Mar 2022

Platforms and purchasers walk a fine line with “collectibles” in Mainland China

NFT legal update

While there are still no NFT-specific regulations enacted in mainland China, Chinese tech companies have been treading carefully.  Following the change in descriptions of NFTs to “digital collectibles”, Tencent and Alibaba have recently taken some pre-emptive measures to further disassociate themselves from risks of NFT trading.

Alibaba’s platform Jingtan said that it would “alert the police and handover [details] to the judicial authorities” if users are found to be organizing transactions outside the platform in ways that constitute criminal activities.  Buyers who use specialised software to snatch up digital collectibles during sales, or those who engage in money laundering and fraudulent activities, will also be reported to authorities.[1]  The platform, as launched by Ant Group, has also increased its penalty for using an over-the-counter (OTC) desk for trading NFTs.[2]

Tencent’s WeChat has over the past few weeks removed several mini programs offering digital collectibles, citing violations of platform rules on operation as a reason.[3]  It was also reported that WeChat justified the ban by saying digital collectibles were among mini program service categories that had yet to be “opened up”.[4]

As discussed in our previous article NFT Legal Update: Hong Kong and PRC, there has been various crackdown on cryptocurrencies in China in the recent years.  State agencies and financial regulators have issued notices banning cryptocurrencies.  Despite a clear anti-cryptocurrency stance from the PRC government, NFTs remain in a grey area.

Currently, mainland citizens have to register with their real names when purchasing NFTs and they could only do so with Chinese yuan but not cryptocurrency.  Tokens also could not be resold on mainland NFT platforms, including Alibaba’s Jingtan and Tencent’s Huanhe.  In February, Alibaba’s Jingtan penalised at least 56 accounts for participating in the resale of digital collectibles, which is against platform policy.[5]

 

Written by: Associate, Karen Choi and Trainee Solicitor, Dorothy Fung

 

[1] https://www.scmp.com/tech/big-tech/article/3171414/tencent-alibaba-tighten-platform-rules-digital-collectibles-nfts

[2] https://cointelegraph.com/news/chinese-internet-giants-remove-nft-platforms-fearing-gov-t-crackdown

[3] https://bitcoinist.com/chinese-wechat-remove-nfts-due-to-regulatory-issues/

[4] Supra note 1.

[5] https://finance.yahoo.com/news/ant-group-nft-arm-punishes-081628518.html

Written by:

Karen Choi

Associate

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