WeChat (微信) is starting to see its first wave of defectors: Chinese cryptocurrency aficionados.
The country’s crackdown on bitcoin and WeChat, the nation’s dominant messaging app, is sending users of both to Telegram and other encrypted services banned in the country.
With administrators personally liable for what is said on groups they run, users of bitcoin exchanges OKCoin (幣行), Huobi (火幣) and BTCChina (比特幣中國) are migrating to services beyond the Chinese government’s reach. On Telegram they are popping up to discuss everything from how to transfer their digital tokens overseas to more effective ways to protect privacy, to initial coin offerings.
The new rules on message groups have delivered a rare setback for WeChat, which permeates the daily life of 963 million users and underpins Shenzhen-based Tencent Holdings Ltd’s (騰訊) US$400 billion market valuation. The crackdown has converged with a tightening on the cryptocurrency business by the government to contain financial risks as consumers pile into a highly speculative market that has grown rapidly this year.
Chinese authorities have ordered Beijing-based cryptocurrency exchanges to cease trading and immediately notify users of their closure.
Exchanges were also told to stop allowing new user registrations as of Friday, according to a government notice signed by the Beijing city group in charge of overseeing Internet finance risks that was circulated online.
Platforms should also tell the government by Wednesday how they will allow users to make withdrawals in a risk-free manner and handle funds to ensure that investors’ interests are protected, said the notice, which was also reported by the Chinese state-run newspaper Securities Times.
“It’s partially due to fears of bitcoin oversight, but I think it has more to do with the new rules on WeChat,” said bitcoin.com general manager Jake Smith, who manages a 500-member English-language group on WeChat.
Smith, a US national, said he has been asked by another Chinese group owner whether he could replace the person as administrator, due to beliefs that foreigners are exempt from the new regulations.
Tencent spokeswoman Jane Yip did not respond to a request for comment.
The crackdown on bitcoin has seen BTCChina, Shanghai’s largest exchange, say it would halt trading by the end of this month.
Some over-the-counter platforms, including those operated by Bitkan (幣看), suspended services this week.
Cryptocurrency groups on WeChat have been quick to disband before mushrooming overnight on Telegram. While there are no figures on how many people have done so, at least 30 such groups have appeared, with some already attracting more than 1,000 users in a single room, mostly speaking Chinese.
OKCoin, Huobi and BTCChina’s telegram groups are not officially run by the companies, according to the notices.
Chinese authorities on Sept. 7 said that beginning next month, creators of online groups are to be held responsible for the behavior of members.
Already, 40 people from one WeChat group have been disciplined for spreading petition letters, while a man has been arrested who complained about police raids, reports in official Chinese media said.
While Telegram is officially blocked in China, users can access the service through virtual private networks (VPN). As a foreign encrypted platform, it is somewhat beyond the grasp of Chinese authorities.
Telegram was founded by Pavel Duroz, a Russian entrepreneur known for his advocacy of Internet freedom. In June, he said the service would be registered with Russia’s state communications watchdog, after it was threatened with a ban in the country.
WeChat, along with Tencent’s QQ service, has to adhere to Chinese government rules. That includes censoring sensitive topics, filtering images, deleting private and public accounts without user consent and storing information sent via its platforms for at least six months on its servers.
After the July death of Liu Xiaobo (劉曉波), memorial images of the long-imprisoned Nobel Peace Prize-winning writer were scrubbed from WeChat and Sina Corp’s (新浪) Weibo (微博).
“If you are a group chat leader you have two choices, either you are going to super-actively monitor the group, because your livelihood is at stake, or you’re going to delete the group,” said Lokman Tsui (徐樂文), an assistant professor at the School of Journalism and Communication at the Chinese University of Hong Kong. “It’s a chilling effect.”
China is also cracking down on VPNs, which route traffic through servers outside the country, to stamp out access to foreign news sites and services. Apple Inc is removing many VPNs from its Chinese app store to comply with local rules.
Additional reporting by Reuters
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