Chinese ‘big three’ bitcoin exchange OKCoin has dismissed claims of using idle users’ funds to invest in risky financial products.
As reported earlier, Chinese state news wire Xinhua published a report that claimed OKCoin and Huobi, two of China’s so-called ‘big three’ exchanges had helped themselves to a collective 1 billion yuan ($150 million) of users’ idle funds toward risky investments. Specifically, the idle funds were alleged to be invested into wealth management products that yield returns of 3-5%, compared to the staple 1.5% yield from deposits at a regional bank.
“Chinese exchanges act as shadow banks,” said bitcoin trading Bitmex CEO Arthur Hayes back in 2015, when Chinese exchanges engaged in zero-fee trading. “They borrow at 0% from clients who wish to trade Bitcoin, and lend out customer funds by purchasing China debt instruments.”
Refuting such claims, OKCoin published a statement to the contrary.
“Recently, there have been rumors and false allegations regarding OKCoin, and its affiliates, in their use of idle client funds,” the exchange wrote in a statement.
We would like to assure all parties, and especially our customers, that we have a strict policy of placing idle client funds into bank-backed low risk products for safe-keeping.
At the time of publishing, Huobi has not issued an official statement about the allegations of diversion of customer funds.
Once the world’s largest bitcoin trading market, Chinese exchanges put an end to zero-fee trading following a crackdown by the People’s Bank of China (PBoC), the country’s central bank. The new regulatory squeeze enforced by the PBoC also saw Chinese exchanges halt margin, or loan based trading.
In a statement to Quartz, OKCoin CEO Star Xu reiterated that any allegations of using customers’ funds for investments in high-risk, high-yield financial products, were false.
“We are, of course, prohibited from using our client’s fund for our own gain, and do not do so,” the bitcoin executive stated.
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Last modified: May 21, 2020 9:17 AM UTC