Following the exciting news out of China that points to a possible change in attitude by the government towards Bitcoin, Cointelegraph caught up with one of China’s biggest bitcoin exchanges, Huobi, to get a better understanding of Bitcoin’s prospects in the country.
The Beijing-based exchange recently saw record BTC trading volumes among all exchanges. It should be noted, however, that trading CNY-BTC on Huobi is free, but fees are applied for USD-BTC trades making it similar to OkCoin, which is frequently associated with commission-free trading.
“The Chinese government should study how digital currency is regulated in the US and follow the steps to establish our own regulation system.”
[Note: the following answers have been provided by several Huobi team members including CEO Leon Li.]
Cointelegraph: How would you interpret the significance of the People's Daily article posted on the CAC website for our Western readers? Do you agree that we are in a “post-Bitcoin era”?
Huobi: Recent bitcoin regulatory activities in the US have set an example for other countries including China. We agree that this “post-Bitcoin era” will inevitably lead to mainstream development in China.
Shifting from volatility to stability requires regulation and rationality. The Chinese government should study how digital currency is regulated in the US and follow the steps to establish our own regulation system, so that Huobi and other bitcoin exchange platforms can compete positively under a standard legal framework and facilitate bitcoin development in the right direction.
From a financial perspective, we think bitcoin can be seen as an investment similar to gold or a global standardized digital asset. As blockchain technology is being widely applied, bitcoin will be accepted by more companies and individuals. However, there’s still a long way before it is used as a currency.
CT: What has been the reason we have been seeing record trading volumes on Huobi recently?
Huobi: Huobi daily trading volume of bitcoin reached 770,000 BTC on October 22, which has made a new record among bitcoin exchanges. We think there are mainly three factors causing this spike in trading volume.
First, the global finance market is experiencing a bounce back after the downturn this summer. Bitcoin market is one step ahead of other markets, which may lead to the rise of trading volume from a macro perspective.
The first global blockchain summit was held in Shanghai recently, gathering hundreds of experts from official departments (PBC finance research institute, PBC credit reference center) banks, brokerages and other financial sectors. Huobi CEO Leon Li also attended the summit and the event drew much public attention to bitcoin and technology to strengthen investors’ faith as well.
Meanwhile, Huobi became the first bitcoin exchange to launch 5X margin trade tool this September, which may have also stimulated users to trade more.
CT: Could you update us on your Caimao platform that links the Shanghai stock exchange to bitcoin? How has the downward market trend affected its operations?
Huobi: Caimao was created and aimed at becoming a one-stop investment service platform covering a variety of global financial products. We recently launched a new project allowing users to invest in stamps, coins and phone cards, which we think is an exclusive market in China.
Moreover, we are also preparing trades of precious metals and planning to launch HK stocks and US stocks at the end of this year. Although China’s stock market is bearish now, with the impetus of Internet technology, the stamps market has already become the second largest investment market after A share market in China. With the Bitcoin industry being gradually regulated, the link between other investments and bitcoin will be on the right track in the future.
CT: In our last interview you noted that Chinese stocks were “too hot to ignore” for many bitcoiners who were jumping onto the stock market. Now that the trend has reversed, are you seeing these traders return to bitcoin?
Huobi: All financial products including stocks are related to capital flow and the economic cycle in the long run. Bitcoin performed well in the recent downturn on the global finance market. On one hand, this reflects the market’s positive attitude towards bitcoin; on the other hand it has concern with the rapid development of Bitcoin and blockchain technology.
“[T]he number of new users on Huobi increased by about 127% compared with September. We believe more traders will return to bitcoin.”
In the last two months, Huobi witnessed bitcoin price spike rapidly from the low of 1,238 yuan to 1,835 yuan. Up to October 11, the number of new users on Huobi increased by about 127% compared with September. We believe more traders will return to bitcoin.
CT: Has there been significant growth in Bitcoin startups in China since the government announced subsidies for the fintech sector back in the summer?
Huobi: The Chinese government announced subsidies for fintech sector this summer to support the development of such companies. However, Bitcoin companies are not clearly specified on the list. Therefore it's hard to say whether Bitcoin companies can benefit from the government’s policy or not.
Given the fact that there are already some stable and mature enterprises in each segment, like mining, trading, media etc., there can't be too many new Bitcoin startups coming up in a short time. Chinese startups are less involved in the Bitcoin application field than their counterparts in the US. Considering the government’s resolution to encourage startups and innovations, we believe a bunch of startups based on Bitcoin application are, nevertheless, about to spring up.
CT: Any updates on your "Digital Asset Research Initiative” with Tsinghua University?
Huobi: Early this year, we announced our collaboration on "Digital Asset Research Initiative" with Wudaokou School of Finance of Tsinghua University. We will soon release a comprehensive report on global Bitcoin development after over six months of research.
“Chinese policy makers are starting to study and rediscover the current status of the Bitcoin industry.”
Meanwhile, by collaborating with Wudaokou School of Finance, which is jointly founded by the University and People's Bank of China, Huobi has more opportunities in communicating with Chinese policy makers for digital currency.
This September, a research group conducted by officials from Beijing municipal bureau of financial work and experts who helped bring about the PBOC official notice of December 5, 2013, visited Huobi office to get more information and study the topic of digital currency and blockchain technology. During the meeting, the research group clearly pointed out the innovative implications of blockchain technology and revealed that they’re currently doing some research to establish a Bitcoin regulatory system, which is in the early stage of development.
“Bitcoin is expected to be an important household asset and a safe haven when facing short-term financial crisis.”
This means that Chinese policy makers are starting to study and rediscover the current status of the Bitcoin industry and we’re happy to be the only bitcoin exchange participating in this research project.
CT: Bitcoin has been shown to increase in price where economic freedom is low and in times of financial uncertainty (e.g. Greece). In the event of another global financial crisis, do you think bitcoin will be the safe haven this time around for many people? Do the Chinese view bitcoin as a safe haven compared to gold, for example?
Huobi: There’s an old saying in China: collect antiques in a thriving age, store gold when in chaos. Many Chinese investors gave priority to gold and silver for keeping value when global economic crisis and disasters happen. As a new type of commodity, "digital gold" bitcoin has seen impressive performance in the recent geopolitical turmoil and Greece crisis.
Along with the announcement by CFTC on Bitcoin's status and the rapid development of blockchain technology, bitcoin is expected to be an important household asset and a safe haven when facing short-term financial crisis.