Exclusive: Huobi's acquisition of the largest exchange in Japan and South Korea may be delayed due to investigation

Wu said blockchain exclusively learned that Huobi was previously in talks to acquire Bitflyer, Japan's largest exchange, for about $500 million. On the 17th, Korean media The Bell revealed that Huobi was trying to acquire Bithumb, South Korea's largest exchange. Wu said blockchain learned that both negotiations had been initiated for some time, and because Huobi was suddenly caught up in the Shanxi investigation, the two acquisitions may have been delayed.

Bitflyer is the largest cryptocurrency exchange in Japan with 2.5 million users. Bithumb is the largest cryptocurrency exchange in South Korea. According to Coingecko spot data, Bithumb ranks 12th, Bitflyer ranks 19th, and Huobi ranks 7th.

Huobi's global development is relatively slow. Most of the high-level employees in the structure are Chinese (in contrast, there is only one Chinese employee in Binance's senior management, He Yi). The investment projects and ecological layout are basically limited to China, and users and revenue mainly come from China. In November 2019, Huobi announced its withdrawal from the US market. Japan and South Korea are the only international markets that Huobi has left. In the high-level structure diagram previously disclosed by Huobi, the CEO of Huobi Japan and the CEO of Huobi Korea are listed.

Huobi Japan CEO Chen Haiteng went to Japan to study in 1992. He has held important positions in super-large companies such as NTT, index, and DAC in Japan. He served as the CEO of Baidu Japan from 2006 to 2013. Huobi Korea CEO Zhao Guofeng is a veteran in the Chinese cryptocurrency circle. The media calls him a well-known Bitcoin robot arbitrageur, the first person in Southeast Asia to hedge and arbitrage cryptocurrencies, the founder of Bitcoin World, and the founder of Rfund.

In 2018, Huobi announced that it had a controlling stake in BitTrade, an exchange with a legal license in Japan. In April 2020, Huobi HT was rarely approved by the Japanese Financial Services Agency, and it was also the first platform coin approved by Japan. However, according to people familiar with the matter, despite the acquisition of BitTrade, both Huobi Japan and Huobi Korea have very few trading volumes and KYC users, and HT's trading volume in Japan is also very small. Kong Deyun, chief industry researcher at OKEx, once pointed out that although Japan and South Korea have high trading activity, users show a very strong "closed" characteristic, mainly using local exchanges, which is difficult for outsiders to expand. Choosing to acquire the existing largest exchange is a reasonable move to conduct business locally.

This also shows that Huobi is in very good financial condition. With the rapid rise of Huobi's contract derivatives and other businesses this year, a lot of profits have been made for acquisitions. Bloomberg once disclosed that Huobi's revenue in 2019 was about 680 million US dollars. The profit margin is estimated to be 50% or higher. Due to the sharp rise in the price of coins this year, Huobi's revenue is expected to increase by more than 50%.

However, there are also some problems with limiting the focus of overseas expansion to Japan and South Korea. The Japanese people are relatively conservative about cryptocurrencies, and the Financial Services Agency has strict controls on ICOs and derivatives, so the valuation of the largest exchange, Bitflyer, is only US$500 million. Although the Korean people are enthusiastic about cryptocurrency speculation, the economy is small, and in September, the Korean National Police Agency raided and arrested the chairman of Bithumb. South Korea also faces severe regulatory policies. Bithumb has a bad reputation and has been widely reported for scandals such as fake volume. In addition, a Chinese transaction attempted to acquire the largest local cryptocurrency exchange in Japan and South Korea, and it is currently questionable whether the local regulatory authorities will approve it.

Both acquisitions originated before the "black swan" incident in mainland China. On October 16, OKEx began to stop withdrawing coins. The media revealed that the founder Xu Mingxing had lost contact a week ago and was assisting the Shanxi police in the investigation. On November 2, Wu said that the COO of Huobi also assisted the Shanxi police in the investigation, but the Huobi platform did not restrict withdrawals. Due to the panic in the market, Huobi and Binance set records for the outflow and inflow of Bitcoin throughout the year.

According to people familiar with the matter, although the negotiations have been underway for quite some time, Huobi’s acquisition of the largest exchanges in Japan and South Korea may be delayed due to this investigation, and the matter is still in limbo. However, some sources also revealed that due to this investigation, Huobi began to reflect on its over-reliance on the Chinese market and its previous slow pace of overseas expansion, and will pay more attention to overseas markets in the future, but everything still needs to go through this disaster.