Despite the Chinese government clamping down on crypto activity in the country, traders have found a way to evade regulatory hurdles by turning to off-the-book transactions for secondhand NFTs.
As China has banned payments using cryptocurrencies, all NFT transactions in the country are tendered with the yuan. In addition, and because of the country’s averse stance towards blockchain technology, NFTs are not issued through decentralized blockchains, but rather, through databases managed by Chinese enterprises.
In response to such position, many digital collectible platforms in the country have blocked the ability for NFTs to be resold. That being said, this has not been a unanimous strategy, as companies trying to continue the NFT hype in the country have began allowing users to transfer ownership of NFTs, ostensibly with no money ever changing hands. This transfer feature has opened up opportunities for new platforms which match sellers to buyers to form.
A case study for this is the recent 10,000 asset digital collectibles collection from Ant Group, Alibaba Group Holding’s financial arm. The assets, which each depicted a traditional headpiece of the Miao, a Chinese ethnic minority, sold out immediately at a price of 8 yuan ($2.66) each. With transfer platforms now in the question, many of the Miao headpiece NFTs instantly appeared on an unnamed online flea market after their sales, at a 50% markup. Here, we can assume that sales on the flea markets and transfers on transfer platforms would then happen symbiotically in a black market kind of style.
Although such operations remain accessible for now, if, or when, authorities crack down on them, they will either be eradicated, or alternatively, made illogical to pursue from an economic standpoint.