Last year, the Chinese government declared everything crypto illegal in a fierce attempt to eliminate both cryptocurrency mining and trading, which seemingly posed a threat to the country’s traditional financial institutions.
The decision to crack down on the cryptocurrency industry, whose mining was being led by China, created the impression that China will frown at other blockchain-based innovations being widely adopted outside the country.
Therefore, it’s surprising when China’s state-backed Blockchain Services Network (BSN) on Tuesday announced a soft launch of a nationwide infrastructure to support Chinese non-fungible tokens (NFTs).
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The move is noted as a key step by China towards creating a domestic industry that is separated from the global market and not associated with any cryptocurrencies.
In the report below, SCMP noted that the idea is to create an NFT industry that is not aligned to ethereum, a move that will help Chinese authorities to exercise their regulatory powers, including unmasking account owners when necessary.
BSN said the infrastructure, known as BSN-Distributed Digital Certificates (BSN-DDC), would offer “a diverse, transparent, credible and reliable” one-stop-shop for businesses to mint and manage their own NFTs without relying on cryptocurrencies, which are banned in China. Most NFTs around the world are part of the ethereum blockchain.
BSN – which is backed by state-owned telecommunications giant China Mobile, state-run payment processing provider China UnionPay, and government think tank State Information Centre – said it planned to officially launch the BSN-DDC in late March.
The 26 founding partners include accounting firm Ernst & Young’s blockchain unit, Digital Art Fair Asia, and the Hainan International Culture and Artworks Exchange Centre.
NFTs are digital assets that are authenticated and traded on public blockchains. NFTs are not illegal in China, and several tech giants – including South China Morning Post owner Alibaba Group Holding’s fintech affiliate Ant Group, Tencent Holdings, JD.com and Baidu – as well as the official Xinhua news agency – have launched NFTs using the term “digital collectibles”.
However, public blockchains, which are decentralized platforms, are “illegal in China”, where the government requires all internet systems to verify user identities and allow regulators to intervene in the event of illegal activities, said He Yifan, chief executive of BSN technical support provider Red Date Technology, in an interview with the Post earlier this month.
To overcome that issue, BSN turned to a technology known as the open permissioned blockchain (OPB), an adapted version that can be governed by a designated group.
The BSN-DDC has already integrated with 10 OPBs, including adapted versions of the ethereum and Corda blockchains, as well as domestic blockchains such as Fisco Bcos, initiated by Tencent-backed fintech firm WeBank.
Minting fees, which can only be paid for with fiat money, can be as low as 0.05 yuan (0.7 US cents) – significantly lower than on public chains, BSN said.
Red Date’s He said he expected the BSN-DDC to help generate more than 10 million NFTs – the amount needed for the project to turn a profit.
While NFTs are currently used mostly for authenticating digital artworks, He said the biggest market would be management for accreditations such as car number plates. Such a system would give the car owner, government, and insurer controlled access to data such as mileage, engine number and repair history, with each party being aware of the others’ rights.
NFTs were first launched on ethereum, the same blockchain that supports the cryptocurrency ether, and most NFTs can still only be purchased using ether. They are unique, irreplaceable, and mostly digital items that users buy and sell online.
In 2021, NFTs hit total sales volume of over $14 billion as artists, investors, and entrepreneurs embrace Web3 space. NFTs use blockchain technology to keep a digital record of ownership.
A growing number of investors who are concerned about cryptocurrency volatility are seeing digital collectibles as alternatives, thus making NFTs potential largest blockchain-based industry.
While the crypto market is currently going through its biggest dip since July 2021, NFTs sales have been on the rise. In the past week alone, sales of NFTs hit $565 million, according to data from NonFungible.com.