The People’s Bank of China (PBOC) has placed a temporary ban on payments made by scanning quick-response (QR) codes with mobile devices.
The move by China’s central bank, which was announced on 14th March, is aimed at stopping, at least for the moment, the upcoming launch of ‘virtual credit cards’ by major Internet companies.
Alibaba, China’s leading e-commerce company, and Tencent, a popular Internet platform hosting social and mobile services, recently announced that they would seek to launch such virtual credit cards – which will utilize QR codes – as an alternative to traditional credit cards.
The PBOC cited security concerns as the reason for the decision. Both Alibaba and Tencent are currently communicating with the PBOC in the hopes of getting the green light for the launch of the services. However, reports suggest the companies are facing substantial hurdles in their deliberations.
Estimates suggest that Alipay processes around $660bn in payments annually from roughly 300 million users, while Tenpay has more than 100 million users and has gained significant ground in 2013 and 2014.
Although the halt in payments using such technology was not aimed at bitcoin or other digital currencies, QR codes remain an active part of the bitcoin peer-to-peer and customer-to-merchant transaction process globally.
As such, many in the digital currency community have debated whether such measures, if prolonged permanently, would have a positive or negative impact on bitcoin users.
Impact on bitcoin
Due to continued uncertainty about bitcoin’s use in China, some in the community were troubled by the news. Reddit message boards debated such topics as whether digital currency exchanges would be targeted for similar reasons, though others maintained that due to bitcoin’s decentralized nature, China could do little to stop overall use.
Eric Gu, co-founder of BitAngelsClub, indicated that he sees the move as a troubling attempt to turn the clocks back on recent innovation in the financial services sector, and that it signals future concerns for bitcoin and other digital currencies.
“As a hardcore bitcoiner I am deeply troubled by the news, I think it is back paddling from the Internet financial innovations in recent years, and the probability is much higher for the central bank to release tougher regulations against bitcoin.”
Bobby Lee, CEO of BTC China, however, disagrees, telling CoinDesk that the measures “won’t really affect the bitcoin industry in China”, adding that this is because the ecosystem itself remains underdeveloped.
“Down the road, if bitcoin payments were to be made available in China, it would also very likely be affected by this disallowance of QR code payments. We are still far from that today.”
QR code risks
With many watching the events closely, there has been new interest in the PBOC’s claims regarding QR code security.
Past research on QR codes indicates that the data transmission tools could potentially be used by malicious individuals to transact potentially harmful items aimed at facilitating larger fraud. However, top consumer security firms, such as Norton, provide tools that can help safeguard consumers against this risk.
Still, awareness of the risks, and the ways to protect against them, arguably remains low among those looking to take advantage of the system’s benefits.
On 17th March, the PBOC revealed that it may enact regulations that severely limit the ability of Internet companies to conduct financial services, barring them from all offline transactions.
The bank is also considering restrictive new caps on the kinds of payments that Alipay and Tenpay, the top emerging alternatives to China UnionPay, can transact. This includes setting a per-transaction limit of 1,000 RMB ($163), and a 10,000 RMB ($1,630) limit on annual spending for individual accountholders.
UnionPay, the world’s largest card issuer, has been described as having a “virtual monopoly” on bankcard services in China, and is in the process of expanding its reach internationally.
Though the QR code halt may only be temporary, these moves signal that the PBOC is looking to restrict the growth of new, technology-enabled payment services. This could ultimately mean more hurdles are likely to arise for Alibaba and Tencent, as well as for alternative technologies such as bitcoin and related businesses.
CoinDesk will continue to monitor this developing story.
QR code scanning image via ShutterStock