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China Hops Aboard NFT Bandwagon But With No Cryptocurrency Links

China is embracing NFTs but will not permit settlement or links to cryptocurrencies.

China Hops Aboard NFT Bandwagon But With No Cryptocurrency Links

Even the Chinese government is down with NFTs now. 

China’s state-backed Blockchain Service Network is planning to roll out infrastructure enabling the creation and launch of NFTs by the end of this month.

Yet with public blockchains and decentralized crypto assets prohibited in China, the country has largely sat out of the NFT boom. In a Medium post published on Jan. 17, BSN said that its NFT ecosystem will have no links to cryptocurrency and all transactions will be settled in Yuan.

“As cryptocurrency is banned in China, the payments […] are in fiat currency to comply with the Chinese regulation,” the post said.

Anti-Crypto Regulations

The BSN is a blockchain network backed by the Chinese government intended to allow local enterprises to harness DLT without risking running afoul of local anti-crypto regulations.

BSN was founded in 2020 by state-owned companies China Mobile China UnionPay;The State Information of China, government think tank; , and Red Date Technology, a Hong Kong-based tech firm. The network bills itself as “one-stop-shop solution for blockchain and distributed ledger technology (DLT) applications” for developers and businesses.

Public blockchains are currently illegal in China as the government requires all domestic internet systems to verify user identities and allow state intervention to prevent illegal  activities.

Google search volumes for ‘blockchain’, ‘ethereum’, ‘bitcoin’, and ‘NFT’ over past 12 months. Source: Google Trends.

China’s BSN plans to roll out technical infrastructure enabling “BSN-Distributed Digital Certificates” (BSN-DDC) to be created and launched on the network, according to the newspaper report. The news was first reported in the South China Morning Post on Jan. 13. 

The report describes BSN-DDC as “offering application programming interfaces for businesses or individuals so they can build their own user portals or apps to manage NFTs.” 

The NFT sector enjoyed rocketing popularity during 2021, with recent Google search traffic for “NFT” surpassing searches for “Ethereum,” “blockchain,” and other fundamental crypto keywords.  While the existing NFT industry is largely associated with speculative cartoon social media avatars and sporting collectibles, BSN appears to be keen to legitimize NFTs in mainstream commercial and government applications.

Growth Opportunity

He Yifan, the CEO of Red Date Technology, described “digital certificate management” as the largest growth opportunity for NFTs. Yifan cited vehicle license plates and educational qualifications among the certification schemes that stand to be revolutionized by nonfungible tokens.

He also told the South China Morning Post that NFTs are free from legal issues in China, provided that related transactions are settled using China’s local fiat currency, the Yuan. 

Leading Chinese enterprises have already begun exploring NFTs, with fintech conglomerate Ant Group, tech firm Baidu, e-commerce giant JD.com, and state-operated media outlet Xinhua News Agency all making forays into blockchain-powered “digital collectibles” in recent months.

In June, Ant Group issued a statement after its June NFT sales were called into question for potentially violating China’s crypto ban. “NFTs are not interchangeable, nor divisible, making them fundamentally different from cryptocurrencies such as bitcoin,” the firm said last year.

BSN noted seven different compliant NFT dapps that are currently operating on the network in a Jan. 17 blog post.

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