The Chinese government appears to be taking another shot at the crypto ecosystem as WeChat, the country’s most popular messaging and social media platform, decided to ban all accounts that engage in trading of non-fungible tokens (NFTs) and cryptocurrencies.
According to WeChat’s new rule, the activities that have been effectively banned include providing “transaction entry, guidance, or issuing channel guidance” in regards to the conversion of digital currencies into fiat currencies, token issuance and derivatives trading, and intermediaries and their pricing.
Accounts that fail to comply with these rules will be subject to restrictions or, depending on the severity of the violation, may be closed for good.
The new rules focus on discouraging intermediaries from using social media platforms such as WeChat to offer NFTs to individuals. It does not prevent people from buying and holding these assets within their accounts.
China’s government has been cracking down on the crypto industry for years now and has progressively banned multiple activities associated with digital assets including the operation of cryptocurrency exchanges and crypto mining activities.
As a result of these measures, many companies in the sector have been forced to move their operations to crypto-services locations. Chinese authorities have stated that mining is an “extremely harmful” activity due to the extensive use of carbon-generated electricity.
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Why is WeChat Changing These Rules?
WeChat is a subsidiary of Tencent Holdings – one of the country’s largest tech companies. It is unclear if authorities forced the company to incorporate these new rules into its terms and conditions. However, the largest tech conglomerates in the country have been adopting measures that follow the government’s guidelines in areas such as data sharing, user privacy, and crypto-related services to avoid being scrutinized.
According to analyst Bao Linghao from Trivium China, this was a preemptive measure adopted by Tencent to avoid any kinds of trouble with Chinese authorities. The NFT market specifically has not yet been formally regulated but policymakers are against speculative activities that can destabilize the domestic financial market.
Blockchains in the country are centralized and actively monitored by authorities. Companies that offer these kinds of services include Baidu, JD.com, Alibaba, and Tencent. Moreover, all parties involved in dealing with digital assets such as NFTs need to be appropriately licensed and use these government-regulated blockchains to mint their assets.
What Is the Chinese Government So Hostile Against the Crypto Sector?
One of the most prominent reasons why the Chinese government may have adopted such a hostile attitude against the crypto sector is that they would like to prioritize the use of the digital yuan instead of allowing citizens to make transactions with other well-known digital assets such as Bitcoin (BTC).
The digital yuan was launched in April 2020 and has been tested already by the country’s authorities in a handful of cities as a regulated mean of payment. WeChat has started to support e-CNY, as the digital currency is known, which means that over 1 billion users are now able to make payments by using the popular platform.
However, adoption is advancing at a slow pace as a recent poll indicated that only 1 in 5 adults within the country has downloaded the e-CNY app. Over 50% of the people surveyed cited that they either don’t know how to use the app or they don’t think they need it at the moment as the top reasons why they have not adopted the digital currency.
For China, a blockchain-powered digital currency such as e-CNY will allow it to increase oversight of day-to-day transactions as the digital wallets used to transact with the token must disclose the identity of the holder.
Authorities have cited that the widespread use of e-CNY can lead to a reduction in money laundering, tax evasion, and other criminal activities.
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