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China Media Watchdog Differentiates Between Digital Collections and NFTs

Non-fungible tokens (NFTs) remain one of the hottest themes in the blockchain industry. Despite China’s ban on cryptocurrencies, NFTs, though in a different form and under specified regulation, are among the few aspects of the technology that still exist in the country. The existence of such products has been an issue of controversy, considering that their definition and limits of functionalities vary.

In China, what is globally referred to as NFTs go by a different nomenclature, which is “Digital Collectibles”. This nomenclature is not just to have a different name. It defines the limitations of the accepted technology and embodies the different features and functionalities of what is permitted in China, in comparison to the original NFT.

Recently, a document that is referred to as a “Reminder Letter” was issued by the Working Group of Fujian Province. The letter aimed to “Clean Up and Rectify Various Trading Venues on Preventing the Risk of NFT Violations”. This letter became necessary due to the significant explosion in the number of participants in the NFT industry in China.

The Reminder Letter pointed out that the number of NFT products in the market has swollen significantly. As a blockchain application, many of such products were deployed for fraudulent activities, hence the need to ramp up regulation and ensure that practitioners are made aware of the risks involved and also the consequences, where applicable.

In line with the ongoing awareness program, Liu Tianjiao, director of the Blockchain Copyright Center of the Comprehensive Laboratory of Science and Technology and Standards of the State Press and Publication Administration has explained what Digital Collectibles are all about in China’s concept. He has also differentiated between this concept which has been adopted by China and the more global concept of NFTs which is closely related to cryptocurrency.

According to Liu, Digital collections refer to the use of blockchain technology to generate unique digital certificates corresponding to specific works and artworks and based on protecting their digital copyrights, to achieve authentic and credible digital distribution, purchase, collection, and use. He notes that there are three major differences between domestic Digital Collectibles and foreign NFTs.

The first difference identified by Liu between the two categories of blockchain products is that foreign NFTs are based on public chains, which are open to everyone, and anyone can participate, read data, and send transactions. This makes adequate supervision of the activities on such products difficult, if not impossible. According to Liu, they are unmanaged, uncontrolled, and not supervised by any person or institution. On the contrary, domestic digital collections are based on consortium chains. Many of the consortium chains in China are infrastructure built by the government. Therefore, the question of proper supervision and management is resolved.

The second difference noted by Liu revolves around copyright issues. Foreign NFTs are not subject to copyright review in terms of the content of the distributed collections. This is different from their domestic counterparts, all of which must undergo some level of scrutiny and content review before being published on the chain.

We position digital collections as digital publications, that is, only after publication can they be circulated and sold, says Liu.

The third difference between foreign NFTs and domestic Digital Collectibles is that foreign NFTs are common with the tokenization of virtual content, a concept that Liu considers not to be real. In comparison, he explains that domestic digital collections circulate cultural elements through the use of blockchain traceable, immutable, open, and transparent technical means, anchoring the value of digital cultural products and copyright works, and conveying the value of our digital cultural elements.

Clarifications like this are key in the developmental cycle of NFTs, more appropriately referred to as Digital Collectibles in China. It helps to clarify the level of acceptability of the technology while actual frameworks are developed to guide practitioners within the space.


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