China’s legal authority issues warning on NFTs for their crypto-like characteristics
In the wake of China’s crypto trading ban, the Supreme People’s Procuratorate cautions that popular NFT collections share features with the now-forbidden virtual assets.
NFTs in the spotlight of Chinese legal authority
China’s top legal prosecution agency, the Supreme People’s Procuratorate, has issued a warning, highlighting that non-fungible tokens (NFTs) bear a striking resemblance to virtual assets in their characteristics. This comes as NFTs continue to gain traction within the country’s digital market, despite China’s stringent ban on cryptocurrency trading.
In a bid to manage potential risks and penalize related crimes accurately, the agency published guidelines on Monday for NFT treatment. The guidelines emphasize the necessity for enhanced “risk research and judgment” in the face of NFTs, which have seen a rise in popularity as “digital collectibles.”
This surge came after the country clamped down on local crypto trading and severed banks from providing crypto-related services in 2021.
Potential risks of NFTs
The agency’s report underlines the potential financial, management, and network security risks posed by NFTs, with special attention to legal risks. As NFTs attach a unique digital identifier to virtual or real items, allowing proof of ownership to be recorded on a blockchain, the agency argues that owners may not truly “enjoy” their ownership.
This is particularly true in the case of digital art, which can still be replicated and distributed despite NFT ownership.
Ambiguity in Ownership and future potential
As one author of the report puts it, “From the perspective of property rights, consumers do not enjoy the ownership of the NFT digital assets they purchase in the sense of civil law.” Therefore, consumers cannot prevent others from accessing, copying, or disseminating the digital assets mapped by NFT.
Despite China’s strict stance on cryptocurrencies, the country recognizes the potential of blockchain technology, the foundation of virtual assets, for building national digital infrastructure. As the report states, “As a new application of blockchain technology, NFT has certain development potential.”
In conclusion, as China navigates the complex waters of digital asset regulation, it seems that the lines between NFTs and cryptocurrencies are getting blurrier than the Great Wall seen through a Beijing smog.
