NFTs are becoming more scrutinized in China as the market heats up.
In a statement released today, China’s Internet Financial Association, China Banking Association, and China Securities Association said they want to “resolutely curb” the tendency for NFTs to be financialized and securitized, as well as limit the risk of illegal financial activities involving the tokens.
Two of these three self-governing institutions said about a year ago that their members are prohibited from doing business with crypto businesses, kicking off one of China’s most significant crackdowns yet. Only a few days later, the country’s top administrative body, the State Council, called for a crackdown on crypto mining and trade.
The three organizations said in a statement released today that NFTs have the capability to enhance “the digitalization of industries and digital industrialization,” but cautioned against financial concerns such as asset exaggeration, money laundering, and other illicit financial activities.
Financial concerns deriving from hype and speculative trading have previously been cited by Chinese officials as justifications for cracking down on cryptocurrency in general.
Six behavioral principles were specified by the organizations:
- NFTs do not represent underlying assets such as securities or precious metals.
- The non-fungibility of the tokens must not be weakened by methods such as dividing them so that the distribution mechanism does not change.
- Centralized trading should not be offered.
- Pricing and settlement of NFT transactions should not include cryptocurrencies.
- Platforms must perform real-name authentication and anti-money laundering.
- Financing support for NFT investments should not be offered.
Despite China’s anti-crypto stance, large corporations and even government agencies continue to assess NFTs. Ant Group and Tencent, two of China’s largest tech giants, rebranded their NFT items to “digital collectibles,” in October, presumably to disassociate themselves from the buzz around NFTs.
The state media and municipal governments have also issued periodic warnings about the NFT market.
Consumers could also protect themselves by adopting the “correct consumption concept,” avoiding speculative investments, and avoiding unlawful financing operations, according to today’s announcement.
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