When Simon Gao, an engineer in China’s eastern city of Hangzhou, decided to join a lucky draw to buy a “digital collectible” profile photo on Bilibili last Friday, he did not expect the process to be so difficult. The video streaming platform set a high bar for potential buyers, requiring bidders to have logged into the site every single day last year. Gao qualified, but he was still unable to get a profile picture featuring cartoon pigeons, which is stored on the company’s blockchain network. Interest in the booming market for non-fungible tokens (NFTs) is as strong in China as anywhere else these days, but the Chinese government remains wary of the technology. This has led to an unspoken rule among mainland companies to ditch the term NFT in favour of the more neutral term “digital collectible”. Many Chinese tech companies now offer their own digital collectibles on blockchains. Hong Kong’s NFT start-ups vie to be next Bored Apes in a crowded space Bilibili is the latest to jump on the bandwagon. It joins other tech giants – including Tencent Holdings and Alibaba Group Holding , the owner of the South China Morning Post – in launching its own NFT trading platform after the market heated up in China late last year. JD.com, Baidu and Xiaomi also sell digital collectibles. However, the sensitivity over crypto products in China has led platforms to limit how digital collectibles can be traded. Unlike NFTs sold on public blockchains around the world, those minted by Chinese tech firms cannot be resold for profit, a condition designed to assure Chinese regulators that the digital products will not become a tool for speculation and capital flight like bitcoin and other cryptocurrencies. That has not dampened Chinese consumers’ enthusiasm. Many new digital collectibles minted in China have been sold within seconds after launch. “You have to be fast enough to get a digital collectible,” said Felix Huang, a graphic designer in the southern tech hub of Shenzhen who has bought 10 digital collectibles. “If you fail to nail the NFT product 10 seconds after it’s released, you’ve almost lost it.” The hype around NFTs revolves around linking digital artwork and other assets to unique blockchain-based tokens, allowing them to be collected and traded like physical assets. The technology is not explicitly banned in China, and authorities have embraced some uses of blockchain, such as protecting intellectual property. While the NFT market was heating up globally, some Chinese tech companies started out using the term. Jingtan, the blockchain platform formerly known as AntChain developed by Alibaba’s fintech affiliate Ant Group, released two “NFT payment code skins” last June called “Dunhuang Feitian”. The digital artwork is based on China’s ancient murals and can be displayed as a background image for Alipay’s payment code. Tencent followed suit two months later with its NFT app Magic Core, or Huanhe in Chinese. Jingtan remains one of China’s most popular NFT platforms. Since last summer, it has released dozens of different works as digital collectibles, including paintings, music, and 3D models of historical artefacts from museums. Each work has a limited quantity of NFTs available, usually under 10,000, which have sold out within seconds. Wang Yongxu, an artist at a studio at Peking University, started minting NFTs for his traditional Chinese paintings last October and selling them on Ali Auction, Alibaba’s built-in auction platform. “Compared with Alibaba’s auction platform, which only enables the sales of digital paintings, Jingtan has a unique advantage, as it releases various forms of products and has a wider user group,” Wang said. He is open to adding works to Jingtan, he added, like many other young artists in China. NFT projects endorsed by Jay Chou and Edison Chen top charts The combination of blockchain technology and the dominant mobile payment app Alipay has helped Ant Group gain a distinct advantage in NFTs, according to Stanley Chao, managing director of the US-based business advisory firm All In Consulting. China’s ban on cryptocurrencies has also helped the fintech company. On OpenSea, the world’s largest NFT marketplace, most NFTs are sold on the Ethereum blockchain and bought using its cryptocurrency ether. The decentralised nature of open blockchains like Ethereum is anathema to Chinese authorities out of concerns for systemic financial risk. So digital collectibles in China are bought using yuan, with purchases on Jingtan happening within Alipay. This is a core difference between how NFTs are sold inside and outside China, where companies mint their digital collectibles on private consortium blockchains. These blockchains are managed by a select number of organisations, said Ma Xin, secretary of the Institute of Electrical and Electronics Engineers’ Digital Transformation working group. Unlike Ethereum or the bitcoin blockchain, these blockchains from China’s tech giants are not open for the public to participate in and authenticate the data. The differences partly stem from the regulatory environment in China, which has adopted a tough stance on crypto products. The Chinese government has declared all cryptocurrency-related activities, including mining and trading, to be illegal. State media have also warned of risks in NFTs. People’s Daily , the official mouthpiece of the ruling Communist Party, warned about NFT fraud in a commentary questioning the prices of digital collectibles. It specifically questioned the record-setting US$69.3 million sale last March of the digital photo collage Everydays: the First 5000 Days created by digital artist Mike Winkelmann, known as Beeple. Last Christmas Eve, though, the state-run Xinhua News Agency issued its own run of more than 100,000 digital collectibles, featuring news photos from throughout the year. Given the sensitivity around crypto, tech giants have been cautious. Alibaba and Tencent started using the term digital collectibles last October. NFT platforms in the country have also banned second-hand selling. Ant Group said it does not welcome “private NFT trading” and has asked users to report any activity that violates its rules. Gao, the Hangzhou-based engineer, owns three digital collectibles on Jingtan, including a 3D model of the torch for the 2022 Asian Para Games. He noted that the value of digital assets has so far been limited. Alibaba, Tencent rename their NFTs as ‘digital collectibles’ amid bubble fears “Currently, the NFTs are just three photos to me. They can neither be used in any circumstances, nor can they be cashed in within the 180-day restriction for transfer,” Gao said. Jingtan allows NFT owners to transfer their assets to another party 180 days after the purchase. The second owner can transfer the asset after two years. However, selling the NFTs for money is still prohibited, and ownership is limited to mainland residents who are at least 14 years old. Bilibili said it will launch a transfer function for its digital collectibles in the future. Tencent, JD.com and Baidu have no such function so far. Black markets for second-hand digital collectibles have also emerged. Searching for “NFT” or “digital collectibles” on Alibaba’s digital flea market Xianyu produces no results, but searching for “Dunhuang” shows many potential buyers willing to spend about 3,000 yuan (US$470) on one of the Jingtan NFTs, over 300 times more than the original price. Given the regulatory restrictions and the difficulty of snapping up NFTs as soon as they are available, Gao said he is thinking of giving up on buying digital collectibles. “After all, what is the value of three digital photos that I can’t sell?” he said.