In mid-April, a group of industry associations in China issued a warning about the potential financial risks of non-fungible tokens, digital assets that represent real-world objects or intangible goods like a song. NFTs should not be traded with cryptocurrencies, the country’s banking, internet finance and securities associations have said, and they should not be used to create securitized products.
Although industry associations have no regulatory power, they nevertheless influence decision makers and are taken seriously by them. Many in the crypto industry see this statement as a death knell for the development of NFTs in China. Curiously, however, Chinese tech giants are showing increasing interest – or some would say, FOMO – in space.
Since crypto trading is banned in China, NFTs exist in a restricted way in the country. Rather than NFTs, tech companies refer to them as “digital collectibles” to distance their initiatives from the financial and speculative nature of many NFTs, emphasizing the function of technology to prove ownership and authenticity. Thus, many objects minted in China are works of art such as an ancient Chinese Buddhist statue or an object conveying historical or cultural significance, such as a famous Chinese spacecraft.
As the financial associations said in the statement, the value of NFTs lies in their potential to promote the growth of the creative and cultural industry.
Unlike NFTs which are minted on Ethereum or other public chains and traded with crypto on open markets, digital collectibles issued in China are minted on licensed blockchains run by local tech giants and often sold through the companies’ own channels. Users should first verify their true identity on these platforms before buying the collectibles using China’s fiat currency, the yuan, and they are prohibited from reselling the works on secondary markets.
The regulations mean that digital collectibles in China are separate from the global NFT market and are extremely illiquid. Some platforms allow owners to sell their assets, but only for free and a few months after purchase.
Still, Chinese tech giants have been rushing to release digital collectibles and some have even ventured across the border to sell NFTs overseas. Below, we’ve summarized some of the key players in the space to date:
- Whaletalk (鲸探) is the flagship digital collection service created by Ant Group, the fintech subsidiary of Alibaba, in mid-2021. 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 collection service on its app, which is a comprehensive platform for Chinese users to order on-demand services and now to also purchase food-themed digital collectibles.
- 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 for 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 self-driving giant, released a Space Day-themed collection on its Xuperchain consortium in April.
To go abroad
Some Chinese tech giants have taken their NFT ambitions overseas – or at least are showing keen interest.
- This week, Bilibili, a popular user-generated video streaming site in China, announced that it is releasing a collection of 10,000 unique profile pictures through its third-party partner. CryptoNatty, a newly incorporated company in Singapore. The company has “licensed” its intellectual property to CryptoNatty, which will mint the artwork avatars on Ethereum. It’s unclear how the two parties split the revenue or who the target audience is, given that most of Bilibili’s users are in China. We contacted Bilibili for more details.
- This week, Huawei tweeted about the Caked Ape collection, causing the floor price of the NFT to skyrocket. The vaguely worded tweet does not indicate what connection the Chinese telecommunications giant has with Caked Apes.
- TikTok, the short video giant owned by ByteDance, distributed its first NFT collection on Ethereum in October featuring Detroit rapper Curtis Roach. The company’s effort was described as “underdelivery” as it reportedly failed to deliver on its promises to work with big-name artists like Lil Nas X and Grimes.
- Cai Wensheng, the founder of Chinese selfie app Meitu, is probably the biggest crypto bull in the Chinese tech industry. Not only was he an early investor in bitcoin, but he also made the decision for Meitu to own up to $100 million worth of cryptocurrency. Meitu bought the first tranche of bitcoins and ethers for a total of $40 million in March 2021.