The mainland ban cannot stop China’s growing crypto-industry
Since last year, the Chinese government has enforced a strict ban on crypto-exchanges, aimed at driving them out of the mainland. However, these regulations seemed to have missed their mark as the crypto-industry in China has continued growing.
Despite the ban in place, InVault - a Shanghai-based cryptocurrency custody provider - was launched last week. The company aims to bring in large-scale cryptocurrency exchanges as customers, pitching to them the need for a custodian to hold their client’s assets, thereby avoiding any moral hazard.
A custodian's main responsibility is to hold assets, physical or electronic, in a secure manner on behalf of other entities. Given that the ban in China aims to prevent businesses from holding assets which are in the form of virtual currencies or which are owned by firms that are not legal within the mainland, InVault’s services could be invaluable.
InVault has also developed a decentralized corporate cryptocurrency wallet service, so that no single centralized authority will have control over the funds in custody. The private keys of the users will be in the custody of the company, which will be deposited in physical vaults accessible only to specific personnel.
Kenneth Xu, founder and CEO of InVault, said the absence of human supervision is the sole solution to keep cryptocurrencies safe. “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,” Xu told South China Morning Post.
Several local crypto-exchanges have operated under different domain names and even considered outsourcing key functions to circumvent the ban. Terence Tsang, chief operating officer of TideBit, a crypto-exchange service provider based in Hong Kong and Taiwan, said, “the latest warning and potentially increased monitoring of foreign platforms is targeted at a batch of smaller exchanges that had claimed to be foreign entities, but are in fact operating in China claiming they have outsourced their operations to a Chinese company.”
Things are looking up for InVault, as it has already secured a major deal to provide custody services for 1 million ETH from an undisclosed cryptocurrency exchange.
Image via Shutterstock
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