Jeff Mei, Director of Global Strategy at Huobi Global, shares how the global cryptocurrency exchange endeavors to stay compliant in the myriad locales in which it operates. Mei also provides advice on how digital asset exchanges and users can combat crypto crime while keeping themselves secure.
Jeff nice to meet you! Please, tell us more about Huobi Group.
Huobi Group was founded in 2013 with the mission to make breakthroughs in core blockchain technologies and to integrate blockchain technologies with other industries. Over the years, Huobi has grown its presence to include public chains, digital asset trading and wallets, mining pools, proprietary investments, incubation, and digital asset research.
Aside from providing spot and derivatives trading to retail users, we also provide institutional services such as OTC trading, asset custody, asset management, and more. And to build out our ecosystem, Huobi has invested in over 60 companies throughout the blockchain industry.
Huobi’s 2,000 employees worldwide provide safe, professional, trustworthy, and world-class services to its global clients in some 170 countries.
So impressive that you cover 170 jurisdictions. Congrats! What are the main features that you observed for each big region that you serve, eg. the US market, Brazil – LATAM, Europe, etc.?
In certain markets such as Turkey and Russia, crypto adoption rates are high and there are a large number of what you call VIP traders, or users who trade unusually large amounts of crypto on a frequent basis, sometimes using advanced derivatives products. In other markets such as India and Vietnam, there are large numbers of retail users, and more user education needs to be done. And in traditional financial centres, there is naturally a large concentration of institutional investors – for example, in London many former FX funds and quant trading funds have pivoted to crypto.
If you were to portray the perfect crypto market (in terms of crypto user adoption, regulator’s stance, local officials’ view of crypto, etc.) what would that look like?
The perfect crypto market, in my opinion, is one where online banking adoption is high, cryptocurrencies can be easily exchanged with fiat currencies, and regulators have not only accepted but embraced cryptocurrencies. We envision a world where regulators not only see the value decentralised finance can bring to the masses but also one where governments understand and appreciate the value the blockchain brings to the various industries — particularly how smart contracts can be used to authenticate not just financial transactions, but processes in other verticals too.
How about crypto-friendly banks? Are there any?
I am aware that DBS has introduced a trust solution via DBS Trustee — the bank’s wholly-owned, licensed trust company — to enable its private banking clients to invest and manage their digital assets hosted on DDEX (namely Bitcoin, Ether, Bitcoin Cash and XRP). The offering builds on DDEX’s existing proposition for private banking clients, which provides security and transparency for crypto-assets with institutional-grade safekeeping and custodial services, and robust due diligence on the chain source.
In March, you talked at the Blockchain Africa conference about Hacks and Checks: What Keeps a Cryptocurrency Exchange Secure? What does it keep it safe?
The rise in price of cryptocurrencies and related assets over the years has attracted the attention of cybercriminals. Some crypto exchanges could be more prone to attacks because they keep large volumes of digital assets in hot wallets, and these are easily accessible by cyber criminals. Such a practice is usually not recommended. In addition, bugs and design issues within IT systems can lead to data breaches and security attacks by cyber criminals.
All of these can be attributed to the fact that many systems are open-source technology-based, and cyber criminals are consistently trying to break the codes.
At Huobi, we have the following measures to keep our assets safe:
Hot and cold wallet separation – 98% of digital assets are stored in multi-signature cold wallets, ensuring security of the private key signature process
Multiple backups ensure the availability of private keys
Total of 15 private key controllers coupled with multi-signature mechanisms ensure the security of funds on the platform are not compromised due to the actions of one or two people
In-house developed security hardware to ensure storage robustness and reliability
Stringent security processes
20,000 BTC fund for dealing with emergencies
Meanwhile, on a user level, one can adopt these measures to keep themselves safe:
When choosing an investment institution, choose a platform with stringent security measures to prevent asset loss due to lapses in platform security
Secure access to your email account – If your email gets compromised, you stand to lose your digital assets on exchanges
Regulation on crypto is always changing (to the extreme); how does Huobi cope with it (since you also operate in multiple jurisdictions)?
Changing regulations around cryptocurrency are not unexpected. They are but a reflection of governments’ cautious attitudes towards new technologies.
We are working towards complying with new laws and regulations that may come into force for the jurisdictions in which we operate and have personnel on the ground to keep abreast of any changes and developments regulations-wise. The landscape is a dynamic one, but we are more than up to the challenge of operating and staying compliant in every locale we have a presence in.
However, in general, governments are adopting a positive approach towards regulation, making it clearer as to what exchanges need to operate in certain jurisdictions, how transactions are taxed, etc. This is because laws and regulations make it easier for crypto exchanges like us to work with traditional banking and payment channels, as well as advertising channels. This enables us to expand beyond die-hard crypto circles and target more mass-market users.
With many crypto exchanges sponsoring different sports events, what’s next for Huobi in terms of enticing users join your ecosystem?
One initiative is that we offer high referral fees for users and influencers who invite their friends to join our exchange, in addition to other benefits such as access to highly coveted token listings.
Sponsoring sports events sounds like a good idea — but it depends on the market and whether it’s easy for users to transfer their money from fiat currencies to cryptocurrencies. If it’s not easy, i.e. banks can’t work with exchanges, then it doesn’t make sense to sponsor sports events and target mass market consumers, because most of them won’t be able to buy crypto that easily.
About Jeff Mei
Jeff Mei leads global expansion for world-leading cryptocurrency exchange Huobi. A Los Angeles native, Jeff began his career working in strategy and operations at a global investment bank. He later started his own consulting firm in Beijing and worked on various tech and blockchain projects before joining Huobi in 2020.