WeChat, the most popular social media and payment platform in China, has just released an update to the app’s payment policy which, among other things, puts a dent in the use of crypto among its users. A founding partner of Primitive Ventures, Dovey Wan, made it known via a tweet that the Tencent-created app will now discontinue letting merchants do any transactions with cryptocurrency. Merchants who continue to do this will have their accounts permanently terminated.
Possible Effect On The Chinese Crypto Market
Wan, after revealing information about the ban, also pointed out that the ban could have some effect on the local market because a large percentage of over-the-counter (OTC) cryptocurrency transactions happen via WeChat.
“Urgh, WeChat just update its payment policy .. merchants can’t serve any token issuance/fund raiding or crypto trading activities, otherwise account will be terminated
Given most OTC transactions are happening in WeChat, this may impact local liquidity to quite some extent.”
Seeing as WeChat has over a billion active customers, it is very possible that this is a big hit for the Chinese crypto sphere.
China and Cryptocurrency
The Chinese government has not exactly been supportive of cryptocurrency and they’ve been doing everything they can, to impede its growth. Last year around August, both WeChat and Alipay began screening cryptocurrency transactions on their platforms. This was supposedly done due to pressure from the government.
Furthermore, around the same time, many commercial places in downtown Beijing were expressly ordered by the district government to turn down all cryptocurrency related events to be hosted in their venues. This order included office buildings, restaurants, shopping malls and also hotels. According to a document relaying the order, they are not only to turn down such events but are legally required to report to the appropriate authorities, if they take place anywhere. This was supposedly done to ensure the financial safety of Chinese people, the continuity of the Yuan as the official legal tender in China and also to ensure the strength of the entire country’s financial system.
Additionally, even though China is the largest market for cryptocurrency mining computer hardware, the government is now actively looking for ways to ban crypto mining.
WeChat Ban has Long Term Gain – Changpeng Zhao
The very optimistic Changpeng Zhao, CEO of Binance, has said the ban isn’t exactly a “bad thing” and it could have long term gains for the industry. According to a tweet from him:
“This is a classic example of short term pain, long term gain.
It is inconvenient for people short term and they take a hit. But long term, it is precisely this type of restriction of freedom that will push people to use crypto. Not a bad thing.”
CZ hopes that this exact ban is what will push people to start using crypto. Since he doesn’t exactly say how this could happen, one can only assume that he thinks that this ban would create strong interest in the industry as it usually happens outside of it. Usually, when something is officially banned, interest in it automatically shoots up as people start to wonder why it was important in the first place. However, could this happen to crypto too?
Generally, it might be unlikely for the same effect to be felt in the crypto market. The ban specifically affects merchants who currently use cryptocurrency for their trades. Other merchants or individual users who do not use crypto at all, would see the ban as just another piece of news because it doesn’t concern them in anyway. How this could possibly lead them to start using crypto is a question CZ is yet to answer.