Chinese Communist Party spokesperson launches NFT research project to ‘guide’ development of digital art

People’s Dailyspokesperson for China’s ruling Communist Party, has launched an NFT research project to “guide the orderly development of digital art” as the country’s NFT industry remains cautious amid mixed regulatory signals.

A new academy, called People’s Lingjing Research Institute, was established as a joint venture between the newspaper’s corporate entity and Sinofaith, a Shanghai-based intellectual property rights firm.

The academy will study legal issues, technical standards and regulatory models for “the process of digitizing works of art”, the People’s Daily said Sunday.

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Lingjing, or spiritual ground, is the Chinese translation of “virtual reality” attributed to Qian Xuesen, known as the father of Chinese space and missile programs.

People’s Daily launched Lingjing in January as a vehicle to promote its own digital collectibles, a term used to describe NFTs in China as the latter remains in a regulatory gray area. While global consumer NFTs trade on public blockchains with cryptocurrencies, Chinese digital collectibles are mostly based on centrally controlled blockchains and are sold in yuan.

Through China’s digital publishing system and censorship mechanisms, the academy’s research lab will explore the “content regulation model” for publishing digital artworks and guide the “orderly development” of the market, according to People’s Daily. It will also explore issuing digital collectibles overseas to promote Chinese culture.

Major Chinese digital collectibles companies have taken a cautious approach due to Beijing’s blanket ban on cryptocurrencies and repeated warnings from authorities about the speculative risks of NFTs.

Last month, industry players released a “self-discipline initiative” that pledged to “strongly resist” speculation while promising identity checks for users and a ban on cryptocurrencies.

Signatories to the initiative included the country’s largest internet companies such as Tencent Holdings, Baidu, and Ant Group, the fintech subsidiary of Alibaba Group Holding, which owns the South China Morning Post. To avoid potential scrutiny, large companies also do not allow secondary trading on their platforms.

While underground trading outside of major platforms remains active among digital collectibles enthusiasts, some companies are already struggling to sustain their NFT operations amid declining interest and regulatory uncertainties. Tencent plans to shut down its NFT Huanhe unit, local media reported last month.

Nonetheless, authorities are pushing their own agendas into space. Internet watchdog the Cyberspace Administration of China now regularly publishes the names of approved blockchain companies, and of the 348 listed last week, nearly 100 were involved in digital collectibles.

China’s Blockchain-Based Service Network (BSN), a state-backed initiative to drive commercial adoption of blockchain technology, also operates blockchain infrastructure services without the involvement of cryptocurrencies, including one that allows businesses to mint and manage their digital collectibles.

In a post that caught many in the industry by surprise, the Shanghai government last month explicitly endorsed NFTs, saying it would help “leading companies explore the creation of NFT trading platforms.” He also pledged to support Web3, a loosely defined vision of a decentralized internet built around the blockchain and often involving cryptocurrencies and NFTs.

But many were skeptical whether Shanghai’s policy support would deliver the big changes Web3 entrepreneurs need, as Chinese regulators’ vision for the industry differs from that of the Web3 community.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice journal on China and Asia for over a century. For more SCMP stories, please explore the SCMP app or visit the SCMP Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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