China’s most popular social media application, WeChat, will enforce a ban on crypto asset trading and fundraising activities at the end of this month. The move is in line with the Chinese government’s ‘war on crypto,’ which has already seen ICOs and local bitcoin exchanges effectively banned.
The Chinese government is moving towards further control and visibility of its citizens’ financial transactions. The next step is to remove crypto trading from the widely used WeChat app.
**WeChat bans crypto trading **
On May 7, WeChat changed its terms and conditions to prohibit token-based fundraising activities, and crypto asset trading. Dovey Wan, a co-founder of crypto investment firm Primitive Ventures, tweeted: “Urgh, WeChat just updated its payment policy. Merchants can’t serve any token issuance/fundraising or crypto trading activities, otherwise, the account will be terminated.”
The rule change is set to commence on May 31, 2019, and has the potential to impact the Chinese OTC market as WeChat is a key communication channel for OTC deal execution.
While it is unclear what prompted the move by Tencent (corporate owners of WeChat) to prohibit crypto asset trading on its platform, the action is consistent with China’s ongoing actions to suppress the crypto market within its borders. The updated policy also prohibits users from investing in unregistered securities and precious metals (via trading platforms).
Tencent reportedly takes an active role in censoring the content on its platforms as required by China’s authoritarian government. Twitter commentators have speculated that the update to WeChat’s terms and conditions will have come as a request from the Chinese leadership. Beijing began to move against crypto businesses a year ago, ordering Baidu, Alibaba and, Tencent to block specific cryptocurrency-related activities on their platforms.
What is WeChat?
Owned by technology giant Tencent, WeChat is China’s leading multi-purpose social media, messaging and payments app. There is no Western equivalent, as WeChat combines the functionality of WhatsApp, Facebook, Instagram, Venmo, and news and entertainment services into one app. WeChat was launched in 2011 and boasts over a billion active users in the People’s Republic. The app plays a significant role during the Chinese New Year. Users use the app to gift ‘red envelopes’ electronically via WeChat Pay as opposed to the traditional envelopes filled with cash.
The application is heavily censored by Chinese authorities. Time Magazine reported in February that the most censored topics on WeChat last year included the US-China trade war, the arrest of Huawei’s Meng Wanzhou, the #MeToo movement, and a Chinese vaccine scandal. The deletion of politically sensitive content is standard practice on the platform.
No end in sight for China’s crypto ban
WeChat’s ban on crypto trading provides further evidence of China’s “blockchain not bitcoin” stance. As previously reported, China has effectively outlawed all cryptocurrency-related activities in its borders with the exception of mining.
China’s next step may be the development of a digital renminbi (RMB). A central bank-issued, blockchain-based digital renminbi could lead to complete financial oversight for the People’s Bank of China, which would complement the country’s newly launched Orwellian social credit scoring system. As an increasingly authoritarian regime, Beijing appears unlikely to embrace decentralized, alternative payment systems such as bitcoin as they would give its citizens the means to remove their capital from within the country’s banking system.
However, WeChat is not the only messaging app that Chinese crypto asset investors can use to trade crypto peer-to-peer. While there is a long list of apps that are blocked in China, including WhatsApp, Telegram, and Signal, there are a number of locally available messaging apps that the local population can use to communicate. However, converting crypto trading profits back into local fiat currency is becoming increasingly difficult.