Alibaba, Tencent and Other Chinese Tech Giants Now Require ID Checks for NFT Purchases

The NFT space in China is in constant evolution. While users await a proper operational framework that will guide participation in the sector, stakeholders are taking measures that could promote favorable conditions when the final rules are rolled out. On several occasions, tech giants in China have adopted self-compliance rules that are in sync with government measures towards other closely related sectors. This has kept the industry flowing so far, without much opposition from the government and regulators.

In a recent development, Ant Group, Tencent, Baidu, JD.com, and other top tech companies in China jointly released a “self-disciplined development proposal” for NFTs, otherwise known as digital collectibles. The proposal introduced the requirement for real-name authentication for anyone who wants to issue, buy or sell digital collectibles. This is a new development and one that is expected to be pleasantly received by the government and regulatory bodies.

China Cultural Industry Association, through which the proposal was communicated clarified that all the signatories to the proposal acknowledged and retained the existing regulatory conditions surrounding the use of cryptocurrencies. Crypto remains banned in mainland China, and when it comes to payments, all dealings relating to digital collectibles must be settled with legal tender. Other existing conditions concerning the obligations of digital collectible platforms also remain relevant. They must hold the relevant regulatory certifications, ensure that the underlying blockchains in their projects are secure, and also support the protection of intellectual property.

All the participating companies that came together to sign the agreement pledged that they will not set up secondary marketplaces for trading digital collectibles. Another obligation that they agreed on is the firm resistance to speculation within their marketplaces.

For NFT users outside China, the conditions agreed upon and released by these tech giants could seem a bit odd and out of order. However, the development does not come across to be strange, considering the stance that China has taken on cryptocurrencies. While the majority of platforms that deal with NFTs in other parts of the world apply the technology as a financial product, the ideology in China is different. Digital collectibles in China fall under the category of digital cultural creativity. This explains the extent of involvement by the China Cultural Industry Association on matters of digital collectibles.

This action by the top tech companies is rather voluntary and independent of state laws. They emanated from a private meeting, therefore are not legally binding on users. For now, they can best be described as tools that could help the state in producing a regulatory framework that will be backed by law. The proposal could be seen by some people as a document to be used as a tool for lobbying the government. However, some of the agencies that are responsible for developing the framework and guidelines for the industry may consider the document.

Since the 2021 wholesale ban on cryptocurrencies by China which saw several practitioners relocate from the country or shut down completely, any related development within the region is approached with great caution. The relationship between NFTs and cryptocurrencies in the mainstream is no secret. However, this idea cannot be carried into the Chinese sector of the industry. If NFTs, otherwise called digital collectibles, must thrive in China, they must be separated from cryptocurrencies.

The above statement is the underlying factor behind the self-regulatory efforts being embarked upon by tech companies that are making inroads into the NFT/digital collectible space in China. They are taking several steps to dissociate themselves from those aspects of the industry that are frowned upon by the government. It is also an attempt to show openness and transparency over their dealing. An attribute that is expected to appeal to the state and perhaps encourage full approval for participating in the industry.