friendly to the miners from time to time, so [miners are] interested in finding new places to mine.”
In addition to the Chinese miners, Turkish and UAE companies are also coming to Iran, Ziablov said. Asked if it was difficult to get the farm licensed in Iran, he said the process took 2.5 months. “It’s hard, but with some persistence, connections and resources it’s feasible,” he added. He said he didn’t know why the Chinese farm in Rafsanjan had to shut down.
Domestic challenges
In the meantime, for small-scale domestic miners the situation has been tough in recent years, according to one long-time miner who talked to CoinDesk anonymously.
Basir (not his real name) told CoinDesk he started mining seven years ago, but three years ago, the authorities took notice. In May 2018, police came to Basir’s house, he said, telling him they suspect he owned an unlicensed gun. Then they saw the ASICs. First, the police thought the machines were “a spy server,” but then the cyber police figured out what they were dealing with.
According to him, Basir spent one week in jail, was charged with having illegal income and money laundering and had to pay a bail that basically swept out his family’s wealth. CoinDesk could not independently verify the details of Basir’s account.
“I sold the house, I sold the car, I sold the graphic cards [that were in my] warehouse at the low price, gold and savings. All was destroyed,” he said. “My luxury life turned into a poor life.”
Last year, the Iranian government issued a directive that all mining facilities in Iran must register with the government. The owners must disclose their identities, the size of their farms and what kinds of ASICs they are using. The government has also raised the electricity tariff from 482 rials to 1,930 for kilowatt per hour (in U.S. dollars, from 0.1 cent to 4.6 cents).
According to the Ministry of Energy, there are currently 24 officially registered mining farms in Iran, consuming 310 megawatt of power.
Miners also need to register their mining equipment, and if it was smuggled into the country, they need to pay the customs fees if those weren’t paid in time, Sadr said. Until recently, there simply was no legal procedure to import ASICs into Iran at all, he added.
One of investing’s loudest critics of China shares his assessment of where the U.S. political and business relationship with the country is headed.
This episode is sponsored byNexo.io.
In this episode, NLW speaks with Kyle Bass. Kyle is the founder and chief investment officer of Hayman Capital Management, a hedge fund focused on global events. He is known for correctly predicting the subprime mortgage crisis, as well as for his outspoken and critical views on China.
Russia’s Ministry of Labor has informed officials of federal and local government bodies that they are prohibited from owning cryptocurrency and must dispose of any holdings.
A document, published on the Ministry’s website and dated December 16, 2020, indicates the directive is aimed at preventing corruption. The news was first reported by Russian crypto news outlet Forklog.
The letter states that public officials in Russia on federal and local levels, including Bank of Russia board members and chairs of government-owned corporations, as well their spouses and under-age children, are not allowed to own cryptocurrencies and any digital assets issued outside the country.
The letter refers to the law on digital assets that came into force this January. The law includes a number of amendments to other Russian laws, including that one that prohibits government officials from opening accounts in foreign banks and buying financial instruments from foreign countries. Now this list also includes “digital assets issued in accordance with the foreign law and cryptocurrencies.”
Government officials must now divest themselves of any digital assets by April 1, 2021.
The rules for disclosure, however, are not that strict yet. Public officials don’t have to report owning digital assets, along with other kinds of property, in their anti-corruption declarations for the year 2020, as this is the first year when the new law came into force.
It’s not clear how many of the government officials in Russia might own cryptocurrencies, as there have been no public reports on the matter.
At least one key executive from crypto exchange Huobi is now in custody with Chinese police due to an investigation related to the exchange’s over-the-counter (OTC) trading service, multiple sources have told CoinDesk, giving more credence to rumors that have been circulating on Chinese social media.
The two people, including COO Jiawei Zhu, were taken by the police in November and December 2020, respectively. Trading on the exchange is not affected because the police are investigating a case related to the Huobi’s separate OTC trading business, said these sources, which include former employees close to Huobi’s core team members and industry executives with direct knowledge about the matter.
Zhu was taken by local police during a company trip in the city of Zunyi in South China’s Guizhou province in November. He is currently still in custody, according to the sources.
CoinDesk first asked Huobi to confirm details in the story on Jan. 15. The exchange had not provided comments as of press time.
Zhu was assisting the police with an investigation, according to a report by Chinese publication The Paper, dated Nov. 30. The police did not take coercive measures to make Zhu cooperate, and the situation is similar to OKEx founder Star Xu’s case, the report indicated. No further details regarding Zhu’s detention in November are provided in the report.
The other person, who is one of the managers in charge of Huobi’s OTC trading services, was detained in December but was released recently by the police, according to one former employee.
It remains unclear whether the local police also put in custody the exchange’s co-founder, Lin Li, during the trip. Li might have been assisting the police with investigations, according to the sources. “Few people know Li’s whereabouts nowadays,” one source said.
Huobi Tech, the Hong Kong-based public company acquired by Li through a reverse takeover, has yet to file any disclosure related to the incident with the Hong Kong Exchange, indicating Li is not facing any criminal charges.
A number of Huobi’s current employees across different departments including trading, finance and legal have been interviewed by the police to assist the investigation. But the police have not been able to bring in more people for questioning because a large part of the exchange’s operations is decentralized, one former employee said.
“Three of their key people are in prison,” Su Zhu, CEO of Singapore-based crypto investment firm Three Arrows, said of the investigation about Huobi in a Dec. 12 podcast. Zhu later clarified to CoinDesk about his comment on the podcast saying that he meant people were in custody rather than in jail and he is not certain why they are in custody.
Huobi came on the police’s radar, in part, because of a particular investigation in 2018, which is also related to major exchange OKEx’s OTC trading services, one former employee said.
The current investigation appears to be focused on potential financial crimes conducted through the exchange’s OTC trading services, including online gambling, two former employees said.
The investigation is related to a particular case the Shanxi local police have been working on, three of the sources said. It was the local police from Shanxi province who were trying to find Huobi’s key executives while they were on the trip in Zunyi, according to two of the sources.
The investigation took place at a time when local police in Shanxi province were ratcheting up their anti-corruption campaign and tightening surveillance over financial transactions via a variety of platforms, according to the sources.
Despite Huobi’s fairly close relationship with the Chinese government, the exchange was not exempt from the investigation because the case is politically sensitive, the sources said.
As one of the largest crypto exchanges founded in China, Huobi has been working with the Chinese government to develop blockchain technology. It has jointly launched multiple blockchain initiatives with the Chinese government and has a Communist Party committee setup in Beijing Lianhuo Information Services Company in 2018, which is one of its subsidiaries based in the city.
Star Xu, the OKEx founder, was reportedly held in custody in October to assist the Chinese police with an investigation. The rumors that Huobi’s executives were taken by the police emerged on Chinese social media in November shortly after the trip. A Huobi spokesperson at the time denied the rumors in an interview with CoinDesk.
The Chinese police appear to have intensified their crackdown on crypto exchanges’ OTC trading services in the last year.
Zhao Dong, one of the most prominent OTC traders in China and co-founder of crypto lending platform RenrenBit, was taken by the Chinese police to assist its investigations in July 2020.
OTC trading has become one of the major channels for Chinese crypto investors and miners to find counterparties and process trade orders since the People’s Bank of China, which is the country’s central bank, started to clamp down on crypto trading on centralized exchanges in September 2017.
Such trading tends to be difficult for Chinese authorities to trace, and is less strict about Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) compliance, compared to trading on centralized exchanges.
Read More: Huobi Guarantees Normal Operations During OKEx’s Suspension of Crypto Withdrawals
One of the reasons Huobi has yet to inform its customers of any information related to the incident is that, unlike OKEx, the exchange’s private keys to its crypto wallets are held by multiple people. Thus, Huobi can still process withdrawals, the sources said.
OKEx, by contrast, informed its customers the exchange would be suspending withdrawals because the private key holder was assisting an investigation with the Chinese public security bureau and could not be reached at that moment. The exchange resumed withdrawals on Nov. 26, five weeks after the suspension.
