Tencent, Ant Group, Baidu, JD.com, and several other leading Chinese tech companies last week issued a “self-disciplined development proposal” for the “digital collectible industry” that would introduce real-name authentication for users that issue, buy, and sell non-fungible tokens (NFTs), according to a South China Morning Post report.
According to a statement by the China Cultural Industry Association, the signatories of the agreement also acknowledged and reaffirmed the existing regulation which bans the use of cryptocurrencies, stressing that platforms offering digital collectibles—the term used in mainland China to describe NFTs—can “only support legal tender as the denomination and settlement currency.”
Digital collectible platforms should also hold relevant regulatory certifications, ensure the security of underlying blockchain technologies, and bolster intellectual property protection.
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Although the document doesn’t mention the resale of NFTs, the initiative pledges to avoid setting up secondary marketplaces for NFT trading and “firmly resist speculation.”
“Different from most foreign platforms that apply NFT technology as financial products, domestic digital collections are more regarded as the category of digital cultural creativity,” the China Cultural Industry Association said.
China and NFTs
The latest initiative for China’s NFT space originates from private companies and as such is not legally binding; however, it could still mark an important step toward more regulatory clarity. State agencies responsible for developing industry standards may take the proposals into consideration.
Last year, Chinese authorities cracked down on crypto businesses in the country, not only banning crypto transactions, but also forcing many Bitcoin mining operators to move abroad.
The crackdown, however, was not extended on the NFT space, with China’s state-backed Blockchain Services Network announcing in January the creation of its own platform for launching tokenized digital collectibles—albeit running on permissioned, non-public blockchain infrastructure with no crypto transactions allowed.
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Tech giants including Tencent, Ant Group, and Baidu, have also launched their digital collectible marketplaces built on private chains that allow purchases with the Chinese yuan only and prohibit secondary trading.
In April, the National Internet Finance Association of China, China Banking Association and the Securities Association of China issued guidelines prohibiting the use of NFTs in the issuance of securities, insurance, and loans, while also preventing the country’s financial institutions from facilitating NFT trading and investments.
