Following a long history with cryptocurrency, China has announced that NFTs are permitted. The conversation has shifted to NFTs since the explosion of sales. Apparently, the Chinese government will allow NFTs as long as cryptocurrencies are nowhere in sight.
Are NFTs illegal in China or not?
Famously known for illegalising cryptocurrency. It may come to some people as a surprise that the Chinese government is more forgiving when it comes to NFTs. The state-backed BSN (Blockchain-based Service Network) was given the okay to market NFTs – as long as they are not sold with cryptocurrency. Whilst the Chinese government is still cautious of this move, BSN is its way of getting in on the NFT hype without adopting decentralisation and cryptocurrency,
NFTs are typically minted on a decentralised, public blockchain. This has been an industry standard since the beginning. It provides access to anyone wanting to write and read data. In China, public chains are illegal, initially leaving the NFT community in the dark. Essentially, the Chinese state requires all internet systems to verify user identities and permit the regulator to intervene in the event of “illegal activities”. And decentralised blockchains don’t facilitate that at all.
Due to this, BSN architect Red Date conducted a plan to provide NFTs whilst working within the restrictions. It created a solution named the Open Permission Blockchain. This blockchain will adapt public chains to offer controls over node deployment. This is all whilst removing the mechanism of using cryptocurrencies to pay. Doing so will promote the orderly development of public chain technology in China lawfully.
Why won’t China’s NFTs be interoperable with Ethereum or Solana?
The short answer is: China hasn’t changed its stance on cryptocurrency or decentralised networks. Unfortunately, this includes Ethereum, Solana, and many other popular chains. Basically, the only currency permitted on BSN is the Chinese Yuan.
Despite that, BSN is integrating tech from both Ethereum and Corda in its blockchain. Since public chains are illegal in China, companies wanting to start an NFT marketplace would have to go the private route. Obviously, this centralised blockchain exists so its government can access the data.
Why would people mint with BSN?
According to the BSN website, it delivers more competitive rates compared to single-company platforms. Combining compatibility across multiple chains and offering competitive rates, it hopes to generate 10 million NFTs to yield a profit. To illustrate, issuing an NFT on its network can be as cheap as 0.05 yuan (0.7 US cents).
Corporate reception to the news
Wary still lingers among companies, opting to call their NFTs “digital collectibles”. However, over 20 companies have shown interest. Some big names on the list include; JD.com, Baidu, and state-run media Xinhua News Agency, which gave away more than 100,000 digital collectibles on Christmas Eve. Plus, BSN has successfully localised more than 20 public chains since its debut in 2018. Reportedly, BSN-DDC will integrate 10 chains, including its adapted version of Ethereum and Corda, plus domestic ones like Fisco Bcos, initiated by Tencent-backed fintech firm WeBank.
In conclusion, China is obviously hesitant around NFTs due to its history with cryptocurrency. Hopefully, BSN and the measures it implements may earn the industry trust from the state. Alternatively, it could just use it as a method to control NFTs in China. Whatever happens, BSN that the project will be ready in early 2022.