China reinvents the NFT market with a big twist that cryptocurrencies may not like: State control

The legislative and technological mechanism known as the Great Firewall has for decades regulated almost every facet of digital life in China. But while its role has traditionally been to control the Internet domestically, the Chinese state is now taking further steps to curb the influence of international blockchains and crypto, which have a major impact on NFT marketplaces with ambitions to expand eastward.

With cryptocurrencies and traditional NFTs backed by tokens such as Ethereum banned in China, the country offers certain services that, while able to lead to more censorship and control, can provide access for those willing to comply with compliance and applicable regulations. and paves the way. for content producers to find new and lucrative avenues for artists and designers.

China’s Blockchain-based Service Network (BSN), a state-sponsored blockchain network, has so far served as the main tool for users looking for digital services that comply with legal requirements. BSN was initiated by the State Information Center with major state-subsidized companies such as Red Date (a Chinese fintech company founded in 2014, headquartered in Hong Kong), China Mobile (the country’s largest provider of telecom services) and China UnionPay (one of the country’s largest providers of financial services). The goal is to help promote blockchain technologies to non-crypto industries and build a global infrastructure for that purpose.

In addition, China has also switched to the digital yuan, which from January 2022 will be used by one in five Chinese nationals, according to the People’s Bank of China.

This new ecosystem paves the way for what are known as BSN-distributed digital certificates (BSN-DDC) – “mainly China’s version of NFTs,” according to Jehan Chua former Sotheby’s specialist whose blockchain, VC Kenetic, invested in Red Date.

“While most decentralized entities in China are limited, DDCs are related to a multi-chain environment, in full compliance with Chinese law,” Chu said.

Since its launch on January 24, 2022, the BSN-DDC network has integrated a number of open permitted blockchains, which are “forked” (mainly the process of moving from popular public chains) to the DDC network. These include Ethereum, Cosmos and EOS. These offer blockchain versions that place restrictions on who can control the technology so that they can identify all participants in accordance with Chinese law.

The BSN-DDC initiative has the potential to showcase not only digital art, but also for other applications. Outside China, NFTs are already being used by companies such as watchmaker Breitling, which distributes them as luxury passports proving authenticity.

Many in China’s large technological ecosystem are also involved. Companies such as Alibaba, Tencent and JD have built their own platforms differently from the BSN-DDC network, but equally in the sense that they offer NFTs and digital assets to the Chinese marketplace in accordance with Chinese law. Some of these prohibit users from reversing or reselling their purchases on the secondary market, and curbing the widespread speculation that has plagued many NFT platforms in the West.

One of the major players in this arena is Ant Groups JingTan (Topnod), a platform that prevents users from reselling digital collectibles, giving users the opportunity to give them as a gift after holding them for more than 180 days.

Topnod works with national museums in China to produce digital twins of historical relics, while working with painters, embroidery artists and other artisans in the cultural industry. They recently collaborated with the Shanghai Symphony Orchestra on a digital artifact of 10,000 sound collectors’ objects from the earliest symphony phonography ever recorded in China, priced at RMB 19.9 (approximately $ 3.15).

Tencent’s digital platform, Huanhe, is also creating waves in the country, known as the more diverse alternative of all platforms. It also works with museums, but also artists, car brands, consumer products and charities.

For example, earlier this year, Huanhe offered digital twins from the Dunhuang Caves for RMB 118 apiece ($ 18). All digital works purchased or otherwise received from Huanhe can be viewed in a virtual 3D gallery, but Huanhe also prevents trading on the secondary market. (Earlier this year, Huanhe became involved in a copyright dispute after a series of digital ink drawings based on works of art by Xu Beihong, a well-known Chinese painter, were published on the website.)

NFTCN is another marketplace that is gaining ground in China. Perhaps closest to OpenSea, NFTCN is open to independent artists who want to sell and collect NFTs. It has a built-in gallery that allows users to exhibit their collections supported by a side chain of Ethereum, and is one of the few platforms in China that allows trading on the secondary market.

All in all, Chu said the impact of BSN-DDCs on the Chinese art market could be significant, but warned foreign companies entering the market to be wary of China’s notoriously strict censorship laws.

“The potential for BSN-DDCs in China cannot be overstated,” he said. “It is not a single-chain environment, but a multi-chain environment with a very robust system of interoperable, allowed applications. This is obviously very controversial for the international crypto community, because it involves censorship. But it is the reality of the framework that exists when working in China. »

Follow Artnet News on Facebook:


Do you want to be at the forefront of the art world? Subscribe to our newsletter to get the latest news, eye-opening interviews and sharp reviews that drive the conversation forward.