In mid-April, a group of industry associations in China issued a warning against the potential financial risks of non-fungible tokens. According to the association this include digital assets that represent real-world objects or intangible goods like a song. Chinese banking, internet finance and securities associations, warned its citizens not to trade NFTs with cryptocurrencies, and not use them to create securitized products.
policymakers take the industry associations seriously although they lack regulatory powers. Many in the crypto industry see the pronouncement as a death knell for NFTs’ development in China. Curiously, though, China’s tech giants are showing a growing interest — or some would say, FOMO — in the space.
Chinese companies launch NFTs disguised as “digital collectibles”
The government’s ban on crypto makes NFTs exist in quite a constrained way. So, rather than NFTs, tech companies call them “digital collectibles”. The purpose of this is to distance their initiatives from the financial and speculative nature of many NFTs. And also emphasize the use case’s function in proving ownership and authenticity. As such, many of the objects being minted in China are artworks like an ancient Chinese Buddhist statue or an object conveying historic or cultural significance, like a famous Chinese spaceship.
As the financial associations said in the statement. The value of NFTs is in their potential to promote the growth of the creative and cultural industry.
Chinese local tech giants mints these digital collectibles on permissioned blockchains managed by local tech giants and often sold on these companies’ own channels. Rather than as NFTs minted on Ethereum or other public chains and traded with crypto on open marketplaces. Users verify their real identities on the platform before buying the collectibles using China’s fiat currency yuan. The law prohibits the users from reselling the works on secondary markets.
Regulations mean that digital collectibles in China are separate from the global NFT market and are extremely illiquid. Some of the platforms let owners give away their assets, but only for free and after a few months of the purchase.
Still, Chinese tech giants have rushed to release digital collectibles and some have even ventured beyond the border to sell NFTs overseas. Below we have summarized some of the major players in the space to date:
Chinese Giants Foray into NFT Despite Crypto Ban
Ant Group, Alibaba’s fintech affiliate created Whaletalk (鲸探) a flagship digital collectible service, in mid-2021. The artworks are minted on AntChain. A distributed ledger that requires permission to join (also called a consortium/alliance chain). And is jointly managed by Ant and its institutional partners.
- In April, Alibaba’s food delivery service Ele.me introduced a digital collectible service on its app, which is an all-encompassing platform for Chinese users to order on-demand services, and now, buy food-themed digital collectibles as well.
Last August, Tencent launched Magic Core (幻核) on Zhixin Chain, a consortium chain built by Tencent and its partners. The most notable use case of Zhixin Chain has been to replace physical ink seals, or corporate stamps to authenticate documents, using blockchain.
- Online retail giant JD.com unveiled its own Lingxi (灵稀) platform that runs on Zhizhen Chain, a consortium chain it operates, in December.
- Baidu, the country’s search engine and autonomous driving giant, released a Space Day-themed collection on its consortium Xuperchain in April.