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China to Launch State-Backed, Crypto-Less NFT Platform—Here's Why It Matters
China has famously come out against cryptocurrency time and again over the years, ramping up its efforts last year as it cracked down on Bitcoin mining. But what about NFTs? A new report out of the country now suggests that China will debut its own state-backed platform for launching such tokenized digital collectibles—with no crypto allowed.
The South China Morning Post reports this week that the state-backed Blockchain Services Network (BSN) is readying permissioned, non-public blockchain infrastructure that will enable the release of NFT-style collectibles under the watchful eye of the government.
According to the report, the platform will not be interoperable with NFTs created on public blockchain networks such as Ethereum and Solana, and will not accept cryptocurrency payments. Instead, the private network will exclusively accept the Chinese yuan to pay for collectibles and platform fees.
BSN will use the term Distributed Digital Certificate (DDC) to refer to its unique brand of state-backed NFTs, per the report, with the platform due to launch at the end of this month.
He Yifan, CEO of Red Date Technology—which is one of the technology firms behind the BSN—told the publication that such collectibles “have no legal issue in China” so long as they are not associated with cryptocurrencies. He added that public blockchains “are illegal” in China, due to government regulations.Crypto Prices Are Down While the NFT Market Remains Red Hot. Here’s Why
The BSN has previously created specially permissioned versions of existing blockchain networks for corporate use, and will integrate 10 of them in its NFT platform—including versions of Ethereum and Corda, per the report.
The firm has reportedly enlisted 20 partners for the upcoming launch, including blockchain network Cosmos, cloud invoicing provider Baiwang, and broadcasting solutions firm Sumavision.
An NFT acts like a deed of ownership for a digital item, such as an image, video clip, video game item, and more. The NFT market generated $23 billion in trading volume over the course of 2021, according to data from DappRadar, up dramatically from $100 million in 2020.Why it matters
Given the Chinese government’s stance on cryptocurrency, it’s no surprise that companies in the country have played it safe on NFTs thus far. In a separate report this week, the South China Morning Post wrote that amid rising demand for NFTs in China, companies have taken to calling them “digital collectibles” and are largely avoiding the NFT branding.
Furthermore, companies selling tokenized digital collectibles cannot allow them to be resold, due to government fears of speculation and money laundering. Even so, companies like Alibaba, Tencent, Bilibili, and JD.com have launched their own digital collectibles.
The government’s reported plan to keep the NFT market under its watchful eye via the use of permissioned blockchain technology rings true, given its stance on cryptocurrency. With this approach, it still provides citizens access to digital assets that they can own and use, but it apparently avoids the speculative frenzy that has erupted around true NFTs.
However, one of the big selling points of NFTs is that they aren’t controlled by a centralized entity. They can be freely bought and sold in a permissionless way, and they are also potentially interoperable, making them usable across platforms and online worlds—a key selling point as the impending metaverse takes shape.Chinese Investment Is Pouring Into the Metaverse
In China, if the BSN’s framework for DDC collectibles takes hold, users may not have the same rights and capabilities. And like other tech and entertainment industries in China, particularly the video game and film markets, China’s strict oversight may limit what citizens have access to and shut out much of the wider world from its sizable potential user base.
It could also limit the potential for the NFT industry to truly go global, and tap into China’s 1.4 billion citizens. Likewise, it may stymie the potential for an open, interoperable, NFT-driven metaverse to fully connect the world’s people.
Chinese firms are pouring investment into the metaverse, despite warnings from state-owned media. However, the government’s stance towards NFTs could ultimately inform its view towards the metaverse to come—and generate another walled garden as a result.
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