NFT Northeast ASIA: Non-fungible token, or NFT, is not a new concept that emerged only recently. It first appeared in 2014 when young developers stored a video clip on a blockchain. NFT, since then, was understood as digital ledgers that have unique values registered on the blockchain system.
What sparked the recent frenzy, however, is a game. Dapper Labs, a blockchain-based developer headquartered in Vancouver, Canada, introduced a fantasy basketball game NBA Top Shot earlier in 2021.
At first, NBA Top Shot seemed like an ordinary card collecting game. Users can collect their favourite NBA players as digital cards in the game. They can also trade their collections with other users. But unlike other games, the collectibles are NFTs, whose value is stored on the blockchain system.
The interest in NFTs started to soar since then. The Google Search traffic for the keyword “NFT” spiked when expectations about the game were initially shared in June, and has been on a steady growth until today. Google Trends shows that countries that searched the keyword the most are Asian countries, such as China and Japan.
New businesses and investments followed the spiked interest. A report predicts Chinese NFT to grow up to 29.52 billion yuan ($4.64 billion) by 2026. Japanese entrepreneurs are investing a large amount of money in a blockchain company specialising in NFTs. Korean tech giants like Kakao Corp. are also entering the competition to create NFT trading platforms.
With the expectations that the global NFT market will continue to grow this year, 4i Magazine reviews the latest NFT trends and relevant government regulations in Northeast Asian countries.
NFT in China: Alliance Chains, Self-Regulation, and “Digital Collectables”
Chinese big tech companies, such as Alibaba and Tencent, are at the forefront of the developments in the NFT industry, with established platforms and digital collectables released every day.
Chinese NFT platforms on so-called “alliance chains” are not a free market for NFTs like in other countries — not anyone can post their NFTs for sale. These platforms find artists and creators with intellectual properties first, then jointly issue NFTs at a fixed price. When the NFTs are sold, they share some parts of their earnings with the creators.
The blockchain systems that these platforms use are Chinese, in most cases. Therefore, the Chinese platforms don’t use the cryptocurrencies, such as ETH. Instead, they trade in Renminbi, the official currency of China.
Many existing trading platforms in China put a focus on “collecting” digital units rather than “selling” them. Users on these NFT platforms can collect NFTs, show them to their friends and yield them to a limited number of people, but reselling them is firmly prohibited.
For example, Ant Group, the parent company of Alibaba, created a blockchain platform Jingtan, where people can trade NFTs of arts. The platform introduces NFTs of artworks ranging from paintings to three-dimensional recreations of ancient relics. The platform releases 10,000 tokens for every item, but they are easily sold out within a few seconds after the release.
The trading rules on this platform are rather specific. The action of trade on this platform is called “transfer”. Holders of NFTs can yield their collectables to another user within the first 180 days since the purchase. The second holder of those collectables can pass on their holdings to other users two years after they acquired them.
Also, the holders are not allowed to make profits from the differences in the buying and selling prices. Eligible users who can purchase other users’ NFTs are Chinese-resident older than 14 years old.
Since crypto activities are banned throughout the country, developers of these trading platforms try to keep a distance from crypto. For instance, Tencent, JD, and Alibaba, three of the country’s biggest tech companies, signed a self-regulatory convention to disassociate their platforms from cryptocurrencies. The criteria of this convention include “preventing money laundering, promising dissociation from virtual currency, protecting consumer rights, and promoting national culture.”
The platforms run by Alibaba and Tencent also call their NFT “digital collectables” or “virtual collectables” rather than “NFT”, as a part of the effort to avoid the language used by Western countries.
NFT in Japan: Intellectual Properties, “NFT Toreka”, and LINE Corp.
Japan is a country with various IPs, including cartoons, animations, and console/mobile/online games. Businesses that run on these IPs had issues with copyrights since their competitors or third-party users could easily replicate the IPs. Since NFT registers the intrinsic value of the IP on a blockchain, many started to suggest NFT is a way to protect IP creators from unauthorised reproduction.
One of the popular uses of NFTs in Japan is digital trading cards, like the ones from the earlier mentioned NBA Top Shot. In Japan, companies are making trading cards for not only sports players, but also celebrities.
For example, trading cards called “NFT Toreka” feature photo cards of celebrities. The word “Toreka” is short for “Trading cards” in Japanese. These cards are bought and sold on Japan’s first NFT marketplace, Coincheck NFT.
While many different celebrities are appearing in the collectibles, the most popular series are the ones that feature popular idol bands, such as “SKE48” and “Momoiro Clover Z”.
SKE48 cards, for example, preserve digitalised media content such as voice and video files. The price of these digital collectables are volatile, depending on the popularity of the idol band member imprinted on the card, and whether the card was released as a limited edition. Every card of this series was initially released at 200 yen ($1.73), but some were resold at several hundred thousand yen later.
Tech giants in Japan are also making developments in building NFT platforms.
Nanakusa, operated by SBI Group, a financial service conglomerate, is one of the recently launched NFT marketplaces where people can exchange trading cards and artworks. Adam by GMO, another marketplace that recently opened its door, is built by an affiliate of Japanese internet company GMO Internet Group. Lastly, LINE, the most popular messenger application in Japan, opened the Beta version of NFT Market last June. LINE users can buy and sell NFTs via LINK, a cryptocurrency created by the application.
Under Japanese law, NFT is not defined as a crypto asset, as it cannot make “payment” like currencies. However, as some experts raised concerns that NFTs can be misused as a way of gambling and other related crimes, authorities including the Japan Blockchain Association are currently working on draft guidelines related to NFTs.
NFT in South Korea: Crypto Exchange, Ground X, and Art
The South Korean NFT market is in its infancy, but crypto exchanges and large tech companies began their efforts in developing trading platforms.
The first marketplace in the country Korbit NFT was established by crypto exchange Korbit last May, and Upbit, also a crypto exchange followed its lead. Other crypto exchanges like Bithumb are developing NFT marketplaces to accommodate more users.
Information Technology companies like Ground X, a blockchain affiliate of South Korean internet company Kakao Corp., unveiled its NFT market Klip Drops last December. Ground X, who is also a developer of the blockchain platform Klaytn, said in its statement that users can buy and sell digital arts in this space. The company also runs another marketplace called Krafter Space, where copyright holders can put up their works for sale.
NFT has been showing stellar development in the art industry in particular. Michelle Jungin Lee, CSO of Art Token, Inc., an art and tech media content group based in Seoul, says a growing number of people are becoming interested in NFT art these days in South Korea.
“Until last April, many people from the Korean art industry held sceptical views towards NFT, as it may transform ‘art’ into a mere ‘merchandise’ or ‘alternative coin’ and derogate the reputation of art,” Lee told 4i Magazine. “But more and more people are showing interest in NFT arts in recent days, and many artists and art museums are jointly working with us. I can feel the rise of NFT awareness in the Korean art market.”
Lee says many NFT art collectors buy digital collectables with a non-financial motive, in other words, they are not collecting the digitalised artworks for money.
“NFT art collectors are a different breed from traditional crypto investors,” said Lee. “The collectors make purchases not only for the profits, but also to enhance their own identities, community values, to win the ownerships of those artworks, and to feel an emotional connection to the artworks.”
Creators are also not chasing after only the profits, but trying to improve the quality of their arts while expanding the world of imagination as artists, Lee explains.
“People should not approach the NFT art market as a method to make money,” Lee said. “NFT collectors must enter the market to assess quality, context-based values of artworks (rather than seeing them as investments).”
As of today, there are no specific regulations set for NFTs in South Korea. In February, the South Korean financial regulator Financial Services Commission said in a report that it is hard to define the legal property of NFTs and it cannot regulate them with a single law, as it covers many different industries, including game, art, and finance.
“NFT is an asset with endless potential,” Lee said. “The government should listen to what the experts say to develop this asset and provide legal assistance for the country’s good.”