What Weibo’s takedown of Binance & Huobi means for crypto in China
Three of China’s major cryptocurrency exchanges’ official accounts on Weibo — the Twitter-like social media platform in China — were suspended without warning on Thursday, raising concerns on whether this signals stricter regulations and more crackdowns on cryptocurrency-related activities to come.
Weibo’s sudden shutdown of the three major crypto exchanges’ social media accounts came on the same day that China’s People’s Congress session came to an end when China’s Premier Li Keqiang declared that the nation “must resolutely crack down on those who commit fraud and illegal fund-raising in the name of new forms of business.”
Even though no direct causal connection to the premier’s words have been made, on the same afternoon, Chinese netizens noticed the official Weibo accounts of OKEx, Huobi and Binance — the three biggest crypto exchange firms in China and around the world — were no longer accessible.
Weibo, alongside the microblogging platform WeChat, is the two most popular social platforms in China, where all social media posts from individuals and companies alike are monitored by censors and subject to the government’s censorship rules.
Weibo, which is owned by Sina — which is in turn owned in part by the internet giant Alibaba — has not given a specific reason why it has banned all three crypto exchange companies’ from its social media platform. If a user searches for the crypto exchanges’ accounts, Weibo displays a generic message that “the account is unavailable due to complaints about violating laws and relevant provisions of the Weibo Community Convention,” and that “the user account does not exist” anymore.
See related article: Binance report: over 100 million people are now crypto users
Binance, Huobi and OKEx — which are ranked number one, four and 16 respectively among the world’s cryptocurrency spot exchanges in the world by 24-hour volume — did not reply to requests by Forkast.News for comment.
Despite the three crypto exchanges suddenly going silent on Weibo, news of what happened circulated quickly and widely on the social media platform, which has an estimated 511 million active monthly users. The hashtag “three top crypto exchanges’ Weibo accounts were suspected to be blocked” has been viewed over 500,000 times since yesterday. Some comments reflected China’s anti-cryptocurrency stance and said variations of: “the fraud of cryptocurrency finally came to an end.” But more people reserved public judgment and remained on the sidelines, or posted relatively neutral statements.
“Something is going to happen,” one netizen predicted.
Premier Li Keqiang’s ultimatum
The day that Weibo cut off the three cryptocurrency exchanges was also the last day of the National People’s Congress session, one of the “two sessions” — also called “Lianghui” — the most important government meetings in China before high-level political decisions are made. At the conclusion of Lianghui, the National People’s Congress passed China’s 14th Five Year Plan, the guiding document for the country’s future social development and economic growth in a multitude of areas, including business and digital technology policy.
At a news conference Thursday, Premier Li pledged that China would invest more in technology innovations research and development. When asked by Xinhua News Agency about how China would approach it in the context of a market-oriented economy, Li — who is also China’s second-in-command — replied that regulations are necessary to build an environment of fair competition and that the government would create new approaches for supervising growth
“We support new forms of business, such as the ‘Internet-plus’ and IoT,” Li said. “However, we must resolutely crack down on those who commit fraud and illegal fund-raising in the name of new forms of business, as it disrupts the market. Without fairness, the competition will not be sustainable.”
For some, Li’s references to new forms of business, fraud, illegal fund-raising and crackdowns evoked China’s fraught relationship with its cryptocurrency industry.
In September 2017, at the height of the cryptocurrency industry’s initial coin offering frenzy and it was clear that a significant swath of the sector was fraudulent, China declared ICOs to be an illegal financing activity and banned them nationally. As a result, many cryptocurrency exchanges and other crypto-related companies that were based in mainland China started to move their headquarters out of China, to not be in direct violation of Chinese law. But some crypto companies — including Binance, Huobi and OKEx — continue to operate in China and still offer mainland users services in a legal gray zone through the over-the-counter market. Mainland residents can buy BTC, ETH, EOS and just about any other cryptocurrency from other crypto holders using RMB through bank cards or digital payments. Cryptocurrency holders can also participate in all kinds of trades.
Since last year, China has also been putting the squeeze on the crypto industry in other ways. Chinese cryptocurrency miners have suffered at least three waves of having authorities freeze their bank accounts in crackdowns that the government says were related to its fight against money laundering. Also last year, pressure from authorities led OKEx to suspend its token withdrawal services for about a month, after its founder Star Xu was detained by police over questions about an equity merger involving a subsidiary crypto company, OK Group.
After that, Chinese authorities pulled the plug on the first-ever blockchain-based bonds that were planned to be issued by China Construction Bank in Malaysia and Fusang digital exchange — which industry watchers said might have stemmed from government concerns about capital outflow.
See related article: China’s bitcoin miners flee Inner Mongolia ahead of crypto mining ban
More recently, Inner Mongolia — one of the world’s centers for bitcoin mining farms — announced the region would ban all cryptocurrency mining for environmental protection reasons.
State of CEOs’ accounts
Thursday’s takedown of Binance, Huobi and OKEx was not the first time that Weibo blocked high-profile cryptocurrency-related accounts.
Weibo has blocked the account of Justin Sun, the flamboyant founder of TRON, at least three times in the past, with one account, “TeacherJustinSun,” only lasting 12 hours before it was shut down.
Perhaps as a result of this as well as the general knowledge about the monitoring of all internet content — especially that related to officially frowned-upon topics like cryptocurrency — those in China’s crypto communities tend to keep their mainland public social media presence relatively low-key. But some have already moved their major digital social media presence outside of China’s digital firewall to platforms like Twitter and Telegram — which are accessible to mainland users via VPNs (virtual private networks).
The exchanges’ WeChat accounts and personal Weibo accounts, like those of CEO Changpeng “CZ” Zhao of Binance and CEO Jay Hao of OKEx, are still accessible. In addition, all three crypto exchanges remain active on Twitter.
In the meanwhile, Binance has announced that former U.S. Senator Max Baucus would join Binance as a policy and government relations adviser.
“#Crypto now have another strong advocate. @Binance is honored to have Sen. Baucus as our advisor,” CZ said, in a tweet today. “Let’s continue push technology innovation and freedom of money in responsible ways. The future is limitless.”
Bitcoin Hoard Fuels One of World’s Biggest Crypto Fortunes
(Bloomberg) – It’s the latest corporate strategy for companies from Tesla Inc. to Square Inc.: shift a portion of cash reserves into cryptocurrencies as digital assets become more mainstream.
Still, few have gone as far as MicroStrategy Inc. Eight months after its first investment, the software firm has a Bitcoin holding worth more than $5 billion.
Shares of MicroStrategy have rocketed almost 600% since mid-July, boosting the fortune of founder Michael Saylor, a billionaire until an accounting scandal in 2000. The chief executive officer is now worth $3 billion, according to the Bloomberg Billionaires Index, joining the ranks of the world’s richest crypto holders, a list that isn’t definitive since some fortunes can’t be identified or verified.
MicroStrategy’s crypto fixation began soon after the pandemic hit when the firm found it had a cash-flow problem: There was just too much of it. After cutting advertising and axing 400 jobs unsuited to home-work, the Tysons Corner, Virginia-based firm was sitting on a cash pile of $550 million with nowhere to put it. Saylor, 56, turned his attention to Bitcoin.
“People still aren’t sure: Are we crazy or are we not crazy?” Saylor said. “The only way to get economic security is to invest in scarce assets that are not going to be debased by the currency expansion. That is the environment that led us to decide we should consider Bitcoin as a treasury reserve asset.”
‘Every Scar’
Not everyone agrees with the strategy.
“Saylor equated Bitcoin to a bank – that’s just ridiculous,” said Marc Lichtenfeld, chief income strategist at the Oxford Club, a financial-research firm that has no stake in MicroStrategy. “When you put your money in a bank, the value of it doesn’t go up or down by 10% a day.”
Saylor has clashed with investors before. In 2000, a shareholder filed a class-action lawsuit against MicroStrategy, alleging it misled investors over the company’s earnings by booking revenue prematurely to inflate profits.
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MicroStrategy agreed to restate its revenue figures and Saylor, once dubbed the wealthiest man in Washington, D.C., with a fortune of $7 billion, lost almost all of it in a matter of weeks after shares fell 95%. He and his fellow executives, without admitting or denying the allegations, paid $11 million to the Securities and Exchange Commission in December 2000, including $1 million in fines.
“It’s made us careful and humble and focused,” Saylor said. “Every scar informs you, and I wouldn’t be who I am without having lived through those experiences.”
Steady Revenue
Saylor has continued to run the analytics software business he founded in 1989, and has overseen annual revenue streams of around $500 million for the last decade, though sales have dipped in recent years.
Bitcoin’s price has soared in recent months, hitting a record above $58,000 last month as big investors pile in and the asset class matures.
Saylor shrugs off concern about Bitcoin’s volatility and said crypto critics are behind the curve. He said he’s also put his own money into the digital asset, amassing a personal holding worth more than $1 billion.
“If you go back 10 years, how many people agreed that Facebook, Google, Apple and Amazon would own the world?” he said. “Who were the last people to embrace this? Senior members of the establishment.”
Raise Debt
Saylor’s appetite to acquire Bitcoin didn’t stop after the company’s first purchase. When the majority of MicroStrategy’s cash reserves were exhausted, Saylor raised a $650 million corporate bond and used it to buy more.
Saylor said he’d rather issue debt against future cash flow now than save up to buy Bitcoin in five years, when he thinks it’ll be pricier.
In February, the company raised another $1.05 billion in a bonds-for-Bitcoin offering, and on March 5 it announced yet more purchases. On Friday, Saylor tweeted that MicroStrategy bought 262 additional Bitcoins for $15 million in cash, bringing the total to about 91,326. The firm’s shares closed down 2.5% to $784 in New York.
Read more: MicroStrategy CEO Will Consider Raising More Debt to Buy Bitcoin
The move has resulted in MicroStrategy becoming a dual-purpose company: part software maker, part Bitcoin investor. While the firm has been transparent about this change in regulatory disclosures, juggling two distinct goals isn’t something that investors are accustomed to.
“If you’re a hedge fund and you want to make that kind of a concentrated bet, you’re entitled to do that,” Lichtenfeld said, but “as a software company to make this kind of a bet is completely irresponsible.”
‘Critical Point’
Saylor said the company has been upfront with investors throughout. When MicroStrategy increased its Bitcoin holding, it held a Dutch auction to give shareholders time to sell their stock.
“Everybody had plenty of time to digest the news and decide whether they’re on or off,” Saylor said.
With all the attention he’s attracted, Saylor wants to do more than just defend a radical investment strategy. He’s become something of a global Bitcoin ambassador in recent months, appearing regularly on crypto podcasts and YouTube shows advocating for digital-asset investments.
“This is a really critical point in human history,” he said. “We’ll build a better world on it once people understand it. We’re still very early. This will be the decade.”
(Updates with additional purchases in 17th paragraph.)
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Bitcoin price under pressure as Binance faces probe, but crypto headed for 16% weekly rise
Bitcoin prices were headed for a sharp weekly rise on Friday, even as the cryptocurrency was facing some negative headlines tied to a major trading platform.
Binance Holdings Ltd., the largest crypto exchange by volume, according to CoinMarketCap.com, was being investigated by the Commodity Futures Trading Commission to determine whether U.S. residents breached securities law by trading derivatives on the exchange, according to a report from Bloomberg News on Friday, citing people familiar.