The crypto industry has recently entered into what can only be described as a frenzy, going crazy for a type of digital asset that provides proof of digital ownership—non-fungible tokens (NFTs). And while NFTs certainly aren’t a new type of cryptocurrencies, they’ve seen a renaissance in 2021, its success seeping into almost every aspect of society. The popularity NFTs have seen in the past several months has even gotten through to China.
Known for its tech-savvy population and deep-pocketed investors, the country quickly added fuel to the fire that is NFT auctions. One of the country’s most established auction houses, Yongle, has expressed plans to enter into the NFT market. In an interview with art publication Artron, Yongle’s CEO Zhao Xu said that they identified a hole in the market and were eager to fulfill it with their own NFT listings at this spring’s major auction event.
Back in March, an exhibition of NFT artwork titled “Digital Area of interest: Have You Ever Seen Memes within the Mirror?” opened at Beijing’s UCCA Lab. Curated by BlockCreateArt (BCA), China’s first NFT trading platform, the exhibition featured artwork in digital form and offered collectors the ability to purchase it in the form of a non-fungible token, which guarantees the buyer a right to ownership. The exhibition was hugely popular, attracting a significant number of visitors and gaining an equally significant amount of media attention.
However, the popularity NFTs have seen in China has also revealed a major paradox.
Namely, as NFTs are a type of blockchain token, purchasing artwork in the form of an NFT requires the payment to be settled in cryptocurrencies. Depending on what platform is used to auction the piece, the settlement can be made in bitcoin (BTC), but most require settlement in ether (ETH) as the majority of NFTs are issued on the Ethereum blockchain.
This means that the artists behind the popular NFTs will receive their payouts in cryptocurrencies. And while this might not sound like a significant problem in a liquid market such as the U.S., a combination of capital controls and internet censorship makes exchanging cryptocurrencies to RMB essentially impossible in China.
According to a report from the Financial Times, this hasn’t stopped young Chinese artists from creating genre-bending art and participating in various NFT auctions throughout the country. Ellwood, a young artist that recently returned to his native China from New York, told the Financial Times that NFTs provide artists with a chance to achieve independence from art galleries. Despite capital controls imposed by the state, such auctions give him access to an easier way to fundraise and support himself.
And, most importantly, NFTs ultimately make art more valuable as they ensure it can’t be forged or copied.