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.

Bitfinex Wants to Offer 100x Leverage For Crypto Derivatives Trading

Michael LaVere
  • Bitfinex will offer 100x leverage trading for cryptocurrency derivatives
  • According to the exchange's CTO, the hedging product is "ready for prime time"

Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders. 

Hedging On Cryptocurrency Derivatives

Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.” 

The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating

“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”

The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement. 

Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades. 

The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release. 

Big Risk, Big Reward

Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism. 

Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading. 

According to Boonen, 

“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”

The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.

Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.