As many might remember, late last month, Chinese crypto powerhouse, Bitmain, submitted its application to be listed on the Hong Kong Stock Exchange via the use of a WVR (Weighted Voting Rights) structure.
However, citing reasons of volatility and speculative activity associated with the virtual currency domain, the President of the Hong Kong Chamber of Commerce said that the listing would not be possible at this time, even though most of Bitmain’s ongoing business comes from the sales of its mining machines. He also mentioned that the “fixed costs associated with cryptocurrency enterprises” are a source of concern for the nation, especially when coupled with the fact that declining altcoin prices will continue to lower returns produced on the mining machines themselves.
Bitmain’s Relationship With Crypto
Bitmain’s primary income comes from the sales of its ASIC mining rigs rather than any bitcoin related transactions. However, the link between the two is undeniable since all of the risks that are faced by Bitmain stem from the profitability aspect of cryptocurrencies in general.
Not only that, with the continuous price swings that being are witnessed by the global crypto markets, it is becoming increasingly difficult to assess the true value of the various altcoins available today (which in turn means a loss of revenue for investors using Bitmains self-operated mining machines).
Add to the equation China’s highly regulated virtual currency environment, and we find that most of the nation’s crypto oriented enterprises are registered offshore. However, what this also means is that investor returns are not guaranteed and that these companies, if they choose to do so, can pack up their operations overnight without honoring any of their business commitments ( a scary prospect to say the least).
What is Bitmain’s Plan of Action Moving Forward
As things stand, Bitmain appears to be shifting its focus from mining related operations to deepening its ties with local Chinese authorities so as to foster healthier business relations between the two entities. It is also worth remembering that irrespective of the current crypto climate that exists within China, Bitcoin has become an essential part of the nation’s financial structure, especially since more and more people are facilitating monetary transactions/ payments using the premier digital asset. As a result of this, the Chinese government is looking to create a more dynamic regulatory framework that can evolve as time progresses.
Bitmain Should Be Placed on HKSE
While mainland Chinese regulations in regards to crypto assets are quite strict, Hong Kong is a different matter altogether. For example, the Special Administrative Region has good market conditions (open and free market avenues, global connectivity) that can foster and help an enterprise such as Bitmain grow to its full potential.
However, due to the exhaustive list of conditions being imposed on Bitmain, the company may find it difficult or be restricted in its access to the HK exchange in the near future.