A group of Chinese business organizations issued a warning in mid-April about the financial hazards of non-fungible tokens, which are digital assets that represent real-world things or intangible products like music. NFTs can not be exchanged with cryptocurrencies or used to generate securitized products, according to the country's banking, internet finance, and securities bodies.
Despite the fact that industrial groups do not have regulatory authority, they have an impact on policymakers and are considered seriously by them. The announcement has been seen by many in the crypto sector as a death knell for the development of NFTs in China. Surprisingly, China's tech behemoths are displaying an increasing interest — or, as some would put it, FOMO — in the industry.
NFTs are restricted in China since crypto trading is prohibited. To distinguish their projects from the financial and speculative character of many NFTs, IT firms refer to them as "digital collectibles," emphasizing the use case's role in verifying ownership and authenticity. As a result, many of the coins minted in China are works of art, such as an ancient Chinese Buddhist statue or a historical or culturally significant object, such as a famous Chinese spaceship.
The value of NFTs rests in their ability to stimulate the expansion of the creative and cultural industries, according to the financial groups who issued the statement.
Digital collectibles generated in China are minted on permissioned blockchains administered by Chinese tech giants and typically marketed through these corporations' own channels, unlike NFTs, which are minted on Ethereum or other public chains and exchanged with crypto on open markets. Users would have to prove their genuine names on these sites before purchasing collectibles in China's fiat currency, the yuan, and resale of the works on secondary markets would be outlawed.
Because of Chinese regulations, digital collectibles are distinct from the global NFT market and are particularly illiquid. Some systems allow owners to give up their assets for free, but only after a few months of ownership.
Nonetheless, Chinese tech behemoths have hastened to develop digital collectibles, with some even venturing beyond the country's borders to sell NFTs. We've compiled a list of some of the most important participants in the sector thus far:
- Alibaba's meal delivery service Ele. me, which is an all-encompassing platform for Chinese customers to order on-demand services and now buy food-themed digital collectibles, added a digital collectable service to its app in April.
- Tencent released Magic Core (幻核) on Zhixin Chain, a consortium chain constructed by Tencent and its partners, in August of last year. The most significant use of Zhixin Chain has been to utilize blockchain to replace conventional ink seals or corporate stamps for document authentication.
- In December, JD.com introduced its own Lingxi (灵稀) platform, which runs on the Zhizhen Network, a consortium chain it owns.
- In April, Baidu, China's search engine and autonomous driving behemoth, unveiled a Space Day-themed collection on its Xuperchain consortium.
Going abroad
- Bilibili, a famous user-generated video streaming service in China, said this week that it will release a collection of 10,000 unique profile photographs through its third-party partner CryptoNatty, a Singapore-based startup. CryptoNatty, which will mint the graphical avatars on Ethereum, has "licensed" the company's intellectual property. Given that the majority of Bilibili's users are in China, it's unclear how the two companies would split the money or who the target audience will be. Bilibili has been contacted for additional information.
- Huawei tweeted about the Caked Ape collection this week, causing the NFT's floor price to skyrocket. The cryptically written tweet makes no mention of the Chinese telecom's behemoth's relationship with Caked Apes.
Design brief: make something that says “we’re hip and trendy, but understand how you feel”
— Huawei (@Huawei) May 2, 2022
Designer: pic.twitter.com/zut2KbQHVu
In October, TikTok, a short video platform owned by ByteDance, released its first NFT collection on Ethereum, featuring Detroit rapper Curtis Roach. The company's venture has been dubbed "underdelivering" since it allegedly failed to deliver on pledges to work with well-known musicians such as Lil Nas X and Grimes.
Cai Wensheng, the inventor of the Chinese selfie app Meitu, is the country's most prominent crypto bull. He was not only an early bitcoin investor, but he also decided that Meitu may acquire up to $100 million worth of cryptocurrencies. In March 2021, Meitu purchased the first tranche of bitcoins and ethers for a total of $40 million.