China launched its first regulated secondary digital asset exchange on January 1, 2018. The platform was designed to provide a credible inventory service, facilitating the trading of digital collectibles and property rights. It was jointly established by China Technology Exchange (CTE) and the Copyright Service Center. This technology will be based on the “China Cultural Protection Chain” blockchain. As of yet, it is only available on a live sign-up basis. However, it will be officially launching in Beijing, where a ceremony will take place in mid-January.
Despite this, there are a number of issues to consider. Some are technical, while others are legal and regulatory. Considering the complexity of the problem, it may be difficult to develop comprehensive solutions. In the meantime, investors have turned to the traditional financial markets for assistance. While the main drawback of this approach is the time it takes to complete the transaction, it has at least paved the way for new and innovative solutions.
One important issue is how to segregate the secondary.digital assets from the corporate balance sheet. Given that there are a number of market players offering the same product, this could be a problem. Luckily, the aforementioned Chinese trading platform is compliant with national standards. Similarly, it uses the VQF (voluntary Quality Framework) to ensure AML compliance among members.
The Chinese government has also invested in a digital collectibles marketplace. This is a first for the country, but it is not entirely clear how such a specialized platform will function. There is talk of providing a standardized process for registering and trading digital collectibles, though the details are scarce. On the other hand, the Chinese have a working group, which includes museums and copyright holders, that will facilitate trading of digital copyrights.
Another noteworthy innovation is the use of a public cloud to provide a secure, scalable and reliable network for tokenized digital collectibles. Previously, the speculative aspect of this sector has been severely restricted in China. Fortunately, the state-backed Blockchain Services Network has rolled out the platform to provide such a service. For now, users have to make payments in yuan. But the aforementioned cloud-based platform has a lot more to offer than just a bare-bones digital currency exchange.
Other notable achievements include announcing the world’s first native digital bond, and a digital utility token. The former will be issued by XSpring Capital Public Company Limited. The latter is a tokenized income stream generated by real estate. Besides, the aforementioned project has already raised over 1.3 billion baht in its Series B round.
However, while the aforementioned products and services are certainly impressive, there is no doubt that the most interesting innovation will be the actual execution. Whether it is by a private or public entity, China’s first fully regulated secondary trading platform for digital collectibles is a worthy first step towards creating a national market for digital assets.