Alipay, the largest $150 billion payment application in China, officially bans Bitcoin trading in OTC trading and prohibits traders from using Alipay accounts.
Alipay’s announcement, shared by Red Li, a crypto-researcher, and co-founder of the Chinese crypto community 8BTC, has explicitly stated that its users are not allowed to use the network to trade bitcoin.
Why Does Alipay Prohibit OTC Trades?
Ant Financial, a subsidiary of Alibaba, is the parent company of Alipay. The company’s valuation rose to $150 billion at the beginning of 2018, after securing another $10 billion in a round of financing.
The $10 billion was raised as additional capital to finance the aggressive expansion of the Alipay fintech network. However, to understand Alipay’s decision to ban OTC bitcoin trading, it is necessary to acknowledge the way Alipay dominated the Chinese payments market and gained 90 percent of its market share.
Over the past decade, the Chinese government has focused on supporting local businesses. The government eliminated competitors like Google, Twitter, and Facebook and replaced them with Baidu, WeChat and others. More than half of the Chinese population already uses Alipay and 90 percent of mobile customers use the network as the primary payment method.
Alipay and Jack Ma, the founder, and chairman of Alibaba have been optimistic about blockchain technology for many years. Although he described Bitcoin as a bubble, Ma emphasized that cryptocurrencies as consensus currencies and blockchain-based distributed systems will be massively distributed in the future.
Despite the craze for the cryptocurrency and blockchain sectors, Alipay was pressured to remove crypto traders indirectly from its network when the Chinese government in February called on all banks and financial services providers to ban Bitcoin trading accounts. An article in the Financial News, a publication of the People’s Bank of China (PBOC), states:
In order to avoid financial risks, China will step up measures to eliminate onshore and offshore platforms related to virtual currency trading or ICOs.
A large number of traders in China have traded Bitcoin in a peer-to-peer manner in the OTC and unregulated market without government approval. Therefore, Alipay was asked to prevent its financial network from being used for crypto-trading.
ICOs and virtual currency trading did not withdraw completely from China after the official ban … after the closure of domestic virtual currency exchanges, many people turned to overseas platforms to continue to participate in virtual currency transactions
What Happens in The Near Future?
Bitcoin trading and digital asset trading was banned by the Chinese government in September 2017 and the government’s attitude to the cryptocurrency market has not changed since then. Alipay’s ban on Bitcoin trade consolidates China’s position.