The future of non-fungible tokens is gaining clarity in China as the country’s tech giants come together to set standards for the emerging industry.
The China Cultural Industry Association, together with Tencent, Ant Group, Baidu and others, jointly issued a ‘self-disciplined development proposal’ for the ‘digital collectibles’, a new name for NFT in China to take away the financial aspects of the technology.
While industry associations do not have regulatory authority, they can be instrumental in developing standards and best practices within an industry. The China Cultural Industry Association was established with the approval of the State Council and counts Alibaba and Tencent among its members, according to information about its website†
China’s NFT enthusiasts are watching regulation from the top. After China banned cryptocurrency trading, speculation was that NFTs in their purest form — traded freely and anonymously with cryptocurrencies on global, public blockchains — would not be allowed in the country.
That seems to be the case. In April, Chinese financial associations proposed that NFTs should not be used for securitization or transactions in cryptocurrencies.
China’s NFT industry could be one step closer to regulation, with the country’s largest platform operators taking a stance. Digital collection platforms must, under the proposal of Tencent, Ant Group and others, have relevant legal permits, ensure the security of underlying blockchain technologies, enforce users’ genuine identity checks, step up protection of intellectual property, firmly prohibit financial speculation, and promote rational consumption among users.
Tech companies in China tested the waters before NFT regulations came into effect. Giants from Tencent, Ant Group to Baidu have all launched their digital collectible marketplaces built on private, consortium chains. Users can only make purchases with the Chinese fiat currency RMB, and secondary trading has been widely banned to avoid price inflation.
One company decided to take its ambition beyond China to explore the full scope of NFTs. In April, Bilibili, China’s largest user-generated video streaming site, commissioned a Singapore-based company to: launch an Ethereum-based NFT collection inspired by the site’s brand assets.