It’s safe to say that today is not a good day for the cryptocurrency ecosystem. Breaking news of the $40 million BTC Binance hack has been swiftly followed by the ban of cryptocurrency transactions from social media monolith WeChat.
Social Media Giant
WeChat, the Chinese social media giant and payments app, has updated its payment policy – informing users that those who engage in cryptocurrency trading will have their accounts terminated.
The policy revision states that:
‘merchants may not engage in illegal transactions such as virtual currency [trading]” or token issuing, alongside other banned payment outlets like pornography or online gambling. The new rule comes into effect at the end of the month, on May 31.’
China’s ongoing ‘complicated’ relationship with crypto-assets is nothing new. Draconian rules have meant that exchanges are banned from offering cryptocurrency services, as well as prior bans/threats to Bitcoin mining operations.
Key OTC Liquidity and Social Mobility
Fascinatingly, WeChat has served as an integral source of liquidity for over-the-counter (OTC) cryptocurrency transactions in China and Asia. A statement by founding partner of Primitive Ventures, Dovey Wan, suggests that local OTC transactions, and subsequent throttling of liquidity, should be expected following the update to its payment policy.
Urgh, Wechat just updated its payment policy .. merchant can’t serve any token issuance/fund raising 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 pic.twitter.com/TdNIO6cggS
— Dovey Wan 🗝 🦖 (@DoveyWan) 7 May 2019
This move by the de facto chat/social ecosystem – which sees 1.08 billion monthly active users and 45 billion daily messages – can be loosely correlated to the Chinese government’s political desires for continued controlled censorship of internet communications. CZ of Binance alluded to this potential motivation.
Interestingly this short-term ban may end up having the opposite desired effect. As many crypto-Twitter pundits have pointed out; the more people are restricted and censored, the more they will seek ways to circumvent the limitations to their expressions. And what burgeoning ecosystem of decentralized digital assets do we know of that could possible do that?