As of July 1st 2016, the Chinese government has issued a regulation to limit 3rd party payment systems. Popular payment systems in China like Alipay and WeChat/Tenpay now limit the following:
- Minimum personal information: transaction limit of 1,000 Yuan ($150) per day
- Maximum personal information: transaction limit of 5,000 Yuan ($750) per day
- Removal of bank to bank 3rd party fee-less transactions
The Current Chinese Payment Ecosystem
Due to the rise of smart phones, mobile and internet payments have become a popular option in China. More than half of the users of apps like Alipay and WeChat use their mobile devices to pay daily bills and financial businesses. According to iResearch, mobile payments reached 6.2 trillion Yuan ($1 Trillion) GMV (Gross Merchandise Volume) in Q1 of 2016 and is growing rapidly as this is 3x larger than the year prior.
Bullishness for Cryptocurrencies
As the Internet has shown us, people don’t like to go back to old technology, especially when it’s slow and expensive. Capital controls highlight the utility of peer-to-peer systems like Bitcoin, which is a form of censorship-free money.
Bitcoin may also become more popular in China as people discover its store of value and its relatively fast and cheap payment system. Right now the majority of bitcoin trading volume comes from China and the recent bull run started on the last major Yuan devaluation.
The Chinese population is so large that even if a small percentage of the Millennials start to look at payment systems like Bitcoin, we may see a dramatic price increase, especially when nearly 40% of millenials in China are using mobile payment systems.
- 40% x 415 Million = 166 Million Millennial mobile payment users in China.
The upside is huge, but no one knows if or when this migration will happen, only time will tell.
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