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Is China’s fear of banning NFTs a positive indication for investors?

China’s contradictory signals about its local NFT business have investors perplexed about the market’s future prospects.

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#nft #nfts #china

It’s no secret that China despises all things crypto, as seen by its decision to prohibit the entire digital asset market outright last year. Despite the restriction, one segment of the crypto sector has thrived in the region: the nonfungible token (NFT) market. However, this may not remain the case for much longer with recent bad developments.

Many local social media platforms and internet companies have continued to amend their policies to restrict and, in some cases, altogether remove NFT sites from their networks, citing a lack of regulatory clarity but, more crucially, fearing a government crackdown on their daily operations.

For example, WeChat, a Chinese instant messaging and social media service with over 1 billion active users, recently removed Xihu No.1, one of China’s most popular NFT ecosystems, from its platform, citing a violation of its active rules of service. Other projects, notably Dongyiyuandian, were targeted in the same way.

In a similar line, in a recent policy update, the Ant Group-backed WhaleTalk, a collectable digital platform, doubled the penalty for persons using its over-the-counter desk for the purpose of NFT trading.

In China, ambiguity reigns supreme when it comes to NFTs

While the usage of cryptocurrencies is prohibited throughout mainland China, the Xi Jinping dictatorship has shown no intention of prohibiting the use of NFTs until recently. The fact that Chinese commercial behemoths like Tencent and Alibaba have applied for multiple new NFT patents in the last year exemplifies this.

However, like with any growing market, the increased popularity of digital collectibles in China has led to severe price speculation and consumer fraud incidents. To date, the rise in unlawful transactions and bot purchases associated with NFT platforms has prompted numerous digital behemoths to take preventative steps that are likely in their best interests.

In fact, numerous local firms continued assisting crypto transactions after China’s blanket crypto ban was announced last September. As a result, WeChat and WhaleTalk’s actions appear to be legitimate, especially given that they are most likely attempting to escape any regulatory attention from the Chinese government.

Finally, while NFTs are not necessarily outlawed in China, its residents are prohibited from engaging in any type of speculative trading involving digital collectible-derived tokens, putting NFT issuers and owners in a difficult position.

Experts weigh in

Tencent and Ant Group’s shift in policy on how their users interact with NFTs is not surprising, according to Philip Gunwhy, partner and brand strategist for prominent NFT platform Blockasset.co, who added: “In order to gain a competitive advantage within the confines of China’s existing legislative framework, tech giants must reposition their platforms.”

“The government has not yet made NFT trading illegal, as the laws are still being ironed out. Even if Chinese authorities do eventually restrict NFTs, innovators and investors would benefit because it took nearly a decade for the government to finally outlaw Bitcoin mining and crypto transactions on its soil. The NFT market is constantly expanding, and patent filings from big internet businesses in China should be regarded seriously.”

The fact that the government has not restricted interaction with NFTs, despite their current popularity, shows that the approach taken with cryptocurrencies may be significantly different, according to Gunwhy. “In any event, Chinese officials are keeping a careful eye on the progress of NFTs,” he stated.

While the Chinese government is hostile to digital currencies, Haris Sevinç, chief technology officer of The Unfettered — a blockchain game based on NFT and metaverse concepts — believes that the country’s obsession with blockchain technology has allowed investors to continue to harness the power of non-crypto technologies like NFTs.

He believes that large internet businesses’ actions to change their rules are purely motivated by a desire to avoid regulatory action because defying the government will almost certainly result in a fine or a ban. Sevinç continued:

“Because the NFT ecosystem is still in its early stages, most regulators are only warming up to this idea and trying to assess its prospects. If authorities implement a positive form of regulation in the NFT space, these tech giants [Tencent and Alibaba] will be among the pioneers of the future of Web3 in China. In that case, the patent bets will keep coming in.”

In China, the future of NFTs could be shattered

According to Ben Caselin, head of research and strategy at crypto exchange AAX, “NFTs are relatively tolerated in China” at the moment and are being classified and sold as digital collectibles. “These are issued on more restrictive hybrid or permission blockchains,” he explained, “which preclude holders from speculating on secondary markets.”

While these domestic markets may prosper for a time, permission NFTs, in Caselin’s opinion, lack many key features or advantages, such as ownership, and hence do not profit from the same dynamics as mainstream NFTs.

When it comes to the Chinese market, Jake Fraser, head of business development at Mogul Productions, a decentralized film funding and movie-based NFT platform, believes there are still plenty of opportunities:

“There will always be regulatory changes and firms revising their practices, but innovation will continue to happen.” Gamification is one area of their NFT industry that is gaining traction. It’ll be interesting to see how this plays out in different scenarios.”

Finally, Fraser stated that trading NFTs is still a fresh concept around the world and that no countries have implemented real rules to date. Although like with initial coin offerings, he believes law is unavoidable, he believes the advances will be “quite positive for the sector” as long as innovation is not impeded.

Not everyone is in agreement

Despite Caselin’s claims that NFTs are on a short leash in China, Vijay Pravin Maharajan, the founder and CEO of bitsCrunch, an NFT-focused analytics firm, told Cointelegraph that the list of NFTs being transacted in yuan continues to grow, and that the Chinese government will soon accept the asset class.

“The market is feasible because of the strict laws and agreements that have been formed surrounding NFTs and digital collectibles. The Chinese government is working to make NFTs as safe and regulated as possible. There’s no doubting that [China] is a pioneer in the field of blockchain technology. As a result, we may soon see a glimpse of Web 3.0 from them.”

According to Maharajan, China is embracing NFTs by making its infrastructure “independent of cryptocurrencies,” contrary to popular belief. He argues that disrupting the existing NFT framework and adopting a new business model is acceptable because these services are unique and may be minted, distributed, and transacted in a variety of ways. “Even though it may appear to be a slow start,” he said, “we are seeing a positive trend with the acceptance of NFTs so far, regardless of crypto restrictions and their consequences.”

As we go into a future dominated by decentralized technologies like NFTs, it will be interesting to see how China, as a key financial mover and shaker, continues to evolve its digital worldview and regulate these assets.

NFT

According to Music Ally, Spotify has begun testing NFTs on its platform

If a trial deployment goes well, artists may soon be allowed to market their non-fungible tokens (NFTs) on Spotify, according to Music Ally.

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Spotify, the most recent tech business to join the NFT bandwagon, entered the web3 world earlier this month with the introduction of “Spotify Island” on Roblox on May 3. Spotify will now test NFTs on the platform to specifically selected US consumers, starting with a single trial selection of artists, including Steve Aoki and The Wombats.

Users will have to purchase NFTs through an external marketplace, thus they won’t be able to sell them directly. As part of the trial, Spotify has stated that it will not take a portion of the sales.

Simultaneously, customers have stated that Spotify is sending out surveys and even paying some people to talk to team members about their feelings regarding NFTs and web3. Questions concerning sentiment, cryptocurrency purchases, and why people acquired NFTs have been circulated on Twitter. Some poster responded with mockery to the queries.

Since March, when Spotify placed two job offers for working on early-stage web3 projects, rumors have circulated that the firm was interested in entering the web3. The announcement comes only days after Meta revealed that it would begin testing digital collectibles and NFTs on Instagram as well.

By the time of publication, Spotify had not responded to a request for comment from The Block.

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NFT

Square Enix intends to issue tokens and make a significant investment in Web3 gaming

By investing in blockchain gaming infrastructure, the big game producer is altering its business strategy to include a stronger NFT environment.

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Square Enix announced in its first-quarter results report that as part of its medium-term business strategy in 2022, it will include nonfungible tokens (NFTs) into more game goods.

According to Square Enix’s most recent earnings report, the company manages $3 billion in assets. The company controls the Final Fantasy franchise, which it sold for $300 million on May 3rd.

According to the report, the company began testing NFTs in February this year on the Shi-San-Sei Million Arthur game. If the pilot program is a success, the game’s NFTs will be renewed for a second season, and the company will expand its NFT and blockchain activities.

SE wants to provide regulatory clarity and norms for blockchain gaming, address scalability in NFT economies, and consider forming a corporate capital venture unit, among the top priorities of its blockchain domain projects.

The company also announced that it intends to create an overseas organization that will be responsible for “issue, administering, and investing our own tokens,” implying that the company will begin to build a large gaming-token economy.

SE has been exploring its options in the blockchain gaming market with the help of Web3 gaming and metaverse venture capital firm Animoca Brands. As SE digs deeper into the ecosystem, collaboration between the two companies is expected to deepen.

Square Enix’s gaming clout, according to Animoca’s executive chairman Yat Siu, will only help the company establish a blockchain gaming presence. On Monday, he said to Cointelegraph,

“Square Enix has long talked about the possibilities of blockchain games, so it understands it better than most of the traditional gaming titans.”

The third objective of the report’s medium-term business strategy is to invest in and monetize blockchain, artificial intelligence (AI), and cloud computing. This aligns with CEO Yosuke Matsuda’s stated desire in January to increase his company’s involvement in such technologies.

Despite a broad cryptocurrency market dip in 2022, the appeal of Web3 and NFT gaming has remained strong. On Saturday, according to market tracker DappRader, there were roughly one million daily active gamers, nearly the same as on January 1.

Gamers, on the other hand, aren’t spending as much as they used to, with total sales volume for NFT game items falling 88 percent from $70 on January 1 to $8.7 million on Saturday.

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NFT

Ukraine’s Ministry of Digital Transformation has approved a charity NFT initiative to aid military operations

On Thursday, Mykhailo Fedorov, Ukraine’s Vice Prime Minister and Minister of Digital Transformation, tweeted his support for Avatars for Ukraine, a non-fungible token (NFT) project that benefits Ukraine’s humanitarian and defense efforts.

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The project includes 70 digital artworks based on Ukrainian imagery and resistance to Russian forces that evolved as a result of the Russia-Ukraine war. All earnings from the sale of digital art go to support Ukrainian war efforts. The Ukrainian Ministry of Digital Transformation has approved Avatars for Ukraine, and the first NFT will be released on May 19.

This isn’t the first time Ukrainian officials have used blockchain technology to help fund war activities. The Ukrainian government opened a website in April this year where people could purchase and trade NFTs to support Ukraine’s military efforts, as well as raise over $100 million in crypto donations.

Avatars for Ukraine also joins a growing trend of NFT projects assisting in the donation of monies to charity, with some or all of the proceeds of NFT art going directly to the charity.

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