(Yicai Global) July 21 -- Tencent closed its non-fungible token trading platform Huanhe this week in anticipation of a likely crackdown on virtual assets, an insider at the Chinese internet giant told Yicai Global.

Tencent has yet to comment on the news, and the Shenzhen-based firm has not said what it will do with the digital collectibles it already owns.

Huanhe stopped all sales of NFTs on July 1 and its last post on its WeChat account was on June 27. According to the platform’s service agreement, should Tencent terminate all or part of Huanhe’s business, it is not a violation of the agreement and customers have no right to demand the company bears any responsibility.

Tencent set up Huanhe in August last year to wade into the NFT craze transforming the artworld. NFTs are created using blockchain, the same unique coding system that underpins crytocurrencies, and as such are one-of-a-kind and the ownership trail is forever traceable. Every time an NFT is sold, the original artist gets a cut due to the embedded data in the blockchain.

China has made its stance on cryptocurrencies very clear but does not have specific rules on virtual assets such as digital collectibles and their derivatives, Guosheng Securities said in a research report. Since the country has changed the term “NFT” to “digital collectibles”, virtual assets' legal nature and the authorities in charge will gradually be determined, the Shenzhen-based brokerage said.

The government is likely to set up a secondary market, but it is not yet known whether NFTs can be a new source of revenue for internet firms such Tencent as there are many uncertainties such as loopholes in code and regulatory policies, it added.

Other Chinese internet firms such as Alibaba Group Holding, Baidu, JD.com and NetEase have also set up their own NFT platforms. It remains to be seen what they will do with their digital collectibles, a securities trader analyst said.

Editors: Shi Yi, Kim Taylor