WeChat Bans Crypto-Related Activity, Due to Chinese Government Pressure

The management at WeChat, a widely-used social media platform in China, has reportedly announced that it will terminate user accounts that are involved in cryptocurrency trading.

According to sources familiar with the matter, WeChat’s management has made revisions to its payment policy. The updated policy mentions that "merchants may not engage in illegal transactions such as [those involving] virtual currencies."

Ban On Virtual Currency Transactions

WeChat’s notice also states that companies or individuals trying to promote or conduct crypto token sales will have their accounts suspended. WeChat users are also prohibited from uploading and exchanging pornographic images.

Online gambling (or gambling in general in China) is also not allowed on the social media network.

As confirmed by local sources, the ban on cryptocurrency-related activity on WeChat will be effective starting May 31st, 2019.

WeChat’s Management "Probably Had No Choice"

Commenting on the matter, Changpeng Zhao, CEO of Binance, the world’s largest digital asset exchange in terms of trading volume, said that WeChat’s management “probably had no choice” as they may have been pressurized by the Chinese government to prohibit crypto transactions.

Zhao, or “CZ”, added that "it would be hard to beat WeChat pay," when it comes to processing payments in a quick and cost-effective manner. He also noted that WeChat has a good UX/UI and had not placed too many restrictions on the types of activities allowed on its platform - until recently banning cryptocurrencies.

As confirmed by Dovey Wan, the founding partner at Primitive Ventures (a “market agnostic” investment firm which has invested undisclosed amounts in Dfinity, the “world computer” project, ZCash (ZEC), among other cryptos), WeChat is a widely-used network for settling over-the-counter (OTC) transactions in China.

Wan also mentioned that the ban on cryptocurrencies could potentially have a negative impact liquidity pools in mainland China.

In September 2018, Lincoln Townley, a UK-born self-taught contemporary artist, had sold a large collection of his artwork for cryptocurrency through WeChat. 

Great Firewall Of China

The Chinese government is well-known for censoring and also completely blocking most major websites including Facebook, Google, and YouTube. The ban is enforced through the Great Firewall of China, which is constantly updated in order to restrict access to internet sites that may interfere with the nation’s economic and political system.

Institutional Derivatives Volumes Went Cold After Crypto Market Crash: CryptoCompare

  • Institutional derivatives trading plummeted following March's crypto market crash according to latest CryptoComapre report. 
  • Mar. 13 generated the highest daily volumes in cryptocurrency history, generating $75.9bn in trades. 

Volume trading on institutional derivatives plummeted following the crypto market crash in March. 

According to the  CryptoCompare March 2020 Exchange Review, institutional derivatives volumes tanked following the market crash on Mar. 12, which saw the price of bitcoin drop as low as $3,800. Trading volume across institutional exchanges, including CME, declined more than 43% in March compared to the month before. 

According to the report, 

Institutional appetite for derivatives products appeared to decline rapidly following the BTC crash, with CME losing 44% of volume compared to February. Trading volumes totalled $7.36bn in March compared to $13.1bn in February.

cryptocompare march 2020 guideVolume trading across crypto exchanges in March 2020 | Source: CryptoCompare

The report found that CME options trading, which launched in January of this year, have not seen significant improvements in volume and are far from generating the activity seen on rival crypto exchange Deribit. 

Despite the market crash, Mar 13. brought about the highest daily volumes in cryptocurrency history, generating $75.9bn in trades. Lower Tier exchanges accounted for the majority of the volume at $54.3bn, while Top Tier volumes also set a record at $21.6bn in daily trades. 

According to the report, spot volumes surged in Q1 2020, with Top Tier exchanges increasing month-on-month since December 2019. Even with the economic uncertainty of the coronavirus, spot volumes for Top Tier exchanges increased 35% on average vs February.

While crypto experienced its single largest day of volume trading, March’s overall volume failed to reach the same levels of Dec. 2017’s crypto bull run.

The report reads, 

Despite the March price crash, volume levels for these exchanges still haven’t reached those seen in the Dec-2017 bull run. Overall, volumes across all Top Tier exchanges increased 8.0% to $288Bn in March.

Binance was the largest Top Tier exchange by volume in March, trading $63.6bn, an increase of 19.2% over the month before. OKEx generated the second-largest volume of $47.7 bn, down 8.2% from February. Coinbase experienced the largest percent increase in volume trading during March, generating $13.3bn, up 41.9%.

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