China NFT Weekly: VCs Pulling Back from Crypto

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: Tencent-backed digital publisher jumps on NFT bandwagon, Chinese state media signals tighter crypto control following Terra’s collapse, Coinbase rescinds accepted offers as valuation plummets, and more.

Tencent-Backed Digital Publisher Jumps on NFT Bandwagon

COL Digital Publishing Group, an online publishing company backed by Tencent, announced last week the launch of an NFT platform called “The Fifth Prism.” The move came despite China’s ban on crypto and regulatory uncertainties regarding digital assets. SCMP first reported the story.

• COL Digital Publishing Group, in which Tencent owns a 10% stake, launched the platform last Sunday along with over 500 “digital collectibles.” Seven other NFTs, priced between 68 yuan ($10) and 198 yuan ($29.7), will be released soon afterwards, the company said.
• The app “requires users to register with real identity and only accepts renminbi,” according to SCMP, citing COL’s filing to the Shenzhen Stock Exchange.
• The platform is built on COL’s library of 5.1 million digital files covering animation, novels, and games. The company also has access to over 450,000 hours of sound files.
• The company will share revenue with creators for content it does not own; shares of COL rose as much as 4.2% to 10.89 yuan following the news.
• Currently, the app is only accessible to users above 18 years old who live in mainland China. Similar to other digital collectible platforms, “The Fifth Prism” does not allow users to resell their collectibles for profit. Gifting is only allowed after the initial buyer has held the item for over a year. COL said that this NFT platform was its first step towards the metaverse. (SCMP)

READ MORE: COL Digital Publishing Launches “The Fifth Prism” Collection Platform

Chinese Tech Companies’ Foray Into Fashion Metaverse

Chinese tech giants are making forays into the fashion metaverse despite slim prospects of monetization and Beijing’s outright ban on crypto. SCMP first reported the story.

• ByteDance, owner of popular short video platform TikTok, announced in April that it is launching a digital fashion business called “Pheagee,” which involves virtual clothing, avatars, fashion, among other features, and it will be linked with Douyin e-commerce and PICO virtual reality headset.
• ByteDance rival Tencent also undertook to collaborate with several fashion brands for its Peacekeeper Elite game, which is a localized version of PUBG Mobile.
• Meanwhile, social e-commerce app Xiaohongshu launched a new art and fashion NFT trading platform called “R-Space.” According to Kirin Lee, the head of “R-Space,” the team was set up last year after seeing encouraging signs from the country’s communities of content creators. As of December 2021, Xiaohongshu had over 200 million monthly active users.
• NFTs are known as “digital collectibles” in China, as they are not allowed to be sold or traded.
• In April, Xiaohongshu partnered with the organizer of Shanghai Fashion Week to launch a digital fashion collection while the city was under lockdown. Nine designers attended the event with 20 designs, which could be bought using the Chinese yuan. People also needed to register with their real names in order to make the purchase, as with all other NFT transactions in China.
• The campaign only sold half of the over 6,000 NFT fashion items, priced between 699 yuan ($104) to 3,999 yuan ($600). A designer who refused to be named revealed that 10% of the proceeds went to the brands. (SCMP)

READ MORE: ByteDance Enters Digital Fashion Industry

Chinese State Media Signals Tighter Crypto Control Following Terra’s Collapse

Chinese state media outlet Economic Times signalled that further regulatory action may be taken toward stablecoins in the wake of the collapse of Terra, an open-source blockchain payment platform for an algorithmic stablecoin. Cointelegraph first reported the story.

• In an article published on May 31, the outlet detailed the collapse of TerraUSD (UST) and LUNA, Terra’s native tokens.
• Terra (LUNA) and TerraUSD (UST) are stablecoins that were launched in 2018 by Terraform Labs, a South Korean company run by Do Kwon. The main objective was to build an algorithmic stablecoin in which Terra (LUNA) would be burnt each time Terra (UST) loses its 1:1 peg to the dollar and vice versa.
• “My country has been cracking down on virtual currency trading speculation and a large number of trading platforms,” reporter Li Hualin wrote, adding, “this has effectively blocked the transmission of this risk in China and avoided investment risks to the greatest extent possible.”
• Liu also quoted Zhou Maohua, a researcher at China Everbright Bank, to make projections about China’s stablecoin policy: “In the future, our country will also speed up the completion of regulatory shortcomings, and introduce targeted regulatory measures for the risk of stablecoins to further reduce the space for virtual currency speculation, illegal financial activities and related illegal and criminal activities, and better protect the safety of the people,” Zhou said.
• Cointelegraph cited Colin Wu, a crypto reporter, who shed light on the ambiguities of the ban: “Institutions and enterprises are completely banned from trading or owning cryptocurrency in China, but individuals are free to own, buy and sell, and some local courts even consider them to be legally protected as virtual property.” (Cointelegraph)

Singaporean Central Bank to Test Blockchain Risk Management

The Monetary Authority of Singapore (MAS) this week announced what it calls “Project Guardian,” meant to test risk-management in blockchain asset tokenization and decentralized finance (DeFi) initiatives. Forkast first reported this story.

• Forkast defines tokenization as the process by which assets are digitally represented on a smart contract on a blockchain, which allows for the borrowing, lending, and trading of said assets without the need for intermediaries.
• “It could potentially enhance the efficiency, accessibility, and affordability of financial services, increase liquidity in financial markets, and enhance economic inclusion,” MAS said in a statement.
• DBS Bank LTD., JP Morgan, and the Marketnode trading platform of the Singapore Exchange will co-lead the pilot of the project by creating a permissioned liquidity pool of tokenized bonds and deposits, as per the statement.
• MAS mentioned that the first pilot will explore potential DeFi applications in wholesale funding markets, which will allow traditional financial services firms to experiment with DeFi-related technology in their day-to-day operations within a controlled environment. (Forkast)

Coinbase Rescinds Accepted Offers as Valuation Plummets

Crypto exchange Coinbase announced last Thursday that it will extend its hiring freeze into “the foreseeable future” and revoke accepted offers from some candidates who have not started their roles. TechCrunch and CNBC first reported the story.

• The news came two weeks after the world’s third-largest crypto exchange began its hiring freeze.
• “After assessing our business priorities, current headcount, and open roles, we have decided to pause hiring for as long as this macro environment requires,” L.J. Brock, Coinbase’s chief people officer, wrote in a blog post on Thursday.
• “Adapting quickly and acting now will help us to successfully navigate this macro environment and emerge even stronger, enabling further healthy growth and innovation,” he added.
• Coinbase has lost over 70% of its value this year as users and revenue shrank in the face of a crypto selloff and economic turmoil.
• Prior to the 2022 downturn, Coinbase was among the fastest-growing tech companies in the world. Last year, it tripled the size of its staff to 3,730 employees. After listing on the NASDAQ last April, the company reported a 12-fold increase in second-quarter sales to $2.28 billion, while profit grew 4,900% to $1.6 billion.
• In the face of rising interest rates and soaring inflation, investors are steering away from high-growth tech companies into safer assets.
• Coinbase said last month that revenue in the latest quarter fell 27% from a year earlier, while total trading volume declined from $547 billion in the fourth quarter to $309 billion in the first three months of 2022.
• Coinbase operates as a remote-first company, and has no physical headquarters. (TechCrunch, CNBC)

Crypto Film ‘The Infinite Machine’ Adds Metaverse Component in Partnership With Decentraland

Versus Entertainment is working with metaverse platform Decentraland to develop Web3 angles for its ongoing film project “The Infinite Machine.” Variety first reported the story.

• “The Infinte Machine” is adapted from an eponymous book about Vitalik Buterin, the co-founder of the Ethereum blockchain. Ridley Scott’s production company Scott Free is the co-producer of the movie.
• According to Kraken, an American crypto exchange, Decentraland is a software running on the Ethereum blockchain that allows users to buy and sell digital real estate, while interacting and playing games within the virtual world. The platform also supports interactive apps, in-world payments, and peer-to-peer communication.
  • Operation of Decentraland is governed by two tokens: LAND – an NFT used to define the ownership of land parcels representing digital real estate – and;
  • MANA – a cryptocurrency that facilitates purchases of LAND, as well as virtual goods and services used in Decentraland.
• The agreement between Versus and Decentraland will see the film and its NFT collection being featured in the Decentraland metaverse.
• “The Infinite Machine” will conduct its third round of NFT issues in the coming months, making it the world’s first ever NFT-financed film. (Variety)

Quick News: VC Crypto Investments Dropped 38% in May

• While venture capital investments in the crypto space almost doubled last year, they are down 38.2%, from $6.8 billion to $4.7 billion, between April and May.
• This short-term decline in investments can be attributed to the recent market correction, where Bitcoin (BTC) and other major cryptocurrencies saw their values drop over 50%. (Cointelegraph)

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!