China’s Huobi launches US$1 billion blockchain fund to bolster domestic business
China’s Huobi, the world’s third-largest cryptocurrency exchange, has announced it is setting up a US$1 billion fund to finance domestic blockchain-related start-ups, in a bid to bolster its operations in the country after shutting down renminbi-to-bitcoin trading last year.
Cryptocurrencies are digital assets designed to function as a medium of exchange and use cryptography to secure transactions. A blockchain is a digitised, decentralised public ledger of all cryptocurrency transactions and bitcoin has become the world’s largest digital currency.
The blockchain fund will be co-launched with Tianya Community Network Technology, a Hainan-based social networking platform. The two companies will build a “Global Cultural and Creative Blockchain Lab”, Huobi said in a blog post on its official website. Huobi also announced plans to move its headquarters from Beijing to Hainan. Huobi didn’t immediately reply to a request for comment.
Hainan island is China’s smallest and southernmost province. Last month President Xi Jinping announced a plan to turn Hainan into a pilot free-trade port, which could see it challenge competitors such as Hong Kong and Singapore. Xi also highlighted Hainan’s advantages as China’s biggest special economic zone, its geography and climate as reasons why it should be a test bed for further reform.
“Against the background of the new era of Chinese socialist characteristics, we have given Hainan’s Special Economic Zone a new mission of economic reformation. It is a national-level strategy that President Xi Jinping personally planned, deployed and promoted,” Huobi said in the April 30 post.
Founded in 2013, Huobi quickly became one of the two biggest cryptocurrency exchanges in China, the other being OKCoin. Huobi’s exchange supports dozens of cryptocurrencies and digital assets and had a total trading volume of US$1.7 billion in a recent 24-hour period, according to data from CoinMarketCap. The Huobi platform has a footprint in 130 countries.
China’s government has taken a cautious approach towards blockchain technologies – banning Initial Coin Offerings (ICOs) on the one hand while encouraging innovation on the other. China is not the only country to tread carefully on cryptocurrencies though – the UK and Russia have also warned of the risks of ICOs. ICOs occur when a percentage of a cryptocurrency is sold to early backers of the project in exchange for legal tender of other cryptocurrencies, usually bitcoin.
Huobi’s official site www.huobi.pro cannot be accessed in China without a VPN service. China’s government cracked down on cryptocurrencies towards the end of last year, banning ICOs and transactions between renminbi and digital assets at exchanges.
“Although China has banned ICOs, there are tons of blockchain-related projects like decentralised gaming apps being developed in China that have not issued ICOs,” said Katt Gu, managing director at iBlock, an incubator for blockchain projects at the University of Illinois Urbana – Champaign. “Huobi has set up the fund to invest in these promising projects as it doesn’t want to miss out on the trend.”
According to a report by information service provider ITJUZI, 41 per cent of start-ups that received funding in China in the first quarter were blockchain-related. “People in the crypto world are hoping that the Chinese government will relax its stance on ICOs in the near future, so they’re building a presence in the country until the time is right,” said Gu.
The master plan for the Xiongan New Area economic zone being built near Beijing highlights the use of blockchain technologies to create a smart city. The Chinese government also mentioned using blockchain technologies in its 13th Five-Year Plan, which guides the country’s development from 2016 through to 2020.
Huobi has been hiring talent from leading Chinese technology companies to bolster its operations. Last month it announced that Wu Shupeng, a former security consultant for ride sharing and AI firm Didi Chuxing, had joined its security and risk management team.