China’s ongoing crackdown on cryptocurrencies has forced Huobi exchange to halt derivatives trading services to users in China. As per an updated User Agreement from the Seychelles-based exchange, China is now on the list of prohibited jurisdictions for derivatives trading. Crypto users in the country can still access the exchange for spot trading.
Huobi Ban Derivatives Trading
The digital currency exchange Huobi has updated its terms of service (ToS) and user agreement and notes that Chinese residents are banned from using Huobi’s crypto derivatives products. On June 16, the exchange reduced futures leverage levels available to users from 125X to 5X and restricted new Chinese users from accessing derivatives, citing renewed regulatory guidelines in the country.
“In order to protect the interests of investors, a portion of services such as futures contracts, ETP [exchange-traded products] or other leveraged investment products are temporarily unavailable to new users from a few specified countries and regions,” Huobi stated.
The Huobi Terms Of Service read:
“Use of the service by persons located in the United States of America, Canada, Hong Kong China, Japan, Cuba, Iran, North Korea, Sudan, Syria, Venezuela, and Crimea is prohibited,” Huobi’s user agreement states…In addition, anyone in mainland China, Taiwan China, Israel, Iraq, Bangladesh, Bolivia, Ecuador, Kyrgyzstan, Sevastopol, and the UK (retail users only) is prohibited from using the derivatives trading services provided by this website,”
Some Chinese traders have been driven to look for alternate trading venues due to Huobi’s derivatives restrictions. The exchange, together with Binance and OKEx, is one of China’s “Big Three” exchanges, and the decision to cease derivatives trading is unlikely to be taken lightly. That’s because derivatives are a crucial product in the Chinese crypto industry, since they define the competition between the biggest exchanges.
Chinese Traders Exiting
The escalation in crypto restrictions in China has led traders and investors to seek alternative trading avenues such as OTC desks. The ongoing waves of China FUD have sparked a market slump in recent weeks as weak hands were spooked into selling their crypto holdings.
Huobi discontinued operations for mainland China citizens and temporarily froze bitcoin withdrawals in 2017, following the Chinese government’s prohibition on cryptocurrency trading. Huobi presently has offices in Seychelles, the United States, Japan, and South Korea, among other places.
Many traders are considering decentralized exchanges (DEXs) over centralized exchanges (CEXs) as viable trading platforms as a result of the Chinese Communist Party’s decision to double down on its crypto prohibition.
Most Chinese traders have begun to get familiar with decentralized crypto trading platforms, according to Rachel Lin, CEO of SynFutures DEX. Long-term traders began to abandon CEXs in October, when OKEX abruptly suspended crypto withdrawals on its platform for five weeks.
Huobi’s ToS changes follow Chinese internet services censoring specific keywords like Binance, Huobi, and Okex. Reports noted that Baidu, Sogo, Zhihu, and Weibo have been blocking specific crypto sites and banning any crypto-related search queries.
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