A Look into China's NFT Market

As a vital part of the transaction function within the metaverse, NFTs have caught everyone’s attention.

As a non-interchangeable unit of data stored on a blockchain, NFT can be sold and traded as a digital certificate. Different from Bitcoin or Ethereum, NFTs have characteristics of uniqueness, non-interchangeability and non-tampering. Therefore, collectors can obtain unique and exclusive items by purchasing NFTs. It is the scarcity of NFTs that makes them the "new stars" of the Internet on a global scale, including China.

So far, NFT China is the only domestic trading platform within China that uses Ethereum, and the first domestic trading platform that adopts a decentralized storage solution. The platform includes a “Bigverse” which covers various businesses such as NFT artist studios, metaverse NFT auction houses and metaverse NFT galleries. According to a report by Wangyi, the platform has attracted more than 800,000 registered users, 80,000 artists and 400,000 NFT digital work in less than a year. The report shows by August 2021, NFT China has recorded a transaction volume of $3.416 million.

Major Chinese companies have also joined the NFT market, including big tech, art auction houses, blockchain startups and retail companies. In June 2021, Alipay introduced 16,000 limited-edition NFTs as QR code backgrounds. The artworks were based on two pieces of ancient paintings from the Mogao Caves and were sold out within seconds of launch.

In August 2021, China’s largest social media and gaming company Tencent developed an NFT purchase and collection trading platform called Huanhe. According to Sina Finance, the platform has sold over hundreds of audio and artwork NFTs.

Rui Tian is an illustrator and a graduate student at the University of Hong Kong. He started to look into the concept and future development trend of NFTs in 2021.

"I came across overseas reports about NFTs first, and I was just curious at first. After a few months, I began to dive into the market," Tian told The Org. After consulting with his teachers, Tian believed that NFT has an important role to promote copyright protection and introduce a new digital form of contemporary art.

He registered on the domestic digital collection trading platforms including Ali Auction and NFTCN, and became a contract artist of Ali Auction's latest section, called Digital Auction.

Last October, Tian Rui's original hand-painted first batch of NFT works, the "Elf Star Language" series, was launched on Ali's Digital Auction section. So far, he has released four batches of about 60 original NFT paintings on Ali Auction. All of these encrypted digital artworks have been successfully auctioned, and more than half of the works on NFTCN have also been sold.

The future of China’s NFT market

Although overseas NFTs are rapidly extending to various fields, creators are still exploring the path of NFT development in China due to restrictions of domestic laws and regulations.

Even though China has a strict approach to cryptocurrency that fully banned crypto trading and mining last year, the country has also introduced a relatively conservative version of blockchain technology, such as the digital yuan. So far, China has allowed NFTs but banned people from reselling or trading them.

In September 2021, the People's Bank of China issued an edict called "Notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation," emphasizing the nature of virtual currency and the illegality of transactions. As a result, instead of the term NFT, most Chinese tech giants use the term “digital collectible” as a workaround to follow the regulation and avoid association with the global crypto market.

In addition, the rights of domestic NFT collectors are also subject to certain restrictions. The platforms do not sell the ownership of works, so most encrypted digital products are traded in the name of digital collections. And overseas NFT buyers can get the ownership and intellectual property rights of the works.

Finally, the types of NFT products launched in China are also relatively similar. monotonous. Overseas has already entered the era of "everything can be an NFT." But under the domestic operation mode of "focusing on platforms and ignoring users," the encrypted digital products launched on mainstream trading platforms are concentrated in the fields of digital image art, digital music and digital trendy games.

Hongwei Liu, the Chief Researcher of Ebang International Research Institute, pointed out in a report that the biggest problem that NFT really needs to solve is not only the current application of digitizing works of art, but the transformation of the traditional concept of non-classification.

“Based on the differences between domestic and foreign NFT trading platforms in terms of blockchain technical support, product circulation and product types, Tencent and Ali's products cannot be regarded as standard NFTs,” Liu said. “You can understand that it is a limited edition based on a certain IP or author. These are just digital works circulated in a way similar to NFT."

Liu added that due to the provisions of relevant regulations in China, exclusive authorization is unavoidable due to security considerations and the need for supervision. Therefore, instead of focusing solely on NFT technology, people should also begin to discuss how to develop a new financial technology under the premise of compliance.

Experts predict that in order to develop encrypted digital tokens, there’s still a lot to work to be done regarding China’s domestic laws on NFTs.

“Taking the issue of copyright protection as an example, whether the same artwork can be uploaded to several blockchains, and whether the author’s rights are still protected after selling NFTs, these are the areas where laws need to be perfected a bit more," Liu said.

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