The article analyzes the evolution of China's digital collectibles industry from the frenzy of 2021 to the rapid clearing in 2022, pointing out that its policy boundaries are clear (prohibiting financialization, securitization, and trading), but as a carrier of cultural digitalization and a brand membership tool, it still has room for compliant development; it emphasizes that the sustainable path lies in embedding it into real scenarios such as cultural tourism, IP copyright, and brand operation, relying on content supply, channel cooperation, and long-term operation capabilities, rather than speculative logic.

Article by: Portal Labs

Article source: Mars Finance

Digital collectibles are probably familiar to everyone. 21 years ago, Chinese players called them NFTs; 21 years later, they call them digital collectibles.

Rewinding to March 2021, Beeple's digital artwork sold for a record $69 million at Christie's, allowing the global market to truly see the value of NFTs for the first time and making this narrative a new focus beyond crypto assets.

This trend quickly spread to China. Starting in the second half of 2021, major domestic companies entered the market one after another: Tencent's "Phantom Core" was launched in August 2021, AntChain's digital collectibles business also began to advance in 2021 and gradually formed the "Whale Explorer" brand, while JD.com's "Lingxi" was launched at the end of 2021. Subsequently, in the first half of 2022, a large number of small and medium-sized platforms flooded in, further accelerating the industry's expansion. According to industry statistics, as of June 2022, the number of NFT/digital collectibles-related platforms in China had increased approximately fivefold compared to the beginning of the year, with more than 500 active platforms.

However, while the market surged, platform narratives showed signs of contraction. For example, the term "NFT" was gradually replaced by "digital collectibles" in public discourse, and secondary trading and financialization were deliberately downplayed. This shift became more pronounced in the second half of 2022. Leading platforms, represented by Tencent's Phantom Core, announced in August 2022 that they would cease issuing digital collectibles and initiate refund arrangements, triggering a rapid industry shakeout. Many platforms that relied on secondary market premiums and speculative sentiment exited the market, and the first cycle of digital collectibles completed its transition from frenzy to contraction within almost two years.

Looking back at the domestic digital collectibles market today, it has already gone through one round of growth and another round of consolidation. The vast majority of models that "rely on transactions to tell stories" have proven unsustainable, with very limited room for continued existence. Logically, this kind of market seems to have come to an end.

But why does Portal Labs believe that digital collections are still a good path for Web3 startups in China? You might want to read on to find out.

Policy space remains

The reason why digital collectibles are still worth discussing in China is primarily because policy hasn't rejected them. What regulators are truly suppressing is the path of financial speculation under the guise of digital collectibles. In other words, digital collectibles are not a completely shut-off sector in China, and a clear boundary has been defined for it.

This boundary is very clear: it cannot be financialized, cannot be securitized, and cannot be traded.

Since 2022, regulatory authorities have repeatedly issued risk warnings regarding speculative risks associated with NFTs. In April 2022, the National Internet Finance Association of China, the China Banking Association, and the Securities Association of China jointly issued an initiative explicitly opposing the financialization and securitization of NFTs and emphasizing the need to guard against risks such as secondary market speculation and illegal fundraising. This almost became a policy watershed moment for the domestic digital collectibles industry.

It is against this backdrop that the concept of "digital collectibles" has gradually replaced "NFT" as a more localized and compliant expression. Platforms no longer emphasize asset transactions, but rather the collectible and cultural attributes of digital content. Many issuers have also begun to actively avoid secondary circulation, downplay price narratives, and instead place digital collectibles in safer scenarios such as cultural and creative industries, branding, and cultural tourism.

Judging from policy signals, this "de-financialized form of digital asset" is not entirely without potential. On the contrary, when digital collectibles are embedded in applications such as cultural dissemination, copyright confirmation, and brand memberships, they become closer to digital credential tools than investment targets. The reason why many digital collectible projects in China can continue to exist is precisely because they have completed this shift in positioning.

More realistically, China does not lack the policy environment for the digital cultural industry. Whether it's the digitalization of cultural tourism or the upgrading of cultural consumption, the direction encouraged by regulations has always been "content industry" and "digital creativity." Digital collectibles can only become a sustainable Web3 entrepreneurial path if they return to this framework.

Therefore, whether digital collectibles can succeed in China depends not on technology, but on which line you choose to operate on. If you focus on transactions, it will inevitably be a high-pressure zone; however, if you focus on cultural content and brand operation, it may become one of the few compliant and viable Web3 entry points.

The industry has completed its shakeout.

If policies set boundaries, then the market itself underwent an even more brutal selection process. The first cycle of digital collectibles in China did not involve a gradual cooling-off, but rather a rapid clearing out. The platform expansion from 2021 to 2022 was almost explosive, but the subsequent contraction was equally swift. Projects that relied heavily on secondary market premiums, speculative sentiment, and gray-market transactions had almost no room left under the combined effects of high regulatory pressure and market downturn.

Since 2022, the industry structure has undergone significant changes. The most crowded part—where issuance equals speculation and collectibles equal assets—has been largely emptied. The remaining platforms and projects exhibit more consistent characteristics: weak trading, heavy content; weak finance, heavy operation. They no longer attempt to replicate the free circulation logic of overseas NFT markets, but instead converge digital collectibles into a digital cultural product and branding tool.

This signifies a significant shift: the challenge for digital collectibles startups in China has moved from simply "being able to release them" to "being able to operate sustainably." In the first cycle, many teams focused on packaging, sales, and creating a sense of scarcity. However, after the shakeout, the market no longer rewards this model. Those that truly survive are often platforms with strong content supply, channel partnerships, and long-term operational capabilities.

The "content supply" here doesn't refer to simply creating an image, but rather the ability to consistently obtain content sources with copyright, intellectual property, and cultural value. Platforms like theone.art, for example, are essentially closer to digital art e-commerce: they acquire licensed works through collaborations with artists and copyright holders, then release limited editions and operate them in a series. The platform isn't selling "on-chain assets," but rather a digital content system with provenance, copyright, and a continuous supply.

The so-called "channel cooperation" is not simply about community dissemination, but rather whether digital collectibles can be embedded in real-world consumption scenarios. Many more sustainable practices in China often occur within cultural institutions and brand systems. For example, when museums and scenic spots collaborate with platforms to issue digital collectibles themed around cultural relics, they are essentially treating digital collectibles as part of cultural dissemination and commemorative consumption, rather than as freely tradable assets. Similarly, the logic behind brands like Starbucks promoting NFT membership systems overseas illustrates that the true value of digital collectibles often comes from membership benefits and the consumption ecosystem, rather than secondary market pricing.

"Long-term operational capability" is the most crucial differentiator for domestic digital collectible platforms. Issuance is just the beginning; the platform truly needs to answer the following questions: Why should users stay? How are rights and benefits redeemed? How can activities be sustained? Many projects fail not because they can't sell, but because there's no follow-up after the sale; the collectible becomes a static image, and users naturally churn. For example, the "Lingjing People's Art Museum" under the People's Daily emphasizes the cultural dissemination attributes of digital collectibles, creating a continuous content rhythm through artist collaborations, themed exhibitions, and content-column distribution, rather than a one-time sale. Similarly, Xinhua News Agency has launched a distribution plan combining digital collectibles with public welfare, embedding digital collectibles into public narratives and brand activities, making them more like long-term cultural projects than tradable assets. Looking at cultural tourism scenarios, the key to the continued success of digital collectible practices in some museums and scenic spots lies not in "price," but in "scenario." They often bind digital collectibles with exhibitions, commemorative ticket stubs, and offline activities, so that users hold not just an image, but a record of cultural participation. The operational logic of these projects is closer to cultural and creative products than crypto assets.

This is precisely why platforms still operating today often have a business model closer to "content consumption platforms" than "asset trading markets": acquiring content through IP collaborations, completing sales through limited releases, and maintaining user retention through membership activities and benefits, rather than relying on secondary market price increases. This model may sound "less Web3," but it is precisely why it has been able to exist in China for so long. The path for digital collectibles to truly succeed in China is not through financial narratives, but through platform-based operations.

The demand side truly exists.

Is there any real demand for digital collectibles? If it's just a concept that "exists in compliance with regulations" but no one is willing to pay for it, then it still cannot become a Web3 startup path.

The answer is yes. Especially in the cultural and tourism sectors.

As a nation with a history and culture spanning 5,000 years, China has no shortage of content assets. However, museums, scenic spots, and local cultural tourism projects have long faced the same problem: how to transform cultural content into products that are disseminated, consumable, and sustainable. Digital collections offer a new form of digital souvenir. They can extend the reach of exhibitions and become part of cultural tourism consumption. For many institutions, this model is lighter, easier to disseminate, and more in line with the digital consumption habits of younger users than traditional cultural and creative products.

Beyond this, the real commercial opportunities for digital collectibles in China largely stem from the "user operation needs" of brands. Consumer brands are constantly searching for new membership vehicles: those that offer a sense of identity, scarcity, and long-term sustainability. Digital collectibles serve more as digital membership credentials than as one-time-sale image products. Brands don't lack budgets; they lack a sustainable membership tool. If digital collectibles can be linked to points, activities, and redemption benefits, they can integrate into the brand's operational system, rather than remaining isolated on the blockchain.

More importantly, these demands have a very clear B2B nature. Cultural institutions need digital content solutions, brands need membership and marketing tools, and platforms provide distribution, rights confirmation, operation, and technical services. The payment logic for the entire chain comes from the content and consumer industries, not from speculative funds in the secondary market.

This is also the most crucial practical significance of digital collectibles in the Chinese context: the buyers are not "investors," but "content providers" and "brand owners." Its value lies not in price appreciation, but in its ability to become the digital infrastructure for cultural consumption and brand operation.

The biggest obstacle: Users' perception remains stuck on "financial speculation".

Even with policy space available and genuine demand, digital collectibles still face an unavoidable obstacle in China: user awareness.

Digital collectibles, or rather Web3 as a whole, have left a heavy "historical burden" in China. The market expansion from 2021 to 2022 was not essentially a "cultural digitization experiment," but rather an asset speculation disguised as content. Many users' first encounter with digital collectibles was not because they were tied to cultural rights or memberships, but because they wondered "would it appreciate in value?" While this approach generated short-term hype, it also almost certainly determined the subsequent collapse of trust.

Therefore, the biggest challenge for digital collectibles today is that many people still understand them as "NFTs," viewing them as a censored form of speculation rather than a new digital credential tool. This misperception directly impacts project operations: users are unwilling to pay for content or commit to ownership; they only care about the existence of a secondary market and potential for appreciation. Once digital collectibles are treated as speculative assets, brands will find it difficult to sustain investment, as they will quickly slip into regulatory sensitivities and deviate from the brand's original operational goals.

A more practical problem is that the value proposition mechanism for digital collectibles has not yet been fully established in China. Many projects remain at the "issuance and then it's over" stage: release an image, conduct a sale, complete a marketing campaign, and then there's no further action. Users only receive a static asset that cannot be traded, has no vested rights, and offers no reason for continued participation. Naturally, users will revert to the most basic question: if it can't appreciate in value, what is it worth? Why should I buy it?

This is also a crucial turning point that digital collectible entrepreneurs must face. In the first cycle, transactions were driven by emotions and a sense of scarcity; in the second cycle, those who truly survive will be able to redefine value through equity structure, scenario binding, and long-term operation.

The dual challenges of membership systems and on-chain transparency

The issue on the brand side is more practical: can digital collectibles truly be integrated into a long-term operational system?

Over the past few years, many consumer brands, both domestic and international, have experimented with NFTs or digital collectibles. Starbucks launched an NFT-based membership system, luxury brands have co-issued digital collectibles, and many domestic brands have also tried their hand at them during marketing events. However, a common phenomenon is that many brands, after launching their first batch, haven't followed up. This is because they've all gotten stuck on "how to use them after launching."

What brands truly need are membership tools. The core of a membership system isn't issuance, but operation: levels, benefits, points, repeat purchases, and event outreach. These elements must form a closed loop. However, digital collectibles in many projects are merely one-time souvenirs, lacking sustainable benefits. Brands struggle to answer a crucial question for users: What does owning it really mean? Beyond "I bought it," what long-term value does it bring?

When digital collectibles cannot be integrated into a membership system, they remain merely a marketing gimmick. Posting them once might generate buzz, but posting them a second time becomes repetitive and may even raise user concerns. This is why many brands stop after trying them – they lack a sustainable operational approach.

A deeper concern stems from the commercial sensitivity brought about by on-chain transparency.

In the Web3 context, on-chain transparency is an advantage because it is verifiable and traceable. However, in the context of brand operations, on-chain transparency can actually be a burden. Once membership structure, user behavior, and consumption preferences are stored on the blockchain in the form of public addresses, it means that competitors can speculate on the brand's user profile and operational strategies. For traditional brands, this "public membership system" is not inherently secure.

Therefore, for digital collectibles to become a long-term tool, it is necessary to help brands truly embed digital collectibles into their membership systems and provide controllable tools within the boundaries of compliance and privacy.

What is the entry point for Web3 startups in digital collectibles?

In conclusion, the truly viable Web3 startup opportunity for digital collectibles in China should revolve around content, branding, and scenarios, providing sustainable infrastructure and service capabilities.

The first entry point is the digital distribution service of cultural tourism and cultural content.

China possesses an extremely rich cultural heritage, but cultural institutions lack the capability to create digital products. The value of digital collectibles here lies not in financial transactions, but in their role as digital souvenirs, carriers of cultural dissemination, and content consumption products. Startups that can provide a complete set of tools, from copyright verification and content packaging to distribution and operation, can find stable demand within the long-term trend of cultural tourism digitalization.

The second approach is the digitalization of brand membership systems.

What brands truly lack isn't the "NFT gimmick," but rather sustainable membership management tools. Digital collectibles, if linked to points, events, levels, and redemption rights, can become a new form of membership identity. The opportunity for startups lies in helping brands design rights structures and provide controllable digital credentials systems, rather than simply selling images.

The third entry point is enterprise-grade digital collection infrastructure on consortium blockchains or permissioned blockchains.

The transparency of public blockchains is not a natural fit for the domestic brand context. Many companies need a digital credential system that is auditable, traceable, yet controllable and segregated. This means that startups can provide underlying capabilities in the area of "compliant on-chain credentials": access control, privacy segregation, user data protection, and integration with existing CRM systems.

The fourth entry point is the operation service provider of digital collectibles.

After the shakeout, the competition among platforms is no longer about "who can publish," but "who can operate." Many cultural institutions and brands don't lack distribution channels; what they lack is an operational methodology: how to create serialized content, how to design rights and benefits, how to retain users, and how to turn digital collectibles into long-term projects. Startup teams can exist as service providers, generating cash flow through project-based models and long-term service fees, rather than pursuing a high-risk assetization path.

Digital Collection Entrepreneurship Action List

The entrepreneurial opportunities for digital collectibles in China are not over; the focus has simply shifted to operation and integration. This path will not return to the frenzy of 2021, nor is it likely to generate a "quick money effect." However, given clear policy boundaries and genuine demand, it may become one of the few Web3 startups that remains within compliant boundaries and can generate long-term cash flow.

If you're considering digital collectibles as a path to Web3 entrepreneurship in China, then before you do, you and your team need to answer a few very real questions:

First, where does your content come from? Do you have a stable supply of copyrighted content and intellectual property?

Second, who is paying for this? Is it a cultural institution or a brand budget?

Third, how will your product be operated? How will the rights and benefits be realized after issuance?

Fourth, where are your compliance boundaries? Have you completely avoided trading and financialization?

Fifth, can you provide long-term service instead of a one-time sale?

Digital collectibles are not a quick-money business. On the contrary, if you truly want to pursue it as an entrepreneurial path, the aforementioned difficulties must be faced squarely and addressed one by one. Therefore, while this path may indeed be one of the few legally viable directions in China's Web3 landscape, it is not easy, nor is it suitable for those expecting instant success. You need to be more cautious and adopt a long-term perspective. You should treat it as a content and operations business requiring in-depth cultivation, not a market opportunity that can be profited from based on emotions and cyclical fluctuations.