Ex-Bitmain CEO to launch new business within a month, with his former employer as a key client

Quick Take

  • Jihan Wu, former CEO of Chinese mining giant Bitmain, is set to launch new startup Matrix before the end of July
  • Matrix, a custody and trading firm, is understood to have been originally incubated within Bitmain, which will subsequently be a major client 
  • Sources say having Bitmain as a key partner could make Matrix into “the world’s biggest OTC desk” overnight

Details about former Bitmain’s CEO Jihan Wu’s newest venture haven’t been particularly forthcoming.

But four sources close to the Chinese business mogul say Matrix – his new crypto-services business – is around a month away from going live. 

And while Matrix is said to be in conversations with prospective clients globally (with the exception of U.S.-based customers), its biggest customer will be Bitmain itself, the giant bitcoin mining firm which filed to list publicly in Hong Kong. The assumption is that Matrix will offer custody and lending services to Bitmain, which generates an enormous volume of crypto assets as a miner, while in turn attracting a liquid pool for its over the counter (OTC) offering.

“Put it this way, they will be the biggest OTC desk and asset-manager [in the world] overnight,” said one source, who works closely with investors in Asia. “With liquidity like that, [low] prices follow,” they said, noting that Matrix should have a competitive advantage in the region as the Asian market is “a lot more price sensitive.”

The news may come as a surprise as it was previously believed that Matrix originated from a rift between Wu and Bitmain co-founder Micree Zhan. But it now seems the exodus of Beijing-based Bitmain staff and resources may have been intentional and part of a wider strategic plan, with Cynthia Wu, Bitmain’s investment director, working closely with Matrix.

“Relations are great between the two,” one source close to the key players noted.

They also explained that Bitmain began building a trading and custody division internally before deciding there was a business opportunity to spin it off into a separate legal entity in February.

Bitmain did not respond to requests for comment. 

It is unclear what role Wu will hold at Matrix, although he is said to be currently running it as “Chairman,” according to two sources. A Chinese media outlet reported that Wu was eventually set to take charge of the project as CEO. Wu is also still a director at Bitmain and continues to hold a 20.5% stake in the firm, which saw a $500 million loss in Q3 of 2018. 

Wu and his co-founder are among the wealthiest individuals in crypto, both billionaires. However, one source alluded that Matrix might be part of the founders’ exit strategy, as they are under political pressure not to liquidate their shares in Bitmain.

As for Matrix’s relationship with the Chinese government, which currently has a sweeping ban over crypto trading, it is yet to be seen whether the two will liaise. Matrix will likely have an offshore holding company, but some suspect it may eventually be granted a monopoly to operate in China, as part of the government’s wish to have greater oversight over the underground market there. 

However, another source familiar with the local government suspects that any official “thumbs-up” would be much more subtle.

“It’s more of a ‘if we can’t beat them, how do we direct them’ attitude,” they noted, adding that the government was a long way off giving overt approval to anyone.

Still, whether or not Matrix can operate in China, the region is set for a major new player, competing with international incumbents like Coinbase and BitMEX.

“This is going to make Asia the new centre of gravity for crypto OTC,” concluded one source.