China’s regulatory and banking associations target NFTs in new restrictions
China proposes restrictions on non-fungible tokens (NFTs) as three industry bodies jointly issued guidelines to prevent the NFT market from overheating.
In a Wednesday notice, The China Banking Association, the China Internet Finance Association and the Securities Association of China issued a joint initiatives aimed at encouraging innovation and applications in NFTs that can promote digitalization of the cultural industries as well as resolutely curb the tendency of NFT financialization and securitization to reduce the risks around illicit activities.
The China Banking Association said institutions should not create NFTs whose underlying characteristic include bonds, insurance, securities previous metals or other financial assets.
NFT’s nonfungibility should not be weakened so as to indirectly facilitate initial coin offerings. Cryptocurrencies including Bitcoin (BTC), Ether (ETH) and stable coin Tether (USDT) should not be used for the pricing and settlement of NFT transactions.
Platforms should not provide centralized exchanges for NFTs. Platforms should perform real-name authentication for NFTs issuers, dealers and buyers, and follow Anti-Money Laundering requirements. Associations and firms should not directly or indirectly invest in NFTs or provide financial support to others for doing so.
China has already banned initial coin offerings, cryptocurrency transactions and crypto mining, restricting NFT’s financial activities can limit the innovation and creation in the web 3, which is commonly known as the next internet revolution that is building a decentralized internet on crypto tokens.
Chinese technology giants such as Tencent and Alibaba-affiliated Ant Group have created consortium blockchain networks where creators can sell their works and users can buy their digital collectibles.
However, the consortium blockchain networks differentiae itself from token-base public blockchain like Ethereum by disabling cryptocurrency. Transactions are done only in Chinese yuan and the marketplaces don’t allow reselling like OpenSea and other NFT marketplace do.
Online marketplace like Jingtan, which is operated by Ant Group on its consortium blockchain Antchain, used a phase “digital collectible” to describe the digital assets it issued, instead of referring it as non-fungible tokens (NFTs) in an attempt to align with the government’s increasing scrutiny of any speculative activities related to crypto.
NFTs are digital assets that represents real-world objects like art, music, videos, and videos, buyer’s ownership recorded on that blockchain.
Ant Group and Tencent Holdings have tightened rules to restrict their digital collectible trading platforms in an effort to avoid potential scrutiny of their digital collectible businesses.
For example, Jingtan has updated its policy to increase the penalty for trading digital collectibles through an over-the-counter (OTC) desk, and snatching up digital collectibles during sales with malware.