Tencent’s NFT Platform Officially Stops Sales Amid Regulatory Scrutiny
- Huanhe will officially stop sales today as regulatory scrutiny of NFTs increases in China.
- Owners of existing collectibles will still be able to hold, 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, rumours circulated of a possible shutdown of Tencent’s non-fungible token (NFT) platform Huanhe only a year after its launch.
Huanhe, which mints and distributes blockchain-based digital collectibles, will officially stop sales today as regulatory scrutiny of NFTs increases in China.
The one-year-old Huanhe platform has experienced slow sales in recent months as Beijing’s ban on secondary markets for digital collectibles has largely impacted its business. In fact, many of its limited releases remain unsold. Last month, the Tencent News app ceased digital collectibles sales 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 hold, display or request a refund for their possessions. The app will remain, however it will only allow existing customers to display, download and share NFTs that they already own. Users can still visit augmented reality art exhibitions.
While permission-based blockchains are allowed under government oversight, secondary marketplaces like OpenSea are forbidden in China.
After the central government banned the trading of cryptocurrencies last year, it was announced that all digital collectibles must be bought with yuan, while reselling for profit is completely outlawed. Yet, companies like Baidu and JD.com as well as state-backed Xinhua News Agency and the Communist Youth League, have all offered their own NFTs.
Secondary Trading of 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 adherence to the country’s ban on cryptocurrencies.
The Digital Collectible Industry Self-Discipline Development Initiative, which has been endorsed by many of China’s biggest tech firms including Baidu and JD.com, states that platforms which sell digital collectibles “shall require real-name authentication of those who issue, sell and buy” with only legal tender supported “as the 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 prohibitions against using NFTs to issue financial assets like securities, insurance, loans or precious metals and the three organisations also said that the pricing and settlement of NFT transactions shouldn’t include cryptocurrencies. Platforms must also perform real-name authentication and follow Anti-Money Laundering (AML) requirements.