Huobi Exchange to Layoff Staff Due to Drop in Revenue As a Result of Removing Chinese Users
Leading cryptocurrency exchange, Huobi is reported to be embarking on a massive layoff exercise that could see it cut down its staff strength by as much as 30%. In an exclusive report by top Chinese crypto journalist, Colin Wu, the layoff exercise is caused by a significant drop in generated revenue by the company. One of the major reasons for this drop in revenue is the removal of Chinese users from the exchange’s platform.
Huobi exchange was originally founded in China and naturally enjoyed the patronage of a large population of users from the country. At the time, China was the hub of cryptocurrency activities, representing the most crypto-active nation in the world. Regulatory challenges forced Huobi and other top exchanges to exit China, finding new bases in more crypto-friendly countries.
Despite operating from outside China, most of the exchanges, including China, sustained their services to Chinese customers until a further crackdown was threatened by the Chinese government. In 2021, the regulatory crackdown on crypto activities in China intensified. Regulators in China banned cryptocurrency transactions and mining. Overseas exchanges were also barred from providing services to Chinese investors over the internet.
As a result of this ban, Huobi exchange embarked on a systematic withdrawal of services to users from China. Huobi’s withdrawal from China was systematic. First, it ceased the registration of new accounts from the country in September 2021, and by the end of the year, all existing users were advised to withdraw their assets from the platform as services towards them were terminated in the last month of 2021.
Having reported having over 15 million users as far back as 2020, the scale of users removal by Huobi was estimated to be in the millions. This is in the consideration of a very high percentage of Chinese users on the platform. For an encryption industry, this is an extremely rare kind of disruption that would have a significant impact both on the platform and other aspects of the industry.
Another coincidence during this period is the significant drop in the price of Bitcoin and other crypto-assets. It has been an extended bear market both in terms of price drop and the duration of the process. Having reached an all-time high of $64,000 in 2021, Bitcoin has since dropped to below $20,000, dragging the entire market along. The drop is so significant that it has led to various predictions for the industry, including that of impending extinction by the Chinese government.
Huobi’s plan to lay off staff is simply an effort to cut down on losses and adjust to the current realities of the industry. Other exchanges are also taking similar measures to downsize or adjust in other creative ways to wedge the storm of unfavorable regulations and a dwindling market.
Before Huobi’s latest announcement, Wu also reported that Bybit, another flagship cryptocurrency exchange had announced plans to downsize its workforce by layoff exercise. Perhaps, this could be an initial step to adjusting to the realities of a struggling market in the hope that such measures will only be temporary. If prices pick up as expected, adoption would likely increase and the effect of the exit of Chinese customers would reduce. Maybe then we could return to a more vibrant market that will create room for more employment.