Messaging Giant WeChat Bans Cryptocurrency Accounts as Chinese Government Tightens Regulations
The leading Chinese social media platform WeChat was reported suspending a couple of blockchain and cryptocurrency accounts, according to China-based financial news-site, Lanjiner. On 22 August, WeChat, which has a super powerful reach with more than 1 billion active monthly users worldwide, permanently shut down at least eight major accounts included Huobi News, CoinDaily, Jinse, Deepchain, Firecoin Information, Daily Currency Reading, Golden Finance, Wujie Block Chain, Coin World Express Service, Cannon Rating, and TokenClub. The action was strongly believed related to the violation of China’s internet regulation under “Interim Provisions on the Development of Public Information Services for Instant Messaging Tools.” The rule prohibits the promotion of ICOs and cryptocurrency trading[1][2].
However, Huobi News denied the allegation. The Beijing based company stated that WeChat took down its account because of “broad action targeting industrial media,” instead of the Chinese government’s censorship of cryptocurrency[3]. The statement was contrary to the announcement from WeChat, as one of the WeChat official’s admitted that the move taken was related to the Chinese government attempt to crack down ICOs and cryptocurrency. “(The accounts were suspended for being) suspected of publishing information related to ICOs and speculations on cryptocurrency trading.[4]”
The government of China has shown reluctance towards cryptocurrency for years. On December 2013, The People’s Bank of China (PBOC) and four other Chinese financial institutions published a joint notice regarding the risks of bitcoin and prohibited any financial institutions from handling bitcoin transactions. Then, on April 2014, commercial banks and payment companies were assigned by PBOC to shut down bitcoin trading accounts. After that, the China’s internet watchdog called Leading Group of Internet Financial Risks Remediation issued a notice for local governments to keep an eye on bitcoin-mining operations to “orderly” quit the business[5][6].
Figure 1: Timeline of Cryptocurrency Ban by The Government of China
Data Source: South China Morning Post
Besides of WeChat, Baidu, a popular Chinese-based internet service provider, and Alibaba, the most potent e-commerce in China, join the force to support the government of China’s movement to crack down cryptocurrency. Baidu has blocked some cryptocurrency chat rooms, including “Digital Currency Bar” and “Virtual Currency Bar.” On the other hand, Alibaba has shut down cryptocurrency transactions on its mobile payment services (Alipay). Prior to these bans, the Chinese government planned to shut down the access to 124 overseas cryptocurrency exchange websites that provided trading services to the mainland. Not only by online, but the clampdown of cryptocurrency is also done by offline. At the beginning of this month, August 2018, Beijing’s local government published a notice prohibiting hotels, office buildings and shopping malls to host events related to cryptocurrencies[7]. Once the most dominant currency in bitcoin trading, now because of these policies, CNY trading volume on bitcoin plunges from 90% to only around 1%.
Figure 2: Bitcoin Trading Volume (All Currencies) August 2016 — August 2018
Data Source: Bitcoinity
Despite of the ban towards cryptocurrency that leads to a drastic drop on cryptocurrency trading activities, this industry hasn’t showed any signs of an end. Cryptocurrency enthusiasts from China are still active in this volatile industry and find other ways to trade cryptocurrency. Most of the cryptocurrency enthusiasts move their cryptocurrency to Hong Kong[8]. Other enthusiasts, especially for bitcoin, prefer to trade bitcoin offline by a face-to-face scheme by meeting face to face, then the buyer can pay by cash or send money through WeChat. Then, the seller can transfer bitcoin to the buyer through a mobile bitcoin wallet. This method is very simple, yet on the other hand requires a great amount of trust. Another way that also can be an option is through a peer-to-peer marketplace or OTC (over-the-counter). One of the most popular platforms to utilize for this scheme is LocalBitcoins. Based in Helsinki, Finland, LocalBitcoins provides over-the-counter trading of local currency for bitcoins by displaying advertisements posted by seller on its website and informing the state exchange rates and payment methods for buying or selling bitcoins. The buyer can choose whatever options available for the payment; bank transfer, Alipay, WeChat, or even face-to-face cash payment[9].
Public sentiment towards the keyword ‘China crypto ban’ shows a neutral indication that tends to be positive, marked by ‘alert’ or ‘calm’ as the dominant emotion. @SengoHector for example, says that ‘ “ I’ve always held strong to the idea that China, in the long term, is not trying to ban crypto. Instead, they’re trying to reform it and clean it up so that they can roll it out in China the way they rolled out the internet, their own way with their own rules”.
Figure 3: Sentiment Towards ‘China crypto ban’ Keyword
Data Source: Sentiment Viz
[1] Gail, E. 2018. WeChat Bans Crypto News Accounts as China Looks to Block Offshore Crypto Exchanges. [https://coincentral.com/wechat-bans-crypto-news-accounts-as-china-looks-to-block-offshore-crypto-exchanges/]. Accessed August 26, 2018.
[2] Young, Joseph. 2018. Chinese Crypto Bans on WeChat Accounts, Events, and Exchanges: What Happened and Why. [https://cointelegraph.com/news/chinese-crypto-bans-on-wechat-accounts-events-and-exchanges-what-happened-and-why]. Accessed August 26, 2018.
[3] Huang, Z. 2018. China Shuts Down Blockchain News Accounts, Bans Hotels in Beijing from Hosting Cryptocurrency Events. [https://www.scmp.com/tech/article/2160805/china-cracks-down-wechat-accounts-offering-blockchain-and-cryptocurrency-news]. Accessed August 26, 2018.
[4] Young, loc. cit.
[5] Leng, S. 2018. Beijing Bans bitcoin, But When Did It All Go Wrong for Cryptocurrencies in China? [https://www.scmp.com/news/china/economy/article/2132119/beijing-bans-bitcoin-when-did-it-all-go-wrong-cryptocurrencies]. Accessed August 27, 2018.
[6] Wikipedia. 2018. Legality of Bitcoin by Country or Territory. [https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory#cite_note-techcrunchBTC-71]. Accessed August 27, 2018.
[7] Huang, Z. 2018. Chinese Internet Giants Shut Cryptocurrency Forums and Transactions Amid Government Clampdown. [https://www.scmp.com/tech/article/2161451/chinese-internet-giants-move-shut-cryptocurrency-forums-and-transactions-amid#add-comment]. Accessed August 29, 2018.
[8] Young, J. 2018. “Experts” Fear China Losing 90% Control Over Bitcoin Market, Forgetting Gov’t Ban. [https://www.ccn.com/experts-fear-china-losing-90-control-over-bitcoin-market-forgetting-govt-ban/]. Accessed August 29, 2018.
[9] 24hChina. 2018. How to Buy Bitcoins in China. [https://www.24hchina.com/buy-bitcoins-in-china/]. Accessed August 29, 2018.
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