China raises red alert on NFT, what's going on?

NFT is a hot topic of particular interest in China, and the Supreme People's Procuratorate has raised many concerns about this digital asset.

The NFT Red Alert of the Supreme People's Procuratorate of China

On May 15, China's Supreme People's Procuratorate issued a series of warnings and comments about the NFT. The nation's top regulatory body has highlighted the risks posed by the NFT market. In addition, the Supreme People's Procuratorate of China noted the need for a new law for NFTs due to the sharing of some properties of digital assets.

Procuratorate Daily is the official newspaper of the Supreme People's Procuratorate of China. According to multiple comments posted on the agency's article, the current NFT market in China is in its early stages and lacks detailed government regulations and industry standards.

China's Supreme People's Procuratorate warned about the NFT.

Prosecutor Wang Xia-fen, one of the article's authors, commented that NFT trading in China poses many financial and social risks, including fraud, price manipulation, and illegal fundraising activities. legal... Mr. Wang noted some of the NFTs on the market are counterfeit and not minted on the Blockchain.

Despite the risks, the prosecutor also acknowledged the potential of the NFT in promoting the development of Blockchain technology and China's digital economy. Mr. Wang also cited a State Council filing in May 2022. Specifically, this profile describes a prospective, regulated market for trading digital assets.

“Around the world, people have recognized that NFT collections are capable of protecting intellectual property rights, promoting content creation, and enriching the digital economy,” prosecutor Wang wrote. Currently, the Chinese government is concerned about the NFT, while banning cryptocurrency mining and trading.

According to a report published on March 14 by the State Administration of Market Regulation of China, the agency received 59,700 NFT-related complaints in 2022, an increase of more than 300 times compared to 2021. In November 2022, a court in Hangzhou city ruled that NFT belongs to the category of digital assets and is subject to China's e-commerce law.

Previously, in April 2022, China's financial, banking, securities and internet associations urged their members to limit funding to the NFT. The appeal has caused most of the regulated NFT trading platforms to stop providing secondary trading services. Huanhe, the NFT exchange of Chinese tech giant Tencent Holdings, stopped selling NFTs and started refunds in August 2022 and will cease operations in June 2023.

However, Chinese prosecutors have noted the emergence of an underground secondary NFT market where speculation takes place unregulated. Sun Shan, an academic at Southwest China University of Political Science and Law, stated that future legislation should require blockchain operators and regulators to be responsible for copyright protection in the market. NFT, where piracy is rampant.

Proposed NFT Legal Framework in China

In March this year, National Assembly member Feng Qiya proposed the NFT regulatory framework at “Two Sessions”, the most important annual political meeting in China. Mr. Feng proposed to establish a clear legal definition of digital collectibles, introducing market access rules for NFT exchanges, and strengthening copyright protection for these assets.

The NFT regulatory framework in China needs to appear soon.

Authorities need to clamp down on illegal NFT speculation to prevent the financialization and securitization of digital collections. National Assembly member Feng Qiya explained the current NFT regulation in China mainly consists of rules established by people in business and local governments.

According to Mr. Feng, NFT legislation and framework should be applied in a top-down model, starting with government agencies. Initiatives to build the digital economy are high on the agenda of “Two Sessions”. The Chinese government is expected to roll out national economic plans for next year and reshuffle many key roles.