US President Donald Trump signed an executive order to ban the Alipay payment platform and seven other apps with links to the Chinese on Tuesday. The apps can access private information of their users.
Separately, U.S. officials are considering banning U.S. citizens from investing in Alibaba Group, a subsidiary of Alipay’s parent company, and Tencent Holdings, people familiar with the matter told Dow Jones. No decision has been taken while the agencies are debating the potential impact on the markets.
Tuesday’s Executive Order prohibits transactions with CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay as well as WPS Office and Alipay, the payment platform of the Chinese billionaire Jack Ma’s Ant Group Co.
The crackdown comes prior to the introduction of the central bank digital currency (CBDC) in China, which is believed to have influenced China’s crackdown on Ant Financial and other Jack Ma companies.
In October, at an event in Shanghai, Ma criticized the Chinese financial system and its state-dominated banking sector: “We shouldn’t use the way of managing a train station to regulate an airport,” said Ma. “We cannot regulate the future with yesterday’s resources. “
Since posting the comments, Ma has held back and his Ant Group IPO has been suspended by regulators.
Industry observers said People’s Bank of China is using the digital yuan as part of a broader effort to curb the growth of Alipay and WeChat Pay.
The introduction of a CBDC is also expected to curb Alipay’s microcredit operations, which provide financial services to non-banks while withdrawing deposits for commercial banks.
China has accelerated its efforts on the CBDC front and appears to be way ahead of the US in developing a digital currency, analysts said.
By investigating Ant now and banning Alipay, the US could inadvertently help the Chinese government fuel its digital currency revolution, given people no choice but to adopt their payment system. The justification for the order is odd too, given that all types of apps in the US and elsewhere, financial or otherwise, have the ability to access people’s private information.
The executive order goes into effect in 45 days and says the apps are banned because they pose a threat to US national security.