China’s tech giants are having FOMO on NFTs

A group of industry associations in China issued a warning against the financial risks of non-fungible token, digital assets that represent real-world objects or intangible goods like a song. The country's banking, internet finance, and securities associations said that NFTs must not be traded with cryptocurrencies.

The industry associations exert an influence on policymakers even though they don't have regulatory power. The death knell has been sounded for the development of NFTs in China. China's tech giants are showing a growing interest in the space.

NFTs exist in a constrained way in China because of the ban oncryptocurrencies. Tech companies call them "digital collectibles" to distance themselves from the financial and speculative nature of many NFTs. Many of the objects being made in China are works of art, like an ancient Chinese Buddhist statue or a famous Chinese spaceship.

The value of NFTs lies in their potential to promote the growth of the creative and cultural industry according to the financial associations.

Digital collectibles issued in China are often sold on their own channels, unlike NFTs that are traded on open marketplaces. Users would first have to verify their real identities on these platforms before buying collectibles using China's currency, the yuan.

Digital collectibles in China are not the same as the global NFT market. After a few months of purchase, some platforms allow owners to give away their assets for free.

Chinese tech giants have rushed to release digital collectibles and some have even ventured beyond the border to sell NFTs overseas. Some of the major players in the space have been summarized.

• Whaletalk (鲸探) is the flagship digital collectible service created by Ant Group, Alibaba’s fintech affiliate, in mid-2021. The artworks are minted on AntChain, a distributed ledger that needs permission to join (also called a consortium/alliance chain) and is jointly managed by Ant and its institutional partners.

There are pictures of the Whaletalk app.

• In April, Alibaba’s food delivery service Ele.me introduced a digital collectible service on its app, which is an all-encompassing platform for Chinese users to order on-demand services, and now, buy food-themed digital collectibles as well.
• Last August, Tencent launched Magic Core (幻核) on Zhixin Chain, a consortium chain built by Tencent and its partners. The most notable use case of Zhixin Chain has been to replace physical ink seals, or corporate stamps to authenticate documents, using blockchain.
• Online retail giant JD.com unveiled its own Lingxi (灵稀) platform that runs on Zhizhen Chain, a consortium chain it operates, in December.
• Baidu, the country’s search engine and autonomous driving giant, released a Space Day-themed collection on its consortium Xuperchain in April.

Going abroad

Some Chinese tech giants are showing a strong interest in taking their NFT ambitions overseas.

• This week, Bilibili, a popular user-generated video streaming site in China, said it’s releasing a collection of 10,000 unique profile pictures through its third-party partner CryptoNatty, a company that was recently incorporated in Singapore. The company has “licensed” its intellectual property to CryptoNatty, which will be minting the illustration avatars on Ethereum. It’s unclear how the two parties are sharing revenues or who the target audience is, given most of Bilibili’s users are in China. We’ve reached out to Bilibili for more details.
• This week, Huawei tweeted about the Caked Ape collection, sending the NFT’s floor price soaring. The vaguely worded tweet doesn’t indicate what connection the Chinese telecoms behemoth has with Caked Apes.