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Asia & Australia,  Cryptocurrencies,  Media

Binance to The Block: STFU and let us do business in China

The Block’s Larry Cermak opened a can of worms in explaining how Chinese citizens can use Alipay and WeChat, which ban cryptocurrency transactions

Did the CEO of Binance, one of the largest cryptocurrency exchanges, threaten cryptocurrency media site The Block over a trio of tweets detailing how banned peer-to-peer cryptocurrency trading really happens in China?

The blow-up happened on October 10. The Block’s research director, Larry Cermak, explained how P2P over-the-counter (OTC) exchanges doing business in China use influence with government officials to get around cryptocurrency trading bans on the country’s two dominant online payment platforms. Those services, Alipay and WeChat, both claim to immediately shut down any account involved in cryptocurrency sales.

In response to Cermak’s tweets, Binance boss Changpeng “CZ” Zhao replied “somethings are better left unsaid. Recommend no more news like these, for the sake of the people, our industry (and your business).”

If that last part sounds like a threat to you, well, you’re not alone. 

The Internet is forever.

Better left unsaid?

What was just as surprising was that Cermak soon deleted the tweets. The Block has a strong reputation for journalistic integrity. 

The entire situation was set against the background of a growing scandal about Western firms, well, kowtowing to Chinese government pressure to self-censor criticism, particularly of its increasingly violent crackdown on pro-democracy protests in Hong Kong. 

President of the People’s Republic of China, Xi Jinping (via Wiki commons).

That was the topic of South Park 300th show, on October 2. Titled “Band in China,” it skewered the NBA and Disney for bending to China’s censorship wishes, among other things. The show’s entire archive was promptly scrubbed from China’s Internet. 

It proved prescient on October 4, when the NBA got into hot water. A pro-Hong Kong tweet by the general manager of the Houston Rockets kicked off a firestorm threatening the league’s long and successful push into China. Two days later, online video game developer Blizzard fined and banned a professional gamer of its Hearthstone league for making a pro-Hong Kong statement after a tournament. Apple then took heat on October 10 after banning an app that helped Hong Kong protestors track police.

After several comments about Cermak’s deletion, The Block’s director of news, Frank Chaparro stepped in, tweeting, “To speak for him while he is asleep, I think he didn’t want to put something like this out there, given its gravity, without it getting the full treatment of a post we would put on our site. But it is an observation that he stands by.”

The next day, Cermak commented, “Exactly right.”

Cermak also explained, “My intention ewas [sic] not to ‘blow it up’. It was to share an interesting insight that’s widely known in the East but not so much in the West.”

That led to a comment claiming that the workaround is “sensitive information regarding an issue where no demonstrable harm is being done, but its exposure, given the irrational civil situation in this location, could do real harm.”

To which Cermak responded, “Well that’s why I deleted it after like 20 minutes.”

The Block's Founder and CEO, Mike Dudas (via The Block).
The Block’s Founder and CEO, Mike Dudas (via The Block).

He also said he did not see Zhao’s comments as an attempt to intimidate The Block, tweeting out, “It was not a threat in any way.”

The Block CEO Mike Dudas declined to comment on whether it intends to run such a story, saying the site did not “share our internal editorial agenda and calendar with external parties.”

READ MORE: The Block is trying to raise $1.75 million and here is their pitch deck

Opening Pandora’s box

Cermak’s tweets on October 10 started by saying that “miltiple [sic] executives at Asian exchanges told me that Alipay and Wechat are both very well aware of P2P OTC trading in China and willingly let it happen. Exchanges have government relationships that tell Alipay/Wechat to turn a blind eye.”

He added, “Some large Asian exchanges (won’t be specific) have dedicated unfreezing teams.”

The exact moment Changpeng “CZ” Zhao says Binance was hacked to the tune of $40 million during his Twitter AMA, May 7, 2019).
The exact moment Changpeng “CZ” Zhao says Binance was hacked to the tune of $40 million during his Twitter AMA, May 7, 2019).

The entire situation started on October 9, with Zhao publicly and vigorously confirming on twitter that Binance was accepting fiat currency payments via Alipay and WeChat.

That day, Binance announced that it had launched P2P trading in bitcoin (BTC), ether (ETH), and tether (USDT) against the Chinese yuan (CNY) accessible to Chinese customers. The announcement led to a question on Twitter from Haiyi “Celine” Lu, CEO of cryptominer BitDeer, about Binance accepting Alipay and Wechat. 

Zhao’s confirmation—”YES”—drew an emphatic “NO, you cannot” response from the official @Alipay Twitter account on October 10. The payment firm is a division of Alibaba, the Chinese megacorporation that is its version of Amazon. 

One country, two truths.

Alipay added, “There’re several reports about @Alipay being used for bitcoin transactions. To reiterate, Alipay closely monitors over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations.  [cont’d…] If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.”

By that time, Zhao had already clarified that Binance could not take Alipay or Wechat payments, but said they could be used in P2P transactions that go directly from buyer to seller.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.