Tencent’s Wechat intends to impose penalties on public accounts facilitating secondary trading of NFTs, a press report has revealed. Accounts offering transaction channels and guidance for cryptocurrencies have also been targeted by the new rule.
Popular Chinese app to impose restrictions on NFT trading
Wechat, the instant messaging, social media and mobile payment application developed by Chinese tech giant Tencent, is introducing a policy update that will prohibit the provision of certain services related to non-fungible tokens (NFTs) and to cryptocurrencies on its platform.
Quoted by the South China Morning Post (SCMP), Tencent said it will “order accounts to rectify if they provide relevant services or content for secondary trading of digital collectibles, and limit some features or even ban the account.” The news comes after in April, Wechat acknowledged it had suspended some accounts linked to NFTs.
The policy update will also introduce penalties for accounts providing transaction channels, advice or issuing cryptocurrencies to Wechat users. Accounts enabling initial coin offerings (ICOs) and crypto derivatives transactions will also be affected.
The report notes that with the move, Wechat’s management is taking into account the guidelines issued by Chinese regulators earlier this year suggesting that businesses in the industry should steer clear of the financial aspect of such digital assets.
According to Wang Yinying, a Shanghai-based lawyer specializing in blockchain and Web3-related cases, “the new rule emphasizes the narrative that the secondary market for trading digital collectibles could lead to speculation and financial market instability.
Wechat Said to Be Acting Preemptively
The legal expert was referring to joint statement issued by the National Internet Finance Association of China, China Banking Association, and the Securities Association of China in April aimed at curbing risks associated with cryptocurrencies.
“Tencent is acting preemptively to avoid trouble,” commented Bao Linghao, senior analyst at research firm Trivium China. He pointed out that there are currently no formal regulations on NFT trading, but stressed that “Chinese regulators don’t like any speculation, including NFTs.”
This spring, Chinese financial institutions were asked to stay away from NFTs, and their use in a number of areas, including securities, insurance, loans, and precious metals, was banned. Experts believe the People’s Republic is likely to establish a centralized platform for secondary trading of NFTs.
Chinese digital collectibles are built on consortium blockchains, not open blockchains like Ethereum. Additionally, guidelines issued in April suggested they should be purchased in Chinese yuan under real identities to avoid money laundering risks.
SCMP further quoted Wechat as saying that the accounts which display digital collectibles and primary transactions would need to have contracts with blockchain companies certified by the Cyberspace Administration of China (CAC) and refrain from supporting secondary trading.
Blockchains built by big tech companies like Alibaba Group Holding, Tencent, Baidu and JD.com were among the first to be approved by the CAC in 2019, the daily noted, adding that since last year, brands Chinese mainstream and state media surged. the NFT bandwagon with collectibles based on such platforms.