Huobi’s acquisition plans were suspended after China’s investigation on the company
- Will the company’s plans to go global push through amidst the crackdown on crypto exchanges in China?
It has been revealed that Huobi is planning to purchase Bithumb and bitFlyer, two major Asian crypto exchanges. Bithumb is one of the top four cryptocurrency exchange platforms in South Korea, while BitFlyer has 2.5 million users and has established itself as the largest crypto trading desk in Japan.
However, since Huobi is currently under investigation by the Chinese authorities, both acquisitions have been suspended. The issue is part of a larger anti-money laundering crackdown that was launched by Beijing, focusing largely on telecoms and the cryptocurrency industry. It has been reported that commercial banks are freezing credit and debit cards that are associated with any over the counter (OTC) crypto transactions.
Crypto miners that are based in China have also been hit by the effects of the card freezing. They are currently facing difficulties in paying for the electricity required to power the massive crypto mining operations.
This information was first released by @WuBlockchain on Twitter, a Chinese cryptocurrency news source.
“Wu learned that Huobi, China’s largest exchange, is trying to acquire Japan’s largest exchange bitFlyer and Korea’s largest exchange Bithumb. The price of bitFlyer is US$500 million. However, as Huobi is investigated by the Chinese government, both will be suspended”.
Later in the Twitter thread, Wu Blockchain explained that Huobi’s attempts at going global have progressed at a relatively slow pace. This could be attributed to how most of their employees, investments, users and revenue streams are connected to China.
Last November, Huobi withdrew from the US market. The company’s only remaining international market branches are based in Japan and South Korea. The thread added that Huobi understood the risk of becoming too dependent on the Chinese market, and felt that it was a top priority to reach out to overseas markets. However, it may not have been a good investment decision to go for these countries because “their users are very closed, and the government has super strict supervision”.
However, the company appears to be in good financial shape for international expansion. Wu Blockchain revealed in another tweet that, “With the rapid rise of Huobi Contract derivatives and other businesses this year, a large amount of profits can be used for acquisitions”.
“Bloomberg once disclosed that Huobi’s revenue in 2019 was approximately $680m [with] the profit margin estimated to be 50% or higher. Due to the sharp rise in currency prices this year, Huobi’s revenue is expected to rise by more than 50%”, Wu Blockchain added.