Tencent Plans to Completely Shutdown It’s NFT Platform This Week
The largest internet company in China, Tencent is on the verge of shutting down its NFT platform prematurely. According to sources, the main reason behind this inevitable action is due to the unprofitability of the entity. So far, the platform has suffered from the lingering ban on secondary transactions on NFT marketplaces in China. This regulation has proven to be too restrictive, leading to the platform taking some drastic measures.
Tencent retains its status as one of the biggest tech companies in China. It is among the companies that have been leading the campaign toward NFT implementation and adoption in the country. Together with other major tech companies in China, Tencent has taken preliminary measures that seem to comply with the body language of the regulatory authorities so far, when it comes to NFTs.
From a change in nomenclature which has led to referring to NFTs as “Digital Collectibles”, to the abolishment of secondary transactions on marketplaces, Tencent has been at the forefront in complying with government regulations. Perhaps, the impact of some of these regulations is becoming rather unbearable, hence the imminent steps being taken by the company.
The specific platform that is about to be shut down by Tencent is known as “Magic Core”. It is at the heart of Tencent’s NFT activities and was launched in August 2021. The closure of Magic Core could represent the final nail in the coffin for Tencent’s NFT project. Before this time, steps have been taken that represent partial closure of the platform. First was the suspension of the sales services of Tencent’s digital collections on July 2, 2022. Less than one month after the suspension, the company suspended the Phantom Core, another unit of its digital collectibles ecosystem.
For Tencent’s NFT project, things have gone full cycle very quickly. Just last May, Wang Shimu, who was previously in charge of Tencent News was transferred to the PCG application line and was put in charge of the Magic Core business. At the time, perhaps there were plans for the project to become more viable and grow. In less than two months, the unit is already shutting down. The organic reason for this has been attributed to “cost reduction and increase in efficiency”.
Regulatory protocols have been identified as the main difference between NFTs from different parts of the world and those with Chinese characteristics. Both the traditional NFTs and the China-based digital collections are products of blockchain protocols. They possess the underlying properties of blockchain products which include immutability, indivisible, and mutually irreplaceable. The essential difference between both categories lies in the bottom layer of their respective protocols.
For traditional NFTs, the bottom layer is decentralized and unregulated. The NFTs can be bought or sold without restriction. However, for digital collections on the Magic Core, the bottom layer is based on Tencent’s Zhixin Chain. They are regulated and cannot be traded in the open market. The extent of the users’ rights is limited to their ability to “share and display” the digital collections.
These limitations on the Magic Core-based digital collections imply that they cannot be sold on the secondary market. It is enabled to meet up with the government’s regulatory conditions for any such entity that operates within China. It is one of the conditions introduced by the government to check speculation and unsupervised financial activities that could lead to different levels of malpractice and fraud.
Having obliged and followed through with these conditions, Tencent seems to have realized that profitability will be difficult to achieve. Hence, its decision to abolish the unit and concentrate on other aspects of its technology. It is yet to be seen if other tech companies within the region that have ventured into NFTs will follow the same pattern or figure out ways to ensure that their businesses are not run aground.