Huobi’s strategy to add China clients faces headwinds
Huobi, the global cryptocurrency exchange, is planning a major revival plan as it seeks to grow its market share in Mainland China and Hong Kong. That is happening as cryptocurrency prices continue recovering, with Bitcoin sitting comfortably above $27,000.
Justin Sun, the company’s advisor and defacto CEO, is working with to add more Chinese costumers, a few years after the country banned digital assets. According to the WSJ, Huobi, which has about 4% market share in the cryptocurrency industry, is planning to use the Commonwealth of Dominica to access more Chinese customers.
The Commonwealth of Dominica has agreed to provide digital citizenship for Chinese. As part of this strategy, Huobi’s new customers who identify as Chinese are pushed to apply for a digital citizenship in the small island nation. In a statement, Justin Sun said:
“The Caribbean strategy is definitely one of the most important priorities for Huobi. We want to advocate this kind of freedom of nationality concept.”
As a result, the new measure will make it possible for Chinese traders and investors to create accounts and trade digital assets. However, the strategy has several challenges. For one, Chinese citizens who use the strategy could be targeted by Chinese regulators. In a note, the People’s Bank of China said it would:
“Promptly deal with domestic and foreign trading platforms that provide virtual currency-related services to residents in China.”
Most importantly, the strategy could be difficult to implement in terms of KYC and AML procedures. As a result, the company could be targeted by key regulators.
Huobi has been attempting to grow its market share in China in the past few months. For example, Justin Sun launched TCNH, a stablecoin that is backed on the off-shore yuan. That stablecoin, which exists on Tron’s ecosystem, has a daily circulation of 10 million coins.
It is unclear why the new strategy has led to inflows in Huobi. Data compiled by DeFi Llama shows that the company has $3.07 billion in assets while its clean assets stand at $2.3 billion. Total assets have dropped by 14% in the past 30 days.
