China's crackdown on message groups drives WeChat Bitcoin devotees to Telegram


Users of bitcoin exchanges OKCoin, Huobi and BTCChina are migrating to Telegram and other encrypted services banned in China.
PHOTO: REUTERS

BEIJING (BLOOMBERG) - WeChat 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, Huobi and BTCChina 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 (ICOs).

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' US$400 billion (S$539 billion) market valuation.

The crackdown has converged with a tightening on digital currencies as China declared ICOs illegal, dampened cryptocurrency trading and is said to consider a ban on domestic bitcoin exchanges.

"It's partially due to fears of bitcoin oversight, but I think it has more to do with the new rules on WeChat," said Mr Jake Smith, general manager at bitcoin.com, who manages a 500-people English language group on WeChat.

Mr 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 spokesman 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 (September). Some over-the-counter platforms, including those operated by Bitkan, suspended services this week.

Cryptocurrency groups on WeChat have been quick to disband and mushroom 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 said on Sept 7 that starting from next month (October), creators of online groups are responsible for the behaviour of members. Already, 40 people from one WeChat group have been disciplined for spreading petition letters while arresting a man who complained about police raids, according to reports in official Chinese media.

While Telegram is officially blocked in China, users can access the service through virtual private networks (VPNs). As a foreign encrypted platform, it is somewhat beyond the grasp of the country's authorities.

Telegram was founded by Mr 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, have 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 death of Chinese Nobel laureate Liu Xiaobo in July, memorial images of the long-imprisoned writer were scrubbed from WeChat and Sina's Weibo.

"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 assistant professor Lokman Tsui 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 is removing many VPNs from its Chinese app store to comply with local rules.

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