On July 20, rumours circulated on blockchain news media about Tencent’s plans to shut down its NFT trading platform “Magic Core”, one of the largest platforms in China. The move is speculated to be a result of stricter regulations and a slump in profit, combined with the personnel adjustment of Wang Shimu, the former general manager of Tencent News who recently became the head of the Magic Core team.
Launched by Tencent in August 2021, Magic Core garnered attention from the millions. On August 3, the very first day of its launch, Magic Core released 300 copies (priced at 18 RMB, or $2.67 each) of its first limited edition NFT artwork “Thirteen Invitations”, which displayed quotes from well-known celebrities. They even etched the owners’ names on each and every NFT. The entire collection sold out within less than a second after going online.
Previously, while cryptocurrencies were being dismantled in China, NFTs remained relatively unscathed. However, over the course of the year, China began to tighten its grip on the NFT market as well. The name was rebranded to “digital collectibles” in order to avoid reference to NFTs amid state media criticism.
In April 2022, Tencent froze several accounts on Wechat that were linked to NFTs. According to a statement from the company, this was to “rectify” public profiles in order to “combat speculation in virtual currency transactions”.
Then Tencent signed an oath stating that it would cease secondary trading of digital collectibles. Other Chinese tech giants who had also entered the NFT industry such as JD.com, Baidu, and Ant Group swiftly followed suit and also made the pledge.
In addition to the crackdown, Magic Core was also reportedly facing lacklustre sales, with many of its limited releases remaining unsold. To make matters worse, analysts indicated a decline in Tencent’s net profit of more than 20% in the first quarter of 2022, resulting in a downwards trend for three consecutive quarters.
While the shutdown has not been confirmed as of yet, people are beginning to realise that even the largest NFT platform in China cannot guarantee the security and longevity of the digital assets purchased by users. The news in itself that Tencent plans to turn off the Magic Core once again exposed the dilemma of the industry to the public.