Crypto activities in China flourishing despite gov’t ban
For months, finance and investment regulators in China have been on a rampage, blacklisting anything related to cryptocurrency. Crypto exchanges were stopped from breaching the great digital wall of China. More recently, authorities have been monitoring communications on social media sites like WeChat and Alibaba, and anyone found to be conversing about the controversial and banned topics, including cryptocurrency, was to be reported to the authorities. However, a new startup in China is braving the regulatory forces in the country as it launches crypto custody services in the largely crypto resistant country.
South China Morning Post reported that Shanghai-based startup InVault found a way around the regulatory bottleneck and will be offering its services to Asian-based crypto exchanges. Commenting on the rising need for exchange-focused custodial services, InVault founder Kennet Xu told SCMP: “Today, the vast majority of cryptocurrency exchanges globally still involve their senior management in managing the transfer of digital tokens ordered by clients. Putting the private keys to your cryptocurrency assets in the hands of senior management is akin to putting all your money in their control.”
In a division of labour model, InVault advocates that exchanges should focus on running their ‘buy and sell’ services while handing over the responsibility of security of customer’s digital assets to another agency. Xu believes this is a much needed service in view of latest exchange hacks like in the cases of Bithumb and Coincheck.
Rather than a centralized repository, InVault intends to use a decentralized model where private keys are stored in different physical locations, to which specific persons have authorized access. For Xu, cryptos will only be fully secured when human oversight is eliminated.
According to reports, InVault has been tapped by an unnamed exchange to hold its 1 million ETH, worth $200 million at current trading price. The company, which has attracted $5.85 million in a seed funding round with Matrix Partners China, has yet to confirm this report.
InVault has demonstrated that it would take more to completely ban cryptocurrency and its related activities in China. At the height of the crackdown, at least 124 China based crypto exchanges relocated overseas in search of a haven. Some Chinese crypto investors have resorted to peer-to-peer transactions for their needs, while some ‘fugitive’ exchanges changed domain names to camouflage their operations.
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