Tencent’s NFT platform officially halts sales amid regulatory scrutiny
Key insights:
- Huanhe will officially halt sales today as regulatory scrutiny of NFTs increases in China.
- Owners of existing collectibles will still be able to keep, display or request a refund for their possessions.
- Ant Group and Tencent signed an agreement in June as part of an industry initiative to stop secondary trading of digital collectibles.
Last month, rumors circulated about a possible shutdown of Tencent’s non-fungible token (NFT) platform Huanhe just a year after its launch.
Huanhe, which creates and distributes blockchain-based digital collectibles, will officially stop sales today as regulatory scrutiny of NFTs increases in China.
Slow sales
The one-year-old Huanhe platform has seen slow sales in recent months as Beijing’s ban on secondary markets for digital collectibles has largely affected its business. In fact, many of the limited releases remain unsold. Last month, the Tencent News app stopped sales of digital collectibles, and the relevant section was renamed “digital orders”, which only allows users to check previous purchase records.
Huanhe will no longer release digital collectibles to the public, but owners of existing collectibles will still be able to keep, display or request a refund for their possessions. The app will remain, but it will only allow existing customers to view, download and share NFTs that they already own. Users can still visit art exhibitions with augmented reality.
While permission-based blockchains are allowed under government oversight, secondary marketplaces like OpenSea are banned in China.
After the central government banned cryptocurrency trading last year, it was announced that all digital collectibles must be purchased with yuan, while resale for profit is completely prohibited. Still, companies such as Baidu and JD.com as well as the state-backed Xinhua news agency and the Communist Youth League have offered their own NFTs.
Secondary trade in digital collectibles
In June this year, Chinese tech giants Ant Group and Tencent signed an agreement as part of a self-driven industry initiative to stop secondary trading of digital collectibles. The agreement, while not legally binding, also promises identity checks for users and compliance with the country’s ban on cryptocurrencies.
The Digital Collectible Industry Self-Discipline Development Initiative, which has been backed by many of China’s biggest tech firms, including Baidu and JD.com, says platforms selling digital collectibles “shall require real-name authentication of issuers, sellers and buyers” with only legal tender backed “as denomination and settlement currency”.
In addition, a trio of financial bodies issued a series of guidelines earlier this year designed to control NFT use. More specifically, the China Banking Association, the China Internet Finance Association and the Securities Association of China published a joint statement warning the public about the risks of investing in NFTs.
These guidelines include a ban on using NFTs to issue financial assets such as securities, insurance, loans or precious metals, and the three organizations also said that pricing and settlement of NFT transactions should not include cryptocurrencies. Platforms must also perform real-name authentication and comply with anti-money laundering (AML) requirements.
