China has had a rocky relationship with the world of blockchain and digital assets for the past couple of years. Originally a country conducive to mining, trading, and other activities, 2021 led to crackdowns on almost everything, mainly due to high energy consumption and a perceived gateway for operations frowned upon by the government.
The Latest in a Series of Crackdowns
The crackdowns ultimately led to all cryptocurrency mining being banned in China, with many miners moving to neighboring countries, Kazakhstan and Iran in particular.
Both of these nations took advantage of the situation and facilitated the newly established crypto business endeavors, albeit with some restrictions.
Some form of digitally-related research is still underway in China, notably around CBDCs. However, in an update to its ToS, WeChat – the largest social network in the country, with over 1.1 billion users – has decided to ban all content believed to be promoting digital assets.
The change in WeChat’s policy towards the crypto world was unearthed by Hong Kong-based journalist Colin Wu.
WeChat with more than 1.1 billion daily active users in China, has updated its rules: WeChat public accounts which involved in the issuance, trading and financing of crypto and NFTs will be limited function or banned. https://t.co/0I9oMrvFTp pic.twitter.com/mzclYjFZNg
— Wu Blockchain (@WuBlockchain) June 20, 2022
NFTs Also Targeted
Prior to this update, NFTs were in a grey regulatory area in China. Although cryptocurrencies were already heavily targeted by regulation, WeChat’s ToS upgrade specifically aims at NFTs.
“Accounts that provide services or content related to the secondary transaction of digital collections shall also be dealt with in accordance with this article.”
The new ToS goes on to state that all accounts determined to be involved with “virtual currencies or digital collections” will be either shadowbanned – a practice that allows users already engaged with a certain community to stay active but removes said community from search results for anyone else – or terminated, depending on the perceived level of ToS violation.
Although NFTs were mostly ignored by Chinese regulatory bodies in the past, a recent report by China Times indicates that the amount of such platforms in the country has grown from about 100 to over 500 in 2022 alone.
According to Wu Junjie, a researcher at the Harbin Institute of Technology, many of these are bogged down by questionable compliance procedures – in regards to property rights and compliance alike.
“Regarding the compliance of intellectual property rights, the Hangzhou Internet Court in the first domestic NFT case determined that digital collection platforms need to undertake a higher pre-examination obligation, and has launched a strict examination and reporting mechanism for digital collection businesses.”
The drastic increase in interest for NFTs culminating in the legal case mentioned above may have brought those assets under regulatory scrutiny, prompting WeChat to target “digital collections” alongside cryptocurrencies.