China NFT Weekly: NFT Sales Are Tanking

Digestible news on the latest developments across the fields of Web3, NFTs, blockchain, and metaverse in China and beyond, compiled for you every week by Pandaily.

This week: Alibaba’s cloud computing unit launches NFT services, Hong Kong securities regulators to tighten rules around NFT-based collective investment schemes, global NFT sales drop as investors continue to pour money into the sector, and more.

Alibaba’s Cloud Computing Unit Launches NFT Services

Alibaba Cloud, a subsidiary of e-commerce giant Alibaba Group Holding, has launched a new range of services outside mainland China for NFT platforms, even as global NFT sales have seen a downward trend in recent months. SCMP first reported the story.

  • The new NFT features include web hosting, digital marketing, and content delivery, the company tweeted on Wednesday.
  • The announcement came after Alibaba’s recent introduction of a series of Web3 and metaverse-related features, data tools, as well as AI and blockchain-as-a-service (BaaS) products.
  • Alibaba Cloud’s NFT-related services are not available for those living in mainland China, as the country has banned all crypto-related transactions since July last year.
  • The new NFT services are not Alibaba’s first push into the industry. Alibaba affiliate Ant Group and rival Tencent both launched their own NFT marketplaces last year. However, the companies had to rename their offerings as digital collectibles due to the government’s tigthened rules around crypto.
  • Digital collectibles are backed by China’s fiat currency as opposed to actual crypto, and they cannot be traded for profit.
  • Alibaba Cloud’s move came at a time when the global NFT market saw its biggest plunge since last year, caused by the collapse of the TerraUSD algorithmic stablecoin in May. (SCMP)

READ MORE: Three Chinese Industry Associations Call for NFT Regulation

Hong Kong Securities Regulators to Tighten Rules Around NFT-Based Collective Investment Schemes

Hong Kong’s security watchdog, the Securities and Futures Commission (SFC), has issued a warning, saying that some NFTs constitute investment products and issuers may need to obtain a license. SCMP and CoinGeek first reported the story.

  • In a Monday statement, the SFC said some NFTs are structured in such a way that they resemble securities or interests in a “collective investment sceme,” and hence need to be regulated.
  • Issuers need to obtain a licence from the SFC, in addition to possibly needing to complete certain authorization requirements.
  • A collective investment scheme allows participants to receive profits or income, especially if they do not actually manage the assets themselves.
  • “As with other virtual assets, NFTs are exposed to heightened risks including illiquid secondary markets, volatility, opaque pricing, hacking and fraud,” the SFC said. “Investors should be mindful of these risks, and if they cannot fully understand them and bear the potential losses, they should not invest in NFTs.”
  • Hong Kong regulators are looking to tighten controls around crypto. They have proposed a regulatory framework that requires virtual asset service providers to obtain licenses and limit their services to professional investors.
  • The SFC did note, however, that most NFTs are not collective investment schemes and therefore do not fall within the organization’s regulatory remit. (SCMP, CoinGeek)

Animoca Brands’ Investment Portfolio Exceeds $1.5 Billion

Hong Kong-based gaming software developer and venture capital firm Animoca Brands released an unaudited report on Monday that shows the firm has invested over $1.5 billion across over 340 transactions as of April 30. CoinDesk and VentureBeat first reported the story.

  • Traded on the Australian stock exchange, the company reported bookings and other income of $148 million for the fourth quarter ended December 31 and $573 million for the four months ended April 30, 2022.
  • Cash balances stood at $98 million and digital asset holdings at $211 million at the end of April. Digital asset holdings included USDC, USDT, BUSD, ETH and BTC, the company said. Other digital asset holdings, including third-party tokens, added up to $659 million.
  • Digital asset reserves were $4.2 billion and included the Animoca Brands tokens SAND, QUIDD, PRIMATE, REVV, TOWER and GMEE, among others.
  • Animoca Brands owns blockchain game companies including The Sandbox, Gamee, nWay, Blowfish Studios, Grease Monkey Games, REVV Motorsport, TOWER, Quidd, Lympo, and Forj (formerly Bondly), in addition to blockchain service revenue arising from portfolio investments and partnerships.
  • The company has recently acquired Grease Monkey, gAMES, eDEN games, Notre Game, and Be Media to expand into Web3 gaming. It has also acquired an educational technology company, for which details are to be announced soon.
  • Earlier this year, Animoca Brands raised almost $360 million in a funding round that valued it at $5.5 billion, representing a doubling in its value in just three months. (CoinDesk, VentureBeat)

READ MORE: Animoca Brands’ Empire of NFT Games

Bitcoin Jumps as Beijing Rolls Back COVID Restrictions

The crypto market cap has jumped over $60 billion to reach $1.35 trillion in the past week, with Cordano’s ADA token and Solana’s SOL leading the way. Forbes first reported the story.

  • Forbes data show that as of June 6, 06:00 EST, ADA topped the list of biggest gainers with a 12% gain at $0.636, followed by SOL, which took a beating last week after the network suffered from a major outage.
  • Bitcoin, the world’s leading cryptocurrency by market value, has risen 5% to $31,460.
  • Beijing’s decision to roll back COVID restrictions pushed regional stock markets higher, triggering the cryptocurrencies’ ascent.
  • The Shanghai Shenzhen CSI 300 Index, one of China’s most closely followed stock market indices, rose by 1.9%, registering the biggest gain in two weeks.
  • According to Forbes, the unwinding of restrictions could help alleviate global supply chain issues and curb inflation. (Forbes)

NFT Sales Slump as Investors Pour Money Into Sector

Global NFT sales have plunged in recent weeks thanks to declining consumer trading, TechCrunch reported.

  • Weekly NFT sales declined by over 70% from a high of nearly 1 million units in the third week of 2022, to a little more than a quarter-million last week, according to TechCrunch, citing data from The Block, a bitcoin research institute.
  • The daily number of global NFT sales last week lingered at around 20,000 last week, down from November when sales were between 160,000 and 200,000, according to SCMP, citing data from Active market wallets also fell to around 17,000 last week, from more than 90,000 in November.
  • While global NFT sales are showing a downward trend, the industry is swelling with capital from investors. As reported by TechCrunch:
  • Yuga Labs of Bored Ape in March raised a $450 million round from a16z at a valuation of $4 billion.
  • In April, Glow Labs raised $4.1 million in seed capital for an NFT-related project that helps creators with no coding experience deploy a smart contract.
  • In early May, Americana raised $6.9 million for its plans to help brands and creators to turn physical items such as streetwear, collectibles, cars and artwork into NFTs. (TechCrunch, The Block, SCMP)

Global Bitcoin Adoption Could Hit 10% by 2030

The global adoption of Bitcoin could reach 10% by 2030, according to Cointelegraph, citing a report by Blockware Intelligence that came out last Wednesday.

  • Blockware arrived at the projection by analyzing past adoption curves for nine “disruptive technologies,” including smartphones, the internet, and social media, along with the growth rate of Bitcoin adoption since 2009.
  • “All disruptive technologies follow a similar exponential S-curve pattern, but […] newer network-based technologies continue to be adopted much faster than the market expects,” it wrote.
  • The report said that based on a metric called Cumulative Sum of Net Entities Growth and Bitcoin’s predicted CAGR of 60%, they forecast that global Bitcoin adoption will break past 10% in the year 2030.
  • Blockware Intelligence is the research arm of Blockware Solutions, a Bitcoin mining and blockchain infrastructure company.
  • “From a consumer perspective, past technologies had convenience/efficiency-related incentives to adopt them: adopting automobiles allowed you to zoom past the horse and buggy, adopting the cell phone allowed you to make calls without being tied to a landline. With Bitcoin, direct, financially incentivized adoption creates a game theory in which everyone’s best response is to adopt Bitcoin.”
  • In other words, similar to other disruptive technologies, Bitcoin is likely to benefit from more people adopting the technology, which is a phenomenon known as “network effect.” (Cointelegraph, Blockware)

That’s it for this week’s newsletter – thanks for reading! As always, I welcome any feedback on how to make this newsletter better. My email is [email protected]. See you again next week!