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As fiscal policies in China continue to impede crypto growth, Chinese tech conglomerate Tencent has closed down one of its two marketplaces for digital collectibles.
Monetary Laws Hinder Sales
China’s long-running battle with digital currencies is common knowledge. Throughout last year the nation’s government progressively imposed measures that culminated in a blanket ban on cryptocurrencies in September. While NFTs aren’t prohibited in the same way, the regulators have made it clear that they have their reservations about them.
In the past, the government has issued warnings to residents highlighting the potential risks of the asset class. Beyond this, the ban on the crypto industry hasn’t directly interfered with the NFT space. However, as Tencent’s recent moves illustrated them, certain fiscal policies within the country hamper NFT sales and by extension the expansion of the industry.
The multinational tech company blames the aforementioned closure on a law that prevents the resale of digital collectibles. After buyers make purchases on the NFT platform, they are unable to sell their tokens in private/external transactions. Indeed, this diminishes the profitability of the NFT industry, without a secondary market buyers cannot profit from their acquisitions.
Tencent Shuts Down New NFT Marketplace
Given the current situation, China’s NFT space is rapidly losing value, hence sales are tumbling at Tencent. The company ordered the closure of one of its platforms at the start of this month. However, the other one continues to fight to survive within the failing market.
According to a local publication, Tencent began working towards the shutdown in May. Two of the company’s core executives heading the NFT platform made their exit in the last week of the month. Additionally, roughly two weeks ago the tech giant erased the NFT section from its Tencent News app.
Tencent’s NFT journey has barely spanned a year yet. The Chinese NFT market took significant leaps late 2021 with major brands like Tencent and Alibaba coming on board. With these well-known companies taking heed and even kickstarting NFT platforms of their own, optimism for the industry was high. However, the hype didn’t just attract investors, it also drew notice from regulatory institutions and the government.
Companies Fear Government Restrictions
As stated earlier, the authorities encouraged buyers to be alert to the possibility of scams. While there hasn’t been any overt action, companies in the region have been wary of a government clampdown. Social media platforms Weibo and WeChat began blocking accounts with ties to NFT platforms in March this year.
Furthermore, despite launching an NFT platform in June, Alibaba erased all related news from the internet soon after.
Tencent, China's largest internet company, has shut down one of its digital collection (NFT) platforms, and another platform is not doing well. The reason is that the Chinese government does not allow users to conduct private transactions after purchasing.https://t.co/VYWS3TxKUF
— Wu Blockchain (@WuBlockchain) July 14, 2022
Wu Blockchain, a Twitter platform crypto reporter broke the news of Tencent shutting down its NFT platform. According to Wu, Chinese residents still conduct secondary NFT sales in the underground market. However, larger companies such as Tencent cannot afford to do the same.