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NFT platforms abandon China for Hong Kong to avoid compliance risks

NFT_platforms_abandon_China_for_Hong_Kong_to_avoid_compliance_risks

Non-fungible token (NFT) platforms from China are spreading to Hong Kong to reduce the risk of not following the law in a gray area. It helps that the city is open to digital asset businesses.

ShucangCN is an NFT platform that started in China in January 2022 and quickly became one of the biggest. Its CEO said that NFT China Ltd. was set up after the territory announced crypto-friendly policy documents in October.

ShucangCN CEO Pengfei Wang told Forkast over the phone on Thursday, “We’re in the process of launching a simple NFT platform in Hong Kong in about two weeks that can facilitate NFT airdrops.”  He said that sales and business will follow how payments are made.

In an interview, Red Date Technology CEO Yifan He said that mainland clients who built NFT platforms on BSN want to move to Hong Kong and “they’re discussing with our Hong Kong team to build their platforms there.”

In contrast to China’s ban on retail bitcoin trading in 2021, Hong Kong’s new licensing system may allow it. In Hong Kong, a special administrative area of China, only institutions and experienced investors with portfolios worth at least $1 million are allowed to trade digital assets.

Even though there are no rules, state media have criticized NFTs for their “speculative behavior.” Chinese customers can buy and trade digital collectibles on several platforms, including ShucangCN.

In 2022, CEO Wang said that the company made 30 million yuan ($4.5 million) in sales and had a 30% gross profit margin. Wang says that it launched its main NFT trading platform, Huashu Wenchuang, in June in partnership with the Chinese cultural equity exchange Huaren Exchange Center of Culture Property, which trades property rights and ownership of traditional artworks. By the end of last year, NFT trades were worth tens of millions of yuan.

Tony Fu, who is in charge of ShucangCN’s Hong Kong business, told Forkast that secondary trading on the mainland is still not clear from a legal standpoint, which could cause problems with compliance.

He of Red Date said that Chinese regulators are especially tough on businesses with unlicensed cash pools because investors are taking on a lot of risk. He said that commissions on NFT trading platforms come from pools of capital.

“All cultural equity exchanges that operate secondary trading are all against the law, as they don’t have the licenses to run secondary market businesses with capital pools involved,” he said.

Hong Kong platform

Wang said that ShucangCN’s future Hong Kong platform will let mainland customers sell “digital collectibles” (NFTs) on the company’s Hong Kong market.

Wang said, “Once our secondary trading platform in Hong Kong is set up, users can choose to mint and trade directly in Hong Kong, or they can mint on the mainland platform and trade in Hong Kong.”  Red Date said that BSN was very important

He says that Chinese mainland platforms that make digital collectibles using BSN-DDC, a domestic BSN network, can transfer NFTs to Spartan or Ethereum and trade on OpenSea.

Since NFTs don’t have any personal information, they can be moved outside the mainland. The money from trading can’t be sent to the mainland. “That’s illegally moving money,” he said.

Slowing down hype

Wang says that the number of people interested in NFTs in China skyrocketed in 2021 and peaked in May and June before slowing down and reaching its lowest point in October.

Wang said that the company on the mainland will look into the uses of digital collectibles.

“Until now, many people bought NFTs for collecting or trading purpose. We’re hoping to explore more possibilities,” Wand said.   ShucangCN is working with a virtual reality company to create digital assets that are tied to virtual structures or assets.

The Hong Kong company wanted to be incubated at Cyberport, a government-backed technology business park.

ShucangCN and NFT China want to make 50 million yuan in 2023, up from 30 million in 2022.

A state player

Official media say that on January 1, China Technology Exchange and Art Exhibition China and Huaban Digital Copyright Service Center, a blockchain developer, made a platform for trading digital collectibles called “China Digital Asset Trading Platform.”

Its website just said that the platform is “coming soon” and that it accepts applications for working together.

He of Red Date said of the new entry, “It’s a bold move to publicly market itself as a secondary trading platform.”  He told BSN platforms that they shouldn’t do secondary trading.

Wang at ShucangCN said that doing business on the mainland is still possible even though regulations are unclear.

Wang stated “ Chinese trading platforms like iBox have been able to avoid government rules for a long time because they try to avoid speculation.

Wang said that the dangers seem to be manageable.

About MahKa

MahKa loves exploring the decentralized world. She writes about NFTs, the metaverse, Web3 and similar topics.

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