After the virtual currency platform's withdrawal, the aftermath: Huoxin will clear HCT, and users need to exchange for JD.com gift cards to exit or convert to an unknown new points system

Source | Blue Whale Finance

The countdown for several virtual currency exchanges to withdraw users from mainland China has begun, and associated platforms are also affected. Recently, a user from the cryptocurrency industry social platform Huoxin informed Blue Whale Finance that the platform's points will be cleared, and aside from being exchanged for an unknown new point system, other exit options include participating in a lottery or redeeming for JD.com gift cards.

The Huoxin APP shows that the points mall can be exchanged for JD.com gift cards ranging from 50 yuan to several thousand yuan. Based on the exchange rate of 33,333 HCT points for a 1,000 yuan JD.com gift card, the value of a single HCT point is approximately 0.03 yuan. It is reported that some users have invested hundreds of thousands over several years. Some users have also found that the daily exchange limit has recently been restricted to sometimes just once, or they have been completely cleared out. As of the evening of December 7, the 3,000 yuan JD.com gift card had already been fully redeemed that day.

Large holders face difficulties in fully exiting through redemption, and the situation regarding the new points available for exchange has not been disclosed by the officials, leading to information asymmetry. Faced with the uncertainties brought about by a lack of communication, some users are quite dissatisfied with the platform's handling methods.

HCT is the point system of Huoxin, a social platform under Huobi, which once launched a peer-to-peer trading feature for HCT.

Huoxin was established with the backing of the cryptocurrency exchange Huobi and began public testing in 2018, with its English name being Huobi Chat, becoming an instant messaging product within the Huobi ecosystem. According to the official Huobi website, Huoxin is a chat software specifically designed for the blockchain industry.

Users can earn native points called HCT, referred to as "locomotives," through chatting, posting articles, and receiving likes. They can earn 20 points for their first post each day, with a daily limit on points earned from a single post, which is also known as a social mining product.

At the time, Huobi Global CEO "Qiye" stated in a social media group interview that Huoxin is a social platform that Li Lin insisted on creating despite opposition. According to sources close to Huoxin, the early head of Huoxin was "Old Wang," who was replaced by "Dan Zong" Huang He due to serious system vulnerabilities, and later succeeded by "Qiye" Weng Xiaoqi, who has not made a public appearance for nearly a year, and the leadership has changed again. In 2020, reports indicated that Huoxin had reached 3 million registered users.

At its inception, Huobi founder Li Lin was active in the official Huoxin groups and stated, "Having HCT is very important, equivalent to us creating Huoxin together with users," intending to create a social media platform for cryptocurrency users; he also urged that HCT should not rush to be listed on exchanges, emphasizing that demand drives value, not speculation, and encouraged users to communicate on the platform rather than just buy and sell coins (HCT).

Despite the founding team's emphasis on building a strong social platform ecosystem, focusing less on mining HCT and trading, and referring to HCT as points rather than tokens. According to users, the Huoxin APP previously had a "Flash Exchange Square" trading feature for users to trade HCT, where the USDT stablecoin could be directly exchanged for HCT. Meanwhile, users could also conduct private transactions on Huoxin, with the chat interface allowing for the sending of cryptocurrency red envelopes, including USDT and HCT red envelopes.

In the Huoxin APP, the "Flash Exchange Square" has been taken offline, and current quotes and information for HCT are not displayed.

As a platform point, the trading function and value of HCT are also factors attracting users to join. Image information shows that some users have received trophies for being "HCT large holders" based on their annual holdings. It is reported that Huoxin previously charged a certain fee for peer-to-peer trading of coins. The trading platform's fees from the "Flash Exchange Square" brought revenue to the platform.

Despite claiming to be points, the platform now indirectly guides HCT assets to exit through gift cards. Many HCT holders believe that the platform should not handle user assets in a forceful manner, and the disposal methods have caused HCT prices to plummet sharply, harming HCT investors.

It is understood that the price of HCT has long maintained around 0.07 yuan, exceeding 0.1 yuan during the 2021 cryptocurrency bull market. Before the announcement, the price of HCT was around 0.04 to 0.05 yuan, while the bids from users claiming to buy HCT are mostly below 0.03 yuan. Over the past three years, faced with the exponential growth of the cryptocurrency market, HCT holders have mixed feelings.

Early community participants suffered heavy losses, repeatedly attempting to communicate with Huobi without response.

Blue Whale Finance learned that those "sent away" by the platform are not just ordinary users but also include the "Little Sparks" group, which consists of long-term volunteers involved in the early community expansion, daily maintenance of community groups, and APP testing for Huoxin.

A participant named Chen Li (pseudonym), who has been a volunteer for over three years, told Blue Whale Finance that he has a relevant professional background and has submitted a large number of documents with suggestions for Huoxin product development, including documents for event planning and implementation. He mentioned that on March 8, 2019, a vulnerability in the Huoxin backend system allowed users to obtain HCT indefinitely, and the "Little Sparks" group invested funds after the official lock-up to stabilize the price of HCT, bringing it back from 0.01 yuan to around 0.07 yuan.

On March 8, 2019, the price of HCT dropped nearly tenfold. At that time, on the flash exchange page, entering a negative unit of HCT would result in the counterpart receiving the corresponding positive value of HCT. Some users exploited this vulnerability to obtain large amounts of HCT at no cost. At that time, "Huobi employees" also exposed internal management issues of Huoxin on workplace social platforms. After the vulnerability incident, Huoxin launched version 2.0 and held a related press conference, with Li Lin and Weng Xiaoqi delivering online speeches.

Regarding the contributions of the "Little Sparks" group to the ecosystem, Li Lin's namesake account once lamented their difficulties on social media, and Huoxin awarded this group the "Outstanding Little Sparks" trophy. It is understood that this group must go through a six-month assessment period to be selected and has a dedicated WeChat work group.

Chen Li recalls that he first saw an advertisement for Huoxin on the Huobi APP, which led him to download and use it, believing that social interaction holds value for the industry, especially with Huobi as a backing. Huobi executives, including Li Lin, were also active in chat rooms, and other industry figures like Sun Yuchen and "Bao Er Ye" had also voiced opinions on Huoxin. During the Spring Festival, various cryptocurrency industry projects were active on Huoxin. For these reasons, he has been involved in Huoxin's development for nearly three years.

Huoxin had previously launched an event to distribute 100 million HCT, with unprecedented promotional efforts. However, it also faced criticism early on due to delays in launching and vulnerabilities.

In addition to participating in community and product development, volunteers like Chen Li also included individuals who made significant investments to purchase HCT. It is reported that some exchanged their holdings of Huobi's platform token HT for USDT and subsequently purchased HCT, investing hundreds of thousands and still holding millions of HCT, with a cost of around 0.08 yuan. Some users invested even more, and the price of HCT had once risen to 0.3 yuan before quickly falling back. Based on the current exchange mechanism, early community participants' losses are mostly over 50%, and there are issues with limits on gift card redemptions.

Faced with the current situation, Chen Li and other participants have received no response from Huobi executives and employees, feeling quite passive, as their efforts and assets have not been valued by the platform, leading to a deep sense of disrespect. Chen Li acknowledges the risks of investment, and his current demand is for the right to know about the new points and for constructive communication.

According to platform regulations, if HCT holders do not exit through point redemption, they will be exchanged for new points on January 1, 2022. The specifics of the new points have not been disclosed by Huoxin, and the volunteer group is also unaware.

Exchanges withdraw users, and mainland enterprises are deregistered, with labor contracts being renewed through third-party companies held by natural persons.

On September 26, Huobi Global announced that it had stopped new user registrations in mainland China as of September 24. For existing users identified as being from mainland China, the plan is to complete the withdrawal by December 31, 2021.

On October 6, Li Lin candidly stated in the HT large holder group that after a few months in Shanxi, he believes the focus should be on family and communicated his thoughts on exiting the Chinese market. In November 2020, after an event in Zunyi, former COO Zhu Jiawei was reportedly taken away by Shanxi police for investigation, and Li Lin subsequently disappeared from the public eye for several months, returning to work in March 2021. During this time, former co-founder Du Jun returned and spoke out.

Six months ago, after the State Council's Financial Stability Development Committee announced a crackdown on Bitcoin mining and trading, it was reported the next day that Huobi would no longer open derivatives trading to new users in mainland China and would suspend mining services in mainland China. According to sources close to Huobi, the company has repeatedly proposed reducing leverage for platform derivatives trading.

In early June, Huobi proposed a distributed office plan to employees. Subsequently, Huobi requested employees to work in Singapore, with some choosing to stay in China for remote work, while others faced obstacles in obtaining visas. Later, some employees returned to work. During this period, Huobi gradually withdrew and adjusted mainland registered enterprises, with all companies where Li Lin served as the legal representative being deregistered. In November, Li Lin and Du Jun co-founded Beijing Chiyu Mugu Management Development Co., Ltd., with the legal representative being another natural person. According to various sources, employees now need to sign labor contracts with third-party outsourcing companies.

The developer of the Huoxin APP is Hainan Haotepai Network Technology Co., Ltd. (hereinafter referred to as "Haotepai"), which was established in June 2018, with initial shareholders being Lanchain Technology Co., Ltd. and Beijing Innovation Risheng Network Technology Co., Ltd. (hereinafter referred to as "Innovation Risheng"). In 2019, it was changed to a natural person, Gao, who also served as a supervisor in Hainan Xinyi Network Technology Co., Ltd. (hereinafter referred to as "Xinyi Network"). Xinyi Network is wholly owned by former Huobi COO Zhu Jiawei, while Innovation Risheng is controlled by Huobi founder Li Lin, both of which have been deregistered. Currently, Haotepai still exists, with shareholders changed to natural persons.

After Huobi announced the withdrawal, exchanges like Binance and others subsequently announced the withdrawal of users from mainland China, with OKEx stating it would maintain its policy of exiting the mainland market; beyond the "three major exchanges," platforms like MEXC, KuCoin, Bitget, Coinex, and BitMart announced they would withdraw users from mainland China within the year; Gate.io, AEX, and CoinBene stated they would close registration and access for mainland users or provide services, while BHEX (formerly Hobit Hbtc) and Biki announced permanent closure of platform services.

The central bank has clarified that providing services to domestic residents by overseas virtual currency exchanges constitutes illegal financial activities. Among the aforementioned platforms, KuCoin's associated enterprise KuCoin (Chengdu) Technology Co., Ltd., the associated entity of MEXC, Meow Star City Technology Co., Ltd., and the associated enterprise of Gate, Jinan Manwei Information Technology Co., Ltd., have all been deregistered previously. In 2021, KuCoin's associated enterprise Chengdu Lemon Cloud Network Technology Co., Ltd. was also deregistered. The deregistration of Atom Chain (Beijing) Technology Co., Ltd. under the CEO of CoinBene, Zhang Yangbin, caused public panic, leading to the cancellation of the simplified deregistration, and it is now listed as operating abnormally.