Justin Sun's Huobi Shakes Up Crypto Market with Novel China Strategy

 Huobi's New Strategy to Win Back Chinese Crypto Traders with the Help of Digital Citizenship Program

Cryptocurrency entrepreneur Justin Sun has taken over as the de facto leader of digital-assets exchange Huobi with a new strategy to revive its fortunes by focusing on winning customers in China. Despite a ban on crypto trading in mainland China, Sun aims to increase Huobi's market share in the country by offering a novel way around Beijing's trading restrictions.

To achieve this, Huobi has signed a partnership with the Commonwealth of Dominica, a small island nation that is willing to grant so-called digital citizenship to Chinese nationals, even those who have never set foot on its shores. Through this program, new users on Huobi's platform who select Chinese as their nationality will be prompted to apply for Dominican digital citizenship. This will allow them to trade cryptocurrencies even if they're based in mainland China, where Huobi is not allowed to accept business.

Huobi's market share fell from around 19% of global crypto trading volumes in 2020 to just 4% in 2022, after it stopped accepting accounts from clients in China. Other Chinese-based exchanges also closed or made a successful shift to other markets, like Binance, the world's largest crypto exchange, which moved out of the country as regulatory pressure increased.

Huobi's push to win back Chinese customers goes a step further than other exchanges in giving them a way to trade through a digital citizenship program. This program could help Chinese nationals who want to trade cryptocurrencies evade the reach of regulators in the country. According to Ben Charoenwong, an assistant professor in finance at the National University of Singapore, "It's easier when you don't show up as a Chinese citizen; you're out of the Chinese financial system."

Huobi's collaboration with Dominica is a significant step in its strategy of global development, and Sun is adamant about the company's intent to attract Chinese customers. He called Huobi "the" exchange for China in a tweet and announced that the exchange had listed TCNH, a stablecoin pegged one-to-one to the offshore yuan, China's more freely-traded currency.

Huobi was one of the world's biggest crypto exchanges before China's crackdown, and Sun's novel strategy to focus on China and use digital citizenship to overcome Beijing's trading restrictions could help it regain its status as a leading global exchange.