context: NFTs (non-fungible tokens) became popular in 2021. Chinese enterprises like Alipay have also started to get involved in relevant business. On 8 Jul 2022, the Shanghai government released a plan for developing the Metaverse industry. Although the plan did not mention NFTs, it mentioned starting a ‘digital property’ trading bloc at the Shanghai Data Exchange and pledged to improve the formulation of standards and regulations on digital property and digital collection trading.
An NFT trading platform is now encouraged by the Shanghai government in its newly issued ‘Shanghai 14th 5-year plan on the digital economy’. The plan aims to build Shanghai as a globally renowned digital economy city and encourages
- launching pilots of NFT trading platforms
- promoting the digitisation of assets
- the global circulation of digital IP
- digital rights protection
- developing business models such as NFT
- accelerating the exploration of digital transformation and digital technology applications in the fields of virtual digital assets, artworks, intellectual property and games
Caixin stated this is one of the earliest official documents that encourage NFTs in China. However, NFTs remain contentious. In 2022, several associations like China Internet Association and China Bank Association jointly issued an opinion to warn of potential risks from NFT such as money laundering and other illegal financial activities.
For avoiding risks, Chinese enterprises and organisations often use ‘digital collection’ for NFTs. Guosheng Securities Research Report believes that NFTs and cryptocurrencies are not the same. The development model of domestic NFTs will be de-tokenized. By changing the name to ‘digital collections’, it will focus on the application of NFT digital property rights certification in the fields of copyright protection and asset confirmation. Caixin advises that there is a need to establish rules for the issuance, sale and circulation of digital collections. (CP note: any form of cryptocurrency is illegal in China, but cryptocurrencies might be issued under the name of NFTs to avoid government regulation.)