After eight years of entrepreneurship, Li Lin admits defeat

Author: Kyle, Hive Finance

More than ten days after the People's Bank of China and ten other ministries issued a statement to crack down on virtual currency speculation, Li Lin, the founder of Huobi Group, who had long been absent from the public eye, appeared in the platform's user group.

Compared to his passionate demeanor when he personally led a team to Zunyi to "retrace the Long March" during Huobi's seventh anniversary, Li Lin candidly expressed "surrender" under regulatory pressure. In the user group, he expressed his feelings, "Without Huobi, everyone would still have Binance and OK, but without me, parents and children cannot be replaced by anyone."

Previously, under heavy regulatory pressure, the cryptocurrency exchange Huobi had announced that it would phase out existing users in mainland China by the end of the year. Li Lin's personal statement officially announced the curtain call for Huobi's operations in the domestic market. For Huobi, fully expanding into overseas markets has become a necessary choice under the current circumstances.

As it celebrated its 8th anniversary, Huobi quietly held a celebration internally, with the phrase "Endless Life" prominently displayed at the event. In the domestic market, Huobi was unusually quiet, while on overseas social channels, it launched a series of airdrop gift activities to attract overseas users' attention.

Since relocating its main company overseas after the "9·4" incident in 2017, Huobi has been expanding its global market. According to its official website, Huobi's current overseas market layout mainly focuses on South Korea, Japan, and Gibraltar. Compared to Binance, which also expanded overseas during the same period, its penetration in the global market is relatively limited. Moreover, with the rise of overseas trading platforms like FTX and Kraken, the competitive pressure it faces overseas is evidently significant.

Facing a new journey, Li Lin, who cannot leave the country, expressed hope for the local platform he built, stating, "The future is still long; exiting the Chinese market is just a new beginning."

"Surrender"

"I'm sorry, I really surrendered. If everyone is disappointed because of this, I apologize." On October 6, while the domestic "National Day" holiday was still ongoing, Li Lin sent a confession in the "HT Big User Group," followed by four fist-bump emoji.

"Surrender" was Li Lin's choice in the face of China's regulatory storm. In the first half of his confession, he opened his heart to platform users, saying, "Only family cannot be replaced by us. Without Huobi, everyone would still have Binance and OK, but without me, parents and children cannot be replaced by anyone." Li Lin's words revealed his compassion, and this confession also signified the imminent end of Huobi's operations in the Chinese market.

Li Lin's confession in the user group on October 6

Earlier, on September 24, the People's Bank of China and ten other ministries jointly issued a notice on "Further Preventing and Handling Risks of Virtual Currency Trading Speculation," which clearly emphasized that conducting fiat currency exchange for virtual currencies, cryptocurrency trading, and issuing tokens are illegal financial activities; overseas virtual currency exchanges providing services to residents in China via the internet are also considered illegal financial activities.

This stern ban was essentially a final ultimatum to all platforms providing virtual currency trading services to Chinese users. That evening, Huobi Global urgently announced the suspension of new user registrations from mainland China. Two days later, Huobi announced that it would orderly phase out existing users identified as being from mainland China by December 31 of this year.

On October 2, Huobi posted the process for phasing out existing users in mainland China on its official website, announcing that it would close the deposit function for mainland Chinese users on December 14 and prohibit cryptocurrency trading for them the following day. By December 31, Huobi would remove the OTC channel for RMB to cryptocurrency exchanges.

As the saying goes, timing and circumstances are crucial. Under heavy regulatory pressure, Li Lin and the Huobi exchange he founded chose to comply with the trend. Both his confession and Huobi's announcements indicate that after relocating its main company overseas in 2017, this time Huobi would completely close the access for mainland Chinese users to use the platform.

In fact, Chinese regulatory authorities have always enforced strict controls on virtual currency speculation activities. On May 21 of this year, the Financial Stability Development Committee of the State Council explicitly ordered a crackdown on Bitcoin mining and trading activities. Subsequently, Huobi no longer opened derivatives trading to new users in mainland China.

According to informed sources, as early as June, Huobi had begun distributed office work and informed employees about relocating to places like Singapore and Dubai. Subsequently, Huobi Tianxia and other related companies in China also successively deregistered. These actions laid the groundwork for Huobi's subsequent phase-out.

The aforementioned informed sources believe that although Huobi has been expanding overseas in recent years, its efforts and determination seem to have been lacking. Its overseas social media accounts have only become active in the past year, indicating that Huobi had not previously focused all its efforts on expanding into overseas markets. In addition to competitive pressure, Huobi's new global journey is also likely to face challenges due to temporary manpower shortages. If the leader Li Lin is unwilling to move abroad, it will also have a certain impact on Huobi's development.

After the "9·24" ban was issued, Huobi finally made the decision to completely sever ties with the Chinese market. Recently, Huobi Group co-founder Du Jun revealed in an interview with Bloomberg, "In the past, we were always looking for ways to operate legally in China. But this time, there is no room for negotiation."

As one of the earliest cryptocurrency exchanges established in China, Huobi's exit from the Chinese market has left many industry veterans feeling nostalgic. For Huobi, continuing to survive and expand has made overseas market expansion an unavoidable step.

Going Overseas

While the attention of industry insiders was focused on Li Lin's statements in the community, few noticed that Huobi had quietly held its 8th anniversary celebration internally.

For the young blockchain and cryptocurrency industry, eight years is a sufficiently long time span, but unlike the lively celebrations of previous years, under the looming regulatory pressure, Huobi was unusually quiet in the domestic market.

Overseas, however, Huobi presented a different scene. On September 30, Du Jun posted photos from Huobi's 8th anniversary celebration on his Twitter account, showing Li Lin and several executives symbolically watering green plants, with the phrase "Endless Life" written in the upper right corner of the backdrop.

Above this photo, Du Jun boldly declared, "We will continue to grow, we will not stop growing, and we are working hard every year to make ourselves better. Please continue to pay attention to the epic events along the way; we will show what the true meaning of 'rocket' is."

Du Jun shared photos from Huobi's 8th anniversary celebration on Twitter

Compared to the "9·4" period in 2017, this time, Huobi is truly engaged in a war in the overseas market, with no way back.

Around Huobi's 8th anniversary, its global official Twitter account simultaneously conducted an airdrop gift activity to attract overseas traffic and increase Huobi's presence in the overseas market.

Undoubtedly, the overseas market has become unprecedentedly important for Huobi. Since its overseas expansion in September 2017, Huobi has been working on expanding its global market for four years. However, in the impression of most industry insiders, Huobi has always been less decisive in its global expansion compared to Binance, which also went overseas during the same period.

According to Huobi Global's introduction, it currently provides digital asset trading and asset management services to tens of millions of users in over 130 countries worldwide. From this vague introduction, it is difficult to discern Huobi's specific layout in the global market, while in Huobi Group's business introduction, it emphasizes the two overseas branches of Huobi Korea and Huobi Japan.

Huobi's development timeline shows that it began its global strategic layout in October 2017, establishing Huobi Korea at the same time.

In August 2018, Huobi Group acquired Hong Kong-listed company Tongcheng Holdings, which was later renamed "Huobi Technology"; after completing the backdoor listing, Huobi Technology was approved to issue Hong Kong's first actively managed virtual fund in March this year; in April, Huobi Trust completed its registration in Hong Kong and subsequently issued four fund products to professional investors, including Bitcoin tracking funds and Ethereum tracking funds. According to Huobi Technology's official website, as of the end of August this year, Huobi Trust's asset custody scale exceeded $1 billion.

In September 2018, Huobi acquired the licensed Japanese cryptocurrency exchange BitTrade, obtaining the Japan No. 00007 exchange license, and later renamed it Huobi Japan. In December of the same year, Huobi obtained a DLT license in Gibraltar to expand into the European market. According to previous media reports, Huobi also has local branches in countries such as Indonesia, Argentina, and Thailand.

The above outlines Huobi's main layout in the global market. Of course, in addition to trading and asset management businesses, Huobi also provides services such as mining pools, wallets, investment, and charity to the global market. However, in the cryptocurrency industry covered by blockchain, no business generates revenue as significantly as trading.

From Huobi's current global layout, its most important markets are South Korea and Japan, while its penetration in the more active cryptocurrency trading regions of Europe and the United States, as well as English-speaking countries, still needs to be assessed.

Challenges

The tightening of policies and strict regulations have had a significant impact on Huobi. If after the "9·4" incident in 2017, Huobi could still provide services to Chinese users by relocating overseas, now, the increasingly stringent regulatory scrutiny forces it to completely abandon the domestic market, presenting it with more challenges.

In a recent interview with Bloomberg, Du Jun reiterated Huobi's development strategy, stating, "From now on, it will be international development." He mentioned that Huobi is currently focusing on expanding in other parts of the world. In recent months, Huobi has begun recruiting in places like Turkey and Brazil, aiming to have 3,000 employees globally by the end of this year. Currently, Huobi Group has about 2,300 employees.

Although Du Jun revealed that nearly 70% of Huobi Group's current revenue comes from markets outside China, it is evident that Huobi's competitiveness in the global market is difficult to compare with Binance, which also expanded overseas during the same period. According to CoinMarketCap data on October 9, Binance's 24-hour trading volume was $30.296 billion, while Huobi's 24-hour trading volume was $4.947 billion after announcing its exit from the Chinese market, less than one-fifth of Binance's volume.

Meanwhile, after years of development in the cryptocurrency market, the exchange industry is no longer dominated by the "three giants" of Huobi, Binance, and OKEx. Especially in the overseas market, emerging players like FTX and Kraken have rapidly risen, bringing competitive pressure to various major platforms.

According to CoinMarketCap's scoring based on dimensions such as trading platform web traffic, average liquidity, trading volume, and the credibility of reported trading volumes, Huobi Global is currently ranked 7th among all exchanges, with Coinbase, KuCoin, FTX, Kraken, and other overseas platforms ahead of it.

Huobi ranks 7th in CoinMarketCap's comprehensive exchange score

According to weekly visitor data provided by SimilarWeb (excluding app data), Huobi Global currently has 962,000 weekly visitors, while most leading overseas platforms have weekly visits exceeding 2 million. This indicates that many overseas trading platforms have already attracted a large user base, making it challenging for Huobi to carve out a share in the existing market once user habits have formed.

On the other hand, due to recent tightening of regulations in South Korea, Huobi Korea's operations have also been affected. According to an announcement on Huobi Korea's platform, it will suspend KRW trading on October 24, retaining only cryptocurrency trading. This is not good news for Huobi, which relies heavily on the South Korean market.

Of course, as a "time-honored brand" in the cryptocurrency exchange industry that has been around for eight years, Huobi still has a solid foundation. Its financial resources, technical strength, and operational experience will provide important support for its global market expansion.

According to Jehan Chu, co-founder and partner at Hong Kong cryptocurrency investment firm Kenetic Capital, Huobi has always been a top global exchange and is no stranger to the tightening of cryptocurrency regulations in China over the years. "With a large balance sheet and a strong international client base, I believe they will adapt and be able to scale in jurisdictions that are more favorable outside of China."

In the community exchange on the evening of October 6, after conveying his compassion for the domestic market, Li Lin also expressed hope for the future. He stated: "The future is still long; exiting the Chinese market is just a new beginning."