China banned cryptocurrencies, but it’s going all in on NFTs
Last year, China’s government banned cryptocurrency trading and mining in one of the world’s most intense crackdowns. But China’s government is pursuing other uses of blockchain technology and non-fungible tokens (NFTs)—as long as the technology stays under its control.
This month, the Blockchain Services Network, a Chinese state-backed blockchain company, plans to roll out infrastructure that would allow individuals and businesses in China to make, sell, and buy NFTs.
He Yifan, chief executive of Red Date Technology, a company that provides technical support to BSN, announced the news to the South China Morning Post and explained that NFTs “have no legal issues in China” as long as they are not connected to cryptocurrencies like Bitcoin that are banned in China.
He also said that China blocks all public blockchains like Ethereum, which is used as a public ledger to support and track NFT trading. Instead, the BSN network will use adapted blockchains from Ethereum and nine other platforms that meet regulatory requirements in China, such as ensuring that all users verify their identities and allowing the state to intervene in case “illegal activities” take place.
BSN will also allow users to buy NFTs using only Chinese yuan instead of the cryptocurrencies commonly used to trade NFTs outside China.
Until now, China’s NFT industry has appeared to operate in a legal gray zone.
In June, Chinese e-commerce giant Alibaba launched a collection of 16,000 NFT artworks that sold out within minutes via its Alipay mobile payments app. At the time, it was careful to draw the distinction between NFTs and cryptocurrencies.
An “NFT is not interchangeable, nor divisible, making it different by nature from cryptocurrencies such as Bitcoin,” a spokesperson at AntChain, a blockchain subsidiary under Ant Group, an affiliate of Alibaba, said at the time.
In following months, Alibaba—along other tech giants like social media company Tencent, video streaming site Bilibili, and e-commerce firm JD.com—rebranded NFT offerings as “digital collectibles,” a move that experts interpreted as efforts to avoid regulatory scrutiny.
In December, China’s government showed signs of warming to NFTs, with state-owned newswire Xinhua launching its own NFT collection.
Still, China’s largest tech companies have not been able to capitalize on surging NFT interest. In China, companies are barred from taking profits on NFT sales, and users who buy them are currently not allowed to resell them.
According to He, BSN will solve at least one of the major problems with Chinese NFTs: They are currently hosted by private companies that do not interact with one another. BSN, he says, will operate across multiple chains in China to form the nation’s largest NFT marketplace.
“NFTs in China will see annual output in the billions in the future,” He told the SCMP.
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