For fear of sanctions from the government and ambiguity regarding regulations for the trading of Non-Fungible Tokens (NFTs), leading tech, social media platforms and internet giants in China have revised their user policies to either restrict or eliminate NFT platforms.
WeChat, a Chinese multi-purpose app, reportedly removed several accounts of digital collectibles platforms for what it called a violation of rules. Xihu No. 1, a famous NFT project in the marketplace is among the accounts. Dongyiyuandian, another platform in a report by a local news source disclosed that its official app has been banned.
WhaleTalk, a digital collectibles platform owned by a leading Chinese fintech firm, Ant Group similarly reviewed its user agreement to include tougher punishment for users of over-the-counter desks for trading NFTs.
The rise in the number of illegal trades and bot purchases related to NFTs have necessitated the measures by the tech giant to avoid being axed by regulatory authorities.
In September 2021, China, through its central bank, People’s Bank of China (PBOC) declared all cryptocurrency-related transactions illegal. The apex bank cited the threat cryptocurrency poses to the nation’s financial system owing to its volatile and speculative nature and its contribution towards financing crime and terror, capital flight amongst others as reasons for the ban.
As a result of the ban on cryptocurrency, NFTs are operated differently in China compared to other climes. The Ethereum blockchain where NFT artwork like the Bored Ape is minted is altogether abandoned and replaced with state-approved semi-private blockchain infrastructures developed by indigenous technology companies, Tencent and Alibaba.
NFTs assets were also renamed “digital collectibles” while NFT buyers use Yuan as opposed to cryptocurrency in a bid to separate NFTs from cryptocurrency to avoid attracting the attention of the regulations.
Though the Chinese government is hard on cryptocurrency, there is no such stance on NFTs which is why the likes of Tencent and Alibaba filed for many NFT trademarks in 2021.
Digital collectibles are a unique or limited edition of a virtual item. Even though NFTs are not necessarily forbidden, all forms of unpredictable trading linked with digital collectibles derived tokens are prohibited in China. Nonetheless, digital collectibles are also vulnerable to speculations and fraud due to their rising popularity.