Huobi's big change before and after IPO, why does the exchange seek "compliance"
Yesterday at the "POW'ER China Blockchain Contributor Annual Summit", Wang Feng had an exclusive conversation with Li Lin, CEO of Huobi. Li Lin answered the word "compliance" five times, and three of them talked about compliance on Huobi. existWang Feng said, "For Huobi's acquisition of Tongcheng Holdings, public opinion believes that Huobi is moving towards an IPO. But on the other hand, while people are queuing up to get projects to enter the new market you created, while you are still in a hurry to go to the traditional securities market. Does the blockchain have to be IPO? Can blockchain companies not go public?"question,Li Lin replied, "This system and the traditional system will last longer. This is a relationship that complements and promotes each other.". Previously, the CTO of Huobi once said on social media, "Our boss has let go, don't ask when Huobi will be listed on Nasdaq, we are in a competitive relationship with Nasdaq." What caused the major change in Huobi's attitude before and after?
Digital currency exchange standing on the cusp
The previous surge in the digital currency market has greatly promoted the high-intensity exposure of blockchain technology. The exposure of blockchain technology has attracted the attention of a large number of venture capital institutions, financial institutions, large enterprises, and retail speculators. In 2017, Since June, the gale of digital currency has officially blown.
With the help of stablecoins, a large amount of hot capital can directly flow into the digital currency trading market. With the spread of news about giants' layout of the blockchain market and policies of various countries,The total global market capitalization of digital currencies soared from US$17.736 billion at the beginning of 2017 to US$616.771 billion at the end of the year, and the 24-hour trading volume also increased from US$130 million to US$44.540 billion. According to coinmarketcap statistics (excluding unlisted currencies), the number of digital currencies reached 1381 in 2017, and 764 new digital currencies were added throughout the year.
2017 global total market capitalization data source: coinmarketcap
Due to its dual identity, the digital currency exchange is connected to the multilateral market, that is, the 17-year digital currency exchange = VC + digital currency (like securities profitability) exchange.On the one hand, it connects the primary investment market of blockchain projects as a VC, and on the other hand, it connects project parties and investors as an exchange. Thanks to the rising period of digital currency, user transaction demand, digital currency listing demand, etc. have surged, and main businesses such as handling fees, service fees, primary market investment returns, and margins have surged, and digital currency exchanges have eaten up this wave. dividend. Take Binance as an example. From its official launch in July 2017 to the end of the year, its net profit exceeded US$200 million.
windMouth passed, fell down
Once a field enters the trendy period, it is the time for a major reshuffle and bankruptcy.The volume of the digital currency market in 2018 is already astonishing. Without more capital inflows and technology implementation, the decline of the digital currency market finally broke out. According to coinmarketcap data, the total global market value of digital currencies on March 27, 2019 was US$138.547 billion, a decrease of 77.4% from January 1, 2018 (the highest market value of non-digital currencies).
Data source of global total market capitalization from 2018 to now: coinmarketcap
Since April, everyone has gradually calmed down from this wave of decline. Everyone found that there are still many problems in the implementation process of blockchain technology. Fraudulent blockchain projects can be seen everywhere in this wave of turmoil, and those relatively reliable projects cannot achieve revenue in the short term.Under the background that the blockchain technology cannot be implemented in the short term to provide benefits, the digital currency can only return to Token financing, but the ICO has long been inactive due to legality issues, and the main businesses of the exchange are naturally the first to be affected and have shrunk sharply.The market activity is becoming more and more sluggish, which is manifested in the decrease in the trading frequency of investors, the severe breakdown of the listing of projects, and even layoffs before the Spring Festival in 2019 to reduce labor costs.
hope to fly higher
In the cold winter, the exchange hopes to grow a small wing to fly higher. First of all, I thought of the original ICO, hoping to use the ICO-like behavior to obtain a large number of new investors. Even if it didn’t work, I could at least charge a service fee deposit and obtain investment income, so a series of stories such as currency reform-STO-IEO happened.Currency reform, STO and the recent extremely popular IEO are essentially just another form of financing. Taking IEO as an example, the digital currency exchange using IEO = VC + digital currency (securities-like) underwriter + digital currency (securities-like profitability) exchange. Compared with the previous dual-identity exchanges, the digital currency exchanges that adopt IEO only have the additional identity of digital currency underwriters, similar to traditional securities underwriters before IPOs.
During this period, the exchange also optimized the stock market in response to the sharp drop in trading volume, and removed relevant trading pairs. Because it involves multiple interests and the duration is short, it only acts as a deterrent to the project party, and it will stop when the market volume recovers.This measure did not really drive out bad coins and improve the quality of digital currencies in the stock market.
These "innovations" are more open-sourced to the original business in the rising period. The root cause of the continuous failure is that the legal compliance problem is difficult to solve, and the mainstream market does not agree.
Why does the mainstream market not agree?
At present, except for Coinbase and some exchanges that have obtained licenses in Japan, most exchanges generally do not have legal licenses. They generally relocate their places of registration, dissociate under the brand name of offshore companies, and play cat-and-mouse games with governments of various countries and regions.
Why are digital currency exchanges generally not recognized by the international mainstream market?On the one hand, it is because the anti-money laundering mechanism of digital currency exchanges is weak, which conflicts with relevant laws and regulations.
In his question, Wang Feng pointed out that after the IPO, financial reports will be released on a quarterly or semi-annual basis, and transparent data will be released. There will also be services for ordinary users, requiring regular release of data or updates. But after many projects are listed on the exchange, there is no movement. When you are happy, you say it, and you don’t say it when you are not happy.This is another problem. Compared with traditional stock exchanges, the management of digital currency exchanges is too extensive. The main manifestations are money laundering by customers, opaque use of listing financing, multiple identities of exchanges, opaque listing financing purposes and corresponding rights and interests, and imperfect punishment and delisting systems.
How to get mainstream market recognition?
In view of the current environment, the most urgent need for digital currency exchanges is the standardization of standards, so as to gain the recognition of the mainstream market as much as possible.Here one is divided into two, one is legal compliance, and the other is transparency standards. No matter how strong the industry develops, it must be recognized and accepted by the mainstream society in the end, and legal compliance is the fundamental issue. If legal compliance issues are to be resolved, exchanges must first rectify all kinds of chaos on the platform, and need to establish a transparent and comprehensive anti-money laundering mechanism, financial disclosure mechanism, listing system, digital currency classification and confirmation, delisting system, etc.
1. In order to solve the problem of money laundering by customers, exchanges need to strictly implement the anti-money laundering mechanism of financial institutions.The first is to establish the identification of investors' true identities, the second is to preserve the investor's identity information and transaction records, and the third is to establish a reporting system for large-value transactions and suspicious transactions.
2. In view of the opaque use of project listing financing, exchanges should regularly disclose the financial status of listed digital currency projects.To avoid most of the existing listed digital currency project parties or foundations using the concept of blockchain for Token financing, in fact, most of the proceeds will be invested in other projects. The exchange should communicate with the above-listed digital currency project parties or funds to obtain financing usage, and for listed digital currency projects, the sponsor must be required to disclose its financial status. (As for the different types of projects, you can refer to four)
3. In view of the multiple identities of the exchange, the exchange should separate the multiple identities and establish a transparent listing system.A third-party organization first conducts transparent screening, and then the exchange conducts deletion. Abandon the blind pursuit of profit, regardless of the future feasibility of the project, and decide entirely based on voting or financial strength. Here you can refer to the third-party sponsor system in the securities market, rather than super nodes that form a community of interests with all parties.
4. In view of the non-transparency of listing financing purposes and corresponding rights and interests, the exchange will classify and confirm the rights of various listed digital currencies.For example, according to the current market circulation and application conditions, they can be roughly divided into three categories. One is a currency-like Token, which has extensive circulation and has the characteristics of a payment and settlement medium; the other is a quasi-ecosystem credit Token, which has limited circulation and can be used in some ecosystems, and enjoys voting rights for some income rights, etc.; It is an X-like Token with narrow circulation and no short-term application scenarios. There may be equity income rights in the future. This type of Token is the most common in the market and has the highest risk factor. After dividing the categories, and communicate with the project or foundation, the rights and interests that can be obtained by holding Token are still only used as payment like BTC.
Fifth, in view of the imperfect punishment and delisting system, the exchange should establish a sound punishment and delisting mechanism.Crack down on other financing, fraud and other behaviors, and create a good blockchain financing environment.
Reference article:
Reference article:
[1] Wang Feng asked Huobi Li Lin ten questions on the spot: choosing a good asset is the core ability of the exchange, there is no one! https://www.huoxing24.com/newsdetail/20190328185829327914
[2] Binance financing data outflow, 2018 net profit will reach 10 billion https://www.huoxing24.com/newsdetail/2018042610485601917
[3] Huobi.com: go to market in China before the big stick of supervision https://www.huoxing24.com/newsdetail/2018020915461875467.html
[4] It is hard to escape the end of extensive management, and the digital currency exchange is on par with the traditional securities trading market? https://www.chainnews.com/articles/998198387868.htm
