Huobi, operator of the world’s second-largest cryptocurrency exchange by trading volume, has imposed a 24-hour condition before a user can withdraw digital tokens in over-the-counter (OTC) transactions, effectively discouraging speculation and dealing another blow to cryptocurrency investors in China amid Beijing’s latest crackdown on the sector.
Under the new requirement, traders can only take out their tokens 24 hours after making any cryptocurrency purchase, according to a statement posted on Huobi’s Chinese-language website on Thursday. It also indicated that a 36-hour condition may be needed in “certain cases”.
Such cases refer to a condition in which users are potentially subject to higher risks, as detected by Huobi’s risk control system, a company spokeswoman said on Friday.
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The new measure aims to “ensure the safety of users’ assets by effectively avoiding losses caused by the inflow of speculative capital”, according to the company’s statement.
Huobi’s latest initiative, which covers all users on its platform, comes after the company initially applied a precondition of up to 36 hours for cryptocurrency withdrawals on “certain users” in August last year.
OTC transactions have become the only method for individual Chinese investors to buy bitcoin and other cryptocurrencies with fiat money, following Beijing’s 2013 ban on financial institutions and payment platforms dealing with bitcoin and its 2017 shutdown of cryptocurrency exchanges in the country.
Traders can enter into OTC transactions, which are relatively unregulated, almost anywhere such as on a platform or even in a chat group, where fiat money is exchanged with cryptocurrency assets. Exchanges also operate OTC desks, but transfer of any legal tender takes place outside these platforms.
As such, it is widely believed that OTC transactions are being used as a gateway for money laundering and capital outflow, as well to drive speculation that fuels the wild volatility of cryptocurrency prices.
Implementing a 24-hour provision for cryptocurrency withdrawals comes just days after Huobi added China to its list of prohibited jurisdictions to trade derivatives, as Beijing continued its crackdown on businesses related to bitcoin and other digital tokens.
That followed the decision by BTCChina, which ran the first cryptocurrency exchange in China, to leave the bitcoin business because of the government’s actions against the cryptocurrency sector.
In May, Huobi was one of the first Chinese-founded platforms to suspend bitcoin mining services and sales of cryptocurrency mining equipment in the world’s second-largest economy.
Apart from mainland China, other jurisdictions are tightening up their scrutiny of cryptocurrency exchanges.
Following the UK’s action, the Monetary Authority of Singapore said it would follow up as required with the local unit of Binance, which has applied for a licence to provide digital payment token services in the city state.
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