WeChat "strikes hard" on secondary transactions of digital collections. The supervision of digital collections may become stricter in the future

On June 20, Kugou Music released the country's first digital music collection of intangible cultural heritage instruments, "Ancient Music Chapter".
On June 20, the official WeChat account of Shenzhen International Preparatory School announced that it will release the first original IP digital collection of a domestic international high school.
On June 20, Industrial and Commercial Bank of China launched the first digital collection NFT of the Jiaqi Xinrong commemorative medal.
On June 20, Jay Chou will co-launch PFP NFT Tiger Champs with Paris Saint-Germain Football Club.
On June 20, the well-known American luxury brand COACH and Web3 studio 1BLOCK reached a cooperation and will launch a limited edition NFT.

In just one day, many digital collections and NFTs were issued both at home and abroad. In such a wildly growing digital collection industry, the number of spawned platforms has also ushered in explosive growth. Many companies have actively entered the field of digital collections. For example, Internet giants such as Alibaba, Tencent, and JD.com are pioneers in testing the waters in this field, and they have launched digital collection platforms as early as 21 years.

Since the beginning of this year, the domestic digital collection market has maintained a relatively rapid growth. The number of digital collection platforms launched each month has risen sharply from single digits in the middle of last year to dozens at the beginning of this year, and to more than 100 in April. According to incomplete statistics from Metaverse, there are currently nearly 600 digital collection platforms.

Against the backdrop of explosive growth in digital collection platforms, WeChat public accounts and WeChat communities have become an important camp for digital collections.
But just yesterday, there was news that the official public account of "NFTea Digital Tea Tickets" was blocked. The reason for the suspension was "due to user complaints and platform review, there were business activities related to virtual currency transactions or secondary transactions of digital collections", which is quite different from the previous statement of banning digital collection accounts.

As early as March this year, WeChat banned a large number of public accounts of digital collections, involving more than ten platforms, all of which were small and medium-sized digital collection platforms, including Art Meta, Yidian Shuzang, Guizang Meta Universe, Huasheng Meta, Yuanben Space, Shenda Shuzang, One Meta, Zero Earth, iBox and Nuofangti, etc. The reasons for these accounts being blocked are basically "the existence of behaviors of publishing, disseminating or engaging in related business activities without obtaining a permit or license." A few of the reasons for the ban were suspected of fraud.

The reason why "NFtea Digital Tea Ticket" was blocked was that it was the first time that WeChat banned a public account on the grounds of "secondary transactions of digital collections".

Due to domestic policies, digital collection platforms do not support the opening of secondary market transactions. If a platform opens secondary transactions, then the platform becomes a "trading venue". According to the State Council's Decision on Cleaning Up and Rectifying Various Trading Venues to Effectively Prevent Financial Risks (Guofa [2011] No. 38) and the State Council's Implementation Opinions on Cleaning Up and Rectifying Various Trading Venues (Guobanfa [2012] No. 37), a trading venue refers to a platform that provides equal and transparent trading opportunities for all market participants and has strong sociality and openness for orderly transactions. Therefore, digital collection platforms that open secondary market transactions are not allowed to operate unless they obtain a "trading venue" license issued by the provincial people's government!

It is reported that the WeChat public platform's "Code of Conduct" has added new clauses related to digital collection transactions. According to Article 3.24 of the "Code of Conduct", if an account is involved in the issuance, trading and financing of virtual currency, once discovered, the WeChat public platform will order the violating public account to rectify within a time limit and restrict some functions of the account until it is permanently blocked, depending on the severity of the violation. If the account provides services or content related to secondary transactions of digital collections, it will also be handled in accordance with this regulation.

This is the second time WeChat has taken action in the field of digital collectibles following the ban on public accounts in March.

What qualifications are required for a digital collection platform?

If digital collection-related operators want to have sustained and good operations, they need to strengthen compliance and self-discipline, enhance risk prevention and control awareness, and actively avoid risks by actively applying for compliance business qualifications, accelerating technological innovation, and improving external monitoring mechanisms, so as to conduct various businesses in compliance and legal manner.

First, conduct blockchain security assessment and filing

Refer to Article 9 and Article 11 of the "Blockchain Information Service Management Regulations"

The second is to apply for an Internet information service value-added telecommunications business license and go through the registration procedures with the enterprise registration authority with the business license.

Refer to Article 7 of the Internet Information Services Management Measures

The third is to obtain the "Internet Publishing Service License"

Refer to Article 2 and Article 7 of the Regulations on the Administration of Online Publishing Services

Fourth, obtain the "Information Network Audiovisual Program Transmission License" or complete the filing procedures

Refer to Article 2 and Article 7 of the Regulations on the Administration of Internet Audiovisual Program Services

Fifth, obtain the "Internet Culture Operation License"

Refer to Article 8 of the Interim Provisions on Internet Culture Management

Sixth, handle the filing of network security level protection

Refer to Article 21, Article 31, and Article 59 of the Cybersecurity Law

Seventh, obtain an auction business license or cooperate with an auction company

If the platform sells products in the form of competitive auctions, it must obtain an auction business license from the commerce department or cooperate with an auction company that has obtained an auction business license.

Standardized development of the industry is the only way forward!

In addition to WeChat's "drastic measures", digital collectibles have also received attention and action from relevant departments, which have put forward initiatives and conventions to regulate industry behavior.
For example, in October 2021, the National Copyright Trading Center Alliance, the China Academy of Art, Ant Group, Tencent and other institutions jointly issued the "Digital Cultural and Creative Industry Self-Discipline Convention", which is the first industry convention in the country for the digital cultural and creative field. It clearly stated that it will resist any form of using digital cultural and creative works as a gimmick to actually issue and hype virtual currency, and guard against speculation and financialization risks.

For example, in April this year, the Internet Finance Association of China, the China Banking Association and the China Securities Association jointly issued the "Initiative on Preventing NFT-Related Financial Risks", requiring resolute curbing of the trend of NFT financialization and securitization, strict prevention of illegal financial activity risks, and conscious compliance with the following behavioral norms.

First, financial assets such as securities, insurance, credit, and precious metals are not included in the underlying products of NFT, which is a disguised form of issuing and trading financial products.

Second, do not weaken the non-homogeneous characteristics of NFTs by splitting ownership or creating them in batches, and do not carry out token issuance financing (ICO) in disguised form.

Third, it does not provide centralized trading (centralized bidding, electronic matching, anonymous trading, market makers, etc.), continuous listing trading, standardized contract trading and other services for NFT transactions, which is a disguised violation of regulations to establish a trading venue.

Fourth, virtual currencies such as Bitcoin, Ethereum, and Tether will not be used as pricing and settlement tools for NFT issuance transactions.

5. Conduct real-name authentication for issuing, selling and purchasing entities, properly preserve customer identity information and issuance transaction records, and actively cooperate in anti-money laundering work.

Sixth, do not invest in NFT directly or indirectly, and do not provide financing support for investment in NFT.

Subsequently, the Metaverse Industry Committee of the China Mobile Communications Association and the Blockchain Professional Committee of the China Communications Industry Association jointly issued the "Self-Discipline Requirements for Regulating the Healthy Development of the Digital Collection Industry", requiring member units to resist disorderly speculation, adhere to the bottom line of compliance, and resist illegal financial activities such as disguised token issuance financing (ICO) and virtual currency speculation.

First, we must adhere to the principle of keeping the truth and making innovations, and promote national culture;

Second, strengthen industrial collaboration and empower the real economy;

Third, resist disorderly speculation and guide reasonable expectations;

Fourth, adhere to the bottom line of compliance and stay away from illegal models;

Fifth, protect intellectual property rights and safeguard the rights and interests of users;

Sixth, strengthen the review of collections and fulfill social responsibilities.

As the digital collectibles market becomes increasingly hot, chaos also arises. For those who currently want to enter the digital collectibles market, they can use these requirements to regulate themselves, and truly realize the value function of digital collectibles while avoiding triggering red lines.

Looking back at this ban incident, WeChat has been increasing its supervision of the digital Tibetan platform. In addition to implementing legal and compliant plans for the platform, relevant operating entities should also understand that they cannot rely too much on the WeChat platform. It is best to establish their own official website, APP and other self-controllable platforms to prevent the public account from losing contact with users once it is blocked.

At the same time, Metaverse News also calls on consumers to establish correct consumption concepts, enhance self-protection awareness, consciously resist NFT speculation, be vigilant and stay away from NFT-related illegal financial activities, and effectively safeguard their own property safety.