Huobi’s move is in line with Beijing’s multi-pronged crackdown against cryptocurrency investors in the country.
The move is a setback for all Huobi users, who will be unable to withdraw their tokens for up to 36 hours if the exchange’s risk assessment system deems them to be particularly at risk.
The move is part of Huobi’s effort to “gradually adopt a number of risk control techniques spanning a bigger segment of customers,” according to the company. The delay is expected to “effectively reduce user losses caused by the inflow of dangerous funds and ensure the safety of users’ assets,” according to the company.
Since August of last year, Huobi has used a more limited version of this protection, imposing a token withdrawal delay of up to 36 hours for some, higher-risk customers.
Beijing’s persistent and multi-pronged crackdown on the country’s cryptocurrency investors, which has recently targeted the mining sector, financial services, and crypto’s online footprint, appears to dovetail well with the new, more comprehensive campaign.
As a result of the restrictions, much of the country’s crypto trading has relocated to the OTC market, which is relatively unregulated and assures that fiat currency transfers do not take place directly on exchange trading desks.
Substantial levels of activity on the OTC market amid regulatory crackdowns are a well-established pattern in China: investors responded by moving to OTC trading when Beijing first took action against crypto exchanges in 2017.
Huobi launched its OTC service in November 2017 in response to a series of tightening regulations on crypto trading in the country.
The statement today contradicts some experts’ projections, who expected Beijing to adopt a softer stance toward OTC trading because the industry is thought to offer fewer capital flight risks than traditional exchanges.
Despite this, the South China Morning Post categorically stated that the OTC sector is seen by regulators as a conduit for capital outflows and money laundering, as well as a source of significant volatility in the crypto markets.
Huobi revised its user agreement document late last month, prohibiting all existing users in China and a number of other jurisdictions from trading crypto derivatives.
The platform had already intervened earlier in June to restrict new users from trading derivatives while also lowering the maximum trading leverage from 125x to less than 5x.