China’s Supreme People’s Procuratorate recently highlighted concerns about the growing NFT market. Nevertheless, even with the apprehension, the potential of NFTs to improve the country’s digital economy and blockchain technology has been recognized.
Risks and potential in the Chinese NFT market
China’s NFT market, which is still in its infancy, struggles with a lack of industry standards and government regulation, as noted in the commentary in Procuratorate Daily. This lack of regulatory oversight, combined with the newness of the market, leads to many financial and social risks, including price manipulation, fraud and illegal fundraising, among others.
Prosecutor Wang Xia-feng, a critical voice in the article, pointed out the presence of fake NFTs in the market, warning potential investors about these dubious assets that were not minted on the blockchain.
However, it is not sad. Wang recognized the bright side of NFTs, noting their potential to advance blockchain technology and strengthen the digital economy in China. Citing a May 2022 State Council file, Wang discussed the vision of a regulated culture-based digital asset market.
The role of digital collectibles in protecting intellectual property rights, encouraging content creation and enriching the digital economy was acknowledged, and Wang suggested that authorities distinguish between genuine innovation and criminal activity.
China’s underground NFT market
The sentiment shows China’s growing interest in NFTs, despite its tough stance on cryptocurrency mining and trading. The State Market Regulation Administration reported a staggering increase in NFT-related complaints in 2022, which rose more than 300 times compared to the previous year.
Legal recognition of NFTs came in November 2022, when a court in the city of Hangzhou classified them as virtual property under the country’s e-commerce law.
However, in light of this growing interest, the Chinese Banking, Securities and Internet Finance Associations issued a statement in April 2022 urging members to cut back on NFT funding, which led to most regulated NFT trading platforms ceasing secondary trading services.
However, this has not prevented the growth of an underground NFT secondary market characterized by uncontrolled speculation. This development only further emphasizes the need for clearer rules.
Sun Shan, a scholar at Southwest China University of Political Science and Law and co-author of the paper, believes that future legislation should oblige Chinese consortium blockchain operators and authorities to provide copyright protection in the NFT market, given the widespread copyright infringements.
Although the path may seem difficult, the NFT journey in China has only just begun.
