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China, Africa, and an NFT reckoning

Two words define China and Africa’s relationship: debt and infrastructure. Over the last two decades, China’s state-backed banks lent African governments billions for roads, ports and airports built by Chinese companies as part of the belt-and-road initiative. As in Angola and Congo, some deals linked repayment to the extraction of natural resources. State-backed lending has since dwindled, as China seeks new funding models.

China says this has been a “win-win” for both. African leaders say China was the only country willing to meet their infrastructure needs. Critics argue that China has built white elephants, fostered corruption and encouraged indebtedness. New research suggests China has been neither the benevolent partner of propaganda nor the scoundrel of the West’s imagination. It also shows that Africans can get more out of the relationship, depending on how they negotiate.

Like the West, China substantially increased its development finance to Africa in the 2000s. Unlike the West, most of it took the form of loans at or near market rates, rather than aid. From 2000 to 2020, Chinese state financiers lent $160bn to African governments. Whereas Western aid or World Bank lending is typically widely spread, almost two-thirds of China’s loans to Africa were for infrastructure. From 2007 to 2020, Chinese infrastructure financing for sub-Saharan Africa was 2.5 times as big as all other bilateral institutions combined. There is little substance to claims of “debt-trap diplomacy”, in which China hoodwinks borrowers so as to seize assets. It is more accurate to say that China’s hard-nosed approach conflicts with its seemingly benevolent rhetoric. China may not be a duplicitous negotiator—but it is ruthlessly self-interested

Growing Pains

Getting the world’s attention can be a good thing when you are trying to launch a new product, or in the case of NFTs, a new theory of ownership. OpenSea is an eBay-like site where people can browse millions of NFTs, buy the images, and put their own up for sale. In the last 18 months, OpenSea has become the dominant NFT marketplace and one of the highest-profile crypto start-ups. The company has raised more than 400 million USD from investors, valuing it at a staggering 13.3 billion USD, and recruited executives from tech giants like Meta and Lyft.

But with that attention comes the scrutiny of regulators. Just last week, US prosecutors in New York’s Southern District have charged and arrested Nathaniel Chastain, a former product manager at the online marketplace OpenSea. The 31-year-old faces one count of wire fraud and one count of money laundering, in connection with a scheme to commit insider trading in non-fungible tokens, or NFTs, “using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain”. According to a Department of Justice press release, each count carries a maximum sentence of 20 years in prison.

The crypto world has long operated on the outskirts of the internet. As it goes more mainstream, we will see whether it can hold up under the spotlight.