Chinese Digital Collection Platforms Retreat Under Strong Supervision

Since October, nearly 20 small and medium-sized digital collection platforms in China have issued announcements regarding scale-backs and liquidations, citing industry risks, low growth rates, stagnated development and other reasons, Lanjiner reported on November 17.

Most of the refund amounts of digital collection platforms range from 10% to 50% of the original sum, while some platforms have not even mentioned the refund rate. One platform called Daniu Shuchuang stated in an announcement that the company suffered a total loss of about 360,000 yuan ($50,301), and that it will refund the digital collections held by users according to 10% of the original sale amount.

Chinese internet giants have also begun to shut down their digital collections business operations, including Tencent’s Huanhe, which was officially shut down in August. On November 16, according to Jiemian News, Tencent Music stopped its digital collection business, and some members of the original team have been transferred to other departments.

SEE ALSO: Tencent Music Entertainment Shuts Down Digital Collection Business

Research institute Sootoo predicts that by the end of 2026, the digital collection market in China will reach 2.47 billion yuan, and the related market will reach 92.63 billion yuan. In the first half of this year, there were more than 500 digital collection distribution platforms in China. With the retreat of inferior platforms and the improvement of compliance, the number of digital collection platforms in the country could reach an estimated 1,858 by 2026.

Chinese authorities have issued various policies recently aimed at supervising industry qualifications and financial risks. On September 9, documents released by the National Copyright Administration showed that the unauthorized use of art, music, animation, games, film and television works to cast NFTs would be severely cracked down upon. On November 10, officials in Henan Province suggested being highly vigilant against NFT investment risks represented by digital collections.

China’s first “Compliance Operational Guidelines for Issuing Digital Collections” issued on October 17 mentioned that enterprises and platforms for casting and issuing digital collections need to have various service licenses and to be evaluated or reviewed by third parties.

The guidelines also analyzed a range of problems in China’s digital collection market, including the mixed qualifications of digital collection platforms, a lack of legal protections for the rights and interests of distributions, and users’ significant attention to speculation in the digital collections field.

There are 1,857 posts regarding digital collections on a Chinese complaint platform, including withdrawing failures, transfer failures, and fraud.

In October, Henan authorities announced a fraud case involving a digital collection platform. By selling virtual cartoon pictures, the platform was suspected of defrauding more than 2.65 million yuan. This case is the first criminal case involving digital collections announced by official departments in China.