Chinese-Canadian billionaire Zhao Changpeng has seen better times as far as his cryptocurrency business is concerned.
Binance, a cryptocurrency exchange Zhao set up in 2017, processed transactions worth US$1.67 billion a day last year. The volume has since plunged by about 60 percent.
During its heyday, Binance made tons of money. Net profit hit US$450 million last year, and Zhao saw his personal wealth zoom to US$2 billion in just six months.
When Binance started, there was a cryptocurrency boom in the United States, Japan and South Korea. Zhao was in the right place at the right time to ride the wave. Eighty percent of Binance’s business came from these three markets, with the US being the largest source.
However, US regulators have tightened margin trading and asked traders to comply with anti-money laundering and Know Your Client rules. The authorities also increased scrutiny over the fund sources of domestic participants. As a result, Binance saw a slump in business.
In a bid to tap a new market, Zhao announced last week that Binance will launch its cryptocurrency exchange service in China, and that the platform will accept Alipay and WeChat as payment and trading channels.
In less than 24 hours, both Alipay and WeChat stated that they would not allow customers to use their platforms for cryptocurrency trading, warning that those who violate the ban may get their accounts frozen.
Zhao may only be employing marketing tactics to draw attention, but given Beijing’s strong stance against cryptocurrency trading, Binance’s brash and high-profile approach to target Chinese users could get itself into trouble.
This article appeared in the Hong Kong Economic Journal on Oct 15
Translation by Julie Zhu
[Chinese version 中文版]
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