"We built the success in China early on and kept the momentum," a close look at Huobi’s global business layout

To many, cryptocurrency exchange Huobi Global seems to always live under the shadow of its long-standing rival Binance. 

Four years older than the 2017-founded Binance, Huobi rapidly gained popularity during the early days of crypto as one of the few exchanges in China. From 2013 to 2014, Huobi raised two rounds of funding backed separately by Zhen Fund and Sequoia China, two of the biggest names among Chinese VCs. At its peak in 2016, the firm claimed to control over 50% of the global bitcoin trading market. 

In 2017, Huobi went on an exodus after the Chinese government’s clampdown on cryptocurrency trading. However, the firm never lost its grip on the Chinese market. According to Huobi Global COO Alan Sun, Huobi still draws its largest crowd from Asia, and specifically China. 

“Huobi started pretty early in China and was very successful since 2013… Huobi’s success today is based on the momentum it had and kept throughout the time,” said Sun.

However, the exchange is just part of Huobi's business. Huobi Global's parent company, Huobi Group, has a business makeup similar to Binance - both have ambitions beyond cryptocurrency trading and aim to own the entire ecosystem surrounding cryptocurrency trading. Thus, Huobi runs its own mining pool, a venture fund, a research team, an initial token offering platform, and several other business lines. 

Recently, Huobi poached Chris Lee from rival OKEx as its CFO. The company, led by CEO Leon Li, recently acquired a publicly traded hardware company in what appears to be an attempt at a backdoor IPO in the Hong Kong market. 

Exchange

Huobi’s flagship product, the cryptocurrency exchange, has reach in markets across Asia, Europe, and the Americas. For the U.S. market, in which Huobi does not have a direct presence, the firm still maintains indirect exposure through HBUS, which, like Binance US, runs independently from the main exchange. However, while Binance US had a high-profile launch that put it in the media spotlight for months, HBUS is less known to most U.S. customers and has consequently had reported little liquidity.

In China, the situation is different. Huobi enjoys as much brand recognition among Chinese investors as Binance, which only recently made a comeback in the Chinese market. In comparison, Huobi has “always been in the leading position ever since the beginning,” according to Sun.

After the fiat to cryptocurrency exchange prohibition during the 2017 regulatory crackdown, small scale peer-to-peer and OTC trading became the major crypto onramp channels. Huobi declined to reveal the trading volumes of its exchange operation in China. However, it is known as one of the few retail venues to purchase cryptocurrencies in China after the major exodus of cryptocurrency exchanges. 

“The regulation in China does not forbid trading, basically it says that fiat conversion to crypto is not allowed, but peer-to-peer is still pretty okay,” said Sun.

In a May report published by cryptocurrency asset manager Bitwise, Huobi was mentioned as conducting wash trading to boost its trading volumes. However, the exchange soon responded that no such abuse was found in the system. 

The firm also operates a separate derivatives trading platform dubbed Huobi DM. The derivatives exchange is said to have had an average daily trading volume of $3 billion in August. The platform offers futures contracts on eight cryptocurrencies, including BTC, ETH, XRP, and TRX. 

Cloud and Ecosystem

Besides running its own exchange, Huobi also licenses out its technology to firms looking to build their own OTC or peer to peer exchanges. Sun said companies that have user traffic but do not have the capacity to independently build and facilitate an exchange market are usually attracted to this service. 

So far, Huobi Cloud has been deployed in Argentina, Thailand, Russia, and Indonesia. In each region, Huobi Cloud partners with a local business to launch a cryptocurrency exchange that connects to Huobi Global's order book to take advantage of its liquidity.

Having one of the largest staffs in the cryptocurrency space, Huobi operates an extensive network of businesses peripheral to trading. In an interview with Chinese media, Huobi's Li stressed the need to take control of services that can support trading activities and retain users, such as digital wallets and mining pools. 

According to the firm, its venture arm Huobi Capital has so far invested in more than 60 projects. Its portfolio includes Korea-based crypto payments firm Terra, blockchain projects Nervos and ThurderCore, and London Fintech company Curve.

Mining is another major business for Huobi. The firm’s mining pool ranks ninth over the last six months on bitcoin.com, with a 5.48% share of bitcoin hash rate. According to the firm, it also offers node services to over 20 blockchain projects.

On the retail customer-facing front, Huobi also runs a digital wallet app, Huobi Wallet, and a messaging app, Huobi Chat. Although there are existing solutions for both apps, Huobi still felt the need to do it on its own since none of the products on the market are satisfactory, according to Li. 

“For us it’s the whole chain, it’s the whole ecosystem, we want to have everything, we started with the exchange, but that’s where the trading happens, the value convergences, gets realized, but there are also other business on this value chain,” said Sun.