China NFT Weekly: Shanghai Pledges Support for Web3

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: Shanghai pledges support for NFT trading platforms, Animoca Brands raises another $75 million amid crypto market crash, Tencent shuts down NFT platform to comply with government rules, and more.

Shanghai Pledges Support for NFT Trading Platforms

The Shanghai government has pledged support for Web3 development, according to the city’s 14th Five Year Plan on the digital economy. SCMP and TechCrunch first reported the story.

  • The largest Chinese city by GDP will explore the development of “key Web3 technologies” as part of the city’s effort to improve its “new digital infrastructure,” according to a document published by the municipal government.
  • Examples of such technologies include end-to-end encrypted communications and decentralized domain systems, according to the SCMP, citing the official document.
  • While the directive is not national, it will likely be promoted in other regions once it has proven to work in Shanghai, the TechCrunch article argues.
  • The Chinese government has taken a strong stance against digital assets, banning all crypto mining and trading last September. In April this year, the country’s top financial industry associations proposed that NFTs must not be used for securitization.
  • While Shanghai’s plan offers a rare voice of recognition of Web3, industry professionals are skeptical as to whether the government’s vision of the decentralized technology will align with that of the industry. (TechCrunch, SCMP)

READ MORE: Digital Collectibles vs Non-Fungible Tokens – An Explainer

Animoca Brands Raises Another $75 Million Amid Crypto Market Crash

Hong Kong-based blockchain game developer and venture capital firm Animoca Brands has raised $75 million following a fundraising drive that now values the firm at $5.5 billion. SCMP and Reuters first reported the story.

  • The $5.5 billion valuation is a modest increase from January, when a $359 million fundraising increased the company’s valuation to $5 billion, more than doubling its $2.2 billion valuation from last October.
  • Animoca Brands, a Hong Kong-based company previously listed on the Australian Securities Exchange, said the latest financing round was the second part of a $360 million round in January.
  • The latest fundraising was supported by investors including Liberty City Ventures, a New York City-based venture capital fund and incubator with over $1.5 billion of assets under management, and Kingsway Capital, a Hong Kong-based early-stage venture firm.
  • The investments were delayed because some investors were concerned about the latest collapse of TerraUSD and that the contagion could spread to other cryptocurrencies.
  • In 2021, investors and speculators piled in to digital assets, as concepts like NFTs and the metaverse became popular during the pandemic. However, the tokens have dropped so far this year. The monthly sales volume on the largest NFT marketplace, OpenSea, plunged to $700 million in June, down from $2.6 billion in May and a far cry from January’s peak of nearly $5 billion.
  • Animoca is one of the most active investors in the NFT space, boasting a portfolio of more than 200 companies. A recent financial statement released by the company shows its portfolio of investments was worth $1.5 billion while its reserves of digital assets such as game-related cryptocurrencies and NFTs were worth $4.2 billion. (SCMP, Reuters)

Tencent Shuts Down NFT Platform to Comply With Government Rules

China’s leading internet and media conglomerate Tencent has reportedly shut down one of its NFT platforms due to declining sales associated with the country’s regulatory crackdown on crypto. Cointelegraph and PingWest first reported the story.

Huobi Applies for Trading License With Hong Kong Watchdog; OTC Trading Exceeds $500 Million

Huobi Technology has applied to become a regulated virtual asset trading platform with the Hong Kong Securities and Futures Commission (HKSFC). Forkast first reported the story.

  • The Seychelles-based cryptocurrency exchange said on Thursday that the Securities and Futures Commission (SFC) is processing its Hong Kong unit’s license application for virtual asset trading.
  • The crypto exchange has applied for licenses for securities trading and automated trading services, according to Forkast, citing the company’s official statement.
  • The SFC issued a statement last month on the financial and legal risks surrounding NFTs claiming that such tokens are not only prone to the typical security vulnerabilities of crypto, but could also constitute financial assets bound by SFC regulation.
  • Specifically, the commission claimed that NFTs could cross the boundary between collectibles and financial assets, therefore resembling securities and/or collective investment schemes (CIS).
  • In a proposed amendment to the Anti-Money Laundering and Counter-Terrorist Financing Bill, virtual asset service providers would be required to obtain a license from the SFC to legally operate in Hong Kong. The regime is proposed to take effect in March 2023. (Forkast)

RELATED: Hong Kong Securities Regulator Ashley Alder to Head UK’s Financial Conduct Authority

GameStop Intends to Launch NFT Marketplace by End of July

GameStop’s new NFT marketplace took home around $44,500 from transaction fees within 24 hours after its launch via a public beta on Monday. CoinDesk and Cointelegraph first reported the story.

  • American video game retailer GameStop (GME) first announced its plan to launch the NFT marketplace in its fiscal fourth-quarter earnings report.
  • The company reportedly generated around $1.98 million worth of NFT sales on its first full day of business, and as the platform charges a 2.25% fee on NFT sales, this equates to around $44,500 in profits.
  • GameStop NFT, which is based on Ethereum layer-2 Loopring, is currently home to several new and unknown NFT projects. However, it will soon introduce several projects from Ethereum layer-2 scaling solution, Immutable X, such as Gods Unchained and Guild of Guardians. The duo partnered back in February to develop NFT games together. (CoinDesk, Cointelegraph)

Federal Bankruptcy Court Freezes Assets of Crypto Hedge Fund Three Arrows Capital

A federal bankruptcy court has frozen the assets of Three Arrows Capital, a prominent crypto hedge fund that until recently managed about $10 billion in assets. The Washington Post and CNBC first reported the story.

  • The Southern District of New York granted a motion allowing liquidators to “transfer, encumber, or otherwise dispose” of any Three Arrows Capital assets located in the United States. It also issued a subpoena for the founders, who appear to be on the run from creditors.
  • On July 1, the firm filed for Chapter 15 bankruptcy protection from US creditors in the Southern District of New York, after a plunge in cryptocurrencies and the collapse of the TerraUSD (UST) stablecoin project wiped out its assets.
  • Global advisory firm Teneo was hired to help manage the liquidation. Meanwhile, creditors are trying to determine what assets remain.
  • According to Friday’s court filing, Zhu Su and Kyle Davies, the company’s founders, participated in a Zoom call last week to discuss basic steps to preserve their assets. However, neither turned on their video, and both remained silent for the duration of the call. (The Washington Post, CNBC)

That’s it for this week’s newsletter – thanks for reading! As always, we welcome any feedback on how to make this newsletter better. Write to us at See you again next week!