https://www.coindesk.com/chinas-crypto-exchanges-didnt-just-survive-theyre-thriving/It began like this: officials from the People's Bank of China stepped into the offices of the largest crypto exchanges in the country and sat down with their executives.
From the financial regulator's Shanghai and Beijing bureaus, the officials told the exchanges they were interested in identifying whether anti-money laundering and capital control mandates were being met.
But according to Robin Zhu, chief operating officer at Huobi, the regulators had an ulterior motive that January day.
"The regulator wanted to grab a big picture of how significant cryptocurrency trading was in China - how does bitcoin work; where does the money come from; where does it go to; how do people make and lose money?" Zhu said.
The PBoC also requested information on the exchange's trading volume and user numbers. In addition to the platform's data, Huobi had been regularly submitting information and reports about worldwide government policy in an effort to help the PBoC understand the industry.
Zhu definitely thought something was up. To him, it seemed like the PBoC was gathering information in an order to create a framework for regulating the industry, something many exchanges wouldn't have necessarily been worried about.
But then September came and with it the announcement that the PBoC was banning initial coin offerings (ICOs) and shutting down domestic fiat-to-crypto order book trading.
It seems the inquiries paved the way for the ultimate clampdown, one that severely affected cryptocurrency exchanges in the country.
In a previous interview with CoinDesk, Huobi's founder and CEO Leo Li reported trading volumes followed suit. On November 1, 2017, these figures were just 5 percent of what they were on Sept. 15, the last day before the close of order-book trading.
Yet, not to be deterred, exchanges such as Huobi have continued to thrive, finding new ways to grow their business.
Westward and eastward expansion
In fact, two of China's largest exchanges at the time, Huobi and OKCoin, already have offerings that again rank within the top 10 in the world by trading volume - Huobi Pro and OKEx, two platforms that now trade cryptocurrencies only.
And Zhu told CoinDesk that Huobi Group has more than doubled its staff to over 400 since September, signaling a strong commitment even facing a tightened regulatory landscape.
"The shift to over-the-counter trading is an unexpected pivot to us. We had never anticipated that to be one of our business strategies," said Zhu.
But until some of the pressure is lifted, Huobi is proceeding with an aggressive expansion plan.
Over the past few months, the exchange has opened offices in Hong Kong, Singapore, South Korea and the U.S.
Through partnerships with Japan's SBI Group and an unnamed partner in South Korea, Huobi is expecting its new exchanges in those countries to be running by March of this year. And in San Francisco, the company's new office is focusing on research and fostering blockchain startups, but Huobi has also employed compliance experts that as well, hinting at a possible crypto service launch in the U.S. too.
"Once we have fully understood the legal issue in the U.S., opening a new exchange remains to be the next phase of the plan," Zhu said.
Presumably the profits of these exchanges are now taxed in the new locations - so the Chinese govt has lost out.
