China’s NFT Warning: A New Regulatory Crackdown Looming Over the Digital Collectible Market?

Chinese legal agency cautioning NFT craze, dimly lit courtroom scene, shadowy figures scrutinizing digital art, chiaroscuro style, tension and uncertainty in the air, blockchain technology in the background, somber and contemplative mood, hint of global impact.

China’s top national legal prosecution agency, the Supreme People’s Procuratorate, recently issued a warning regarding non-fungible tokens (NFTs), stating that these digital assets share similar attributes to virtual assets, which are banned in the country. This announcement has raised concerns among NFT enthusiasts who believed that digital collectibles could circumvent the current cryptocurrency restrictions.

In 2021, China imposed a crackdown on local crypto trading and severed bank connections to crypto-related services. This move effectively wiped out the local industry. However, NFTs, as digital collectibles, managed to dodge the regulatory hurdles and gained popularity in the country. With the recent guidelines issued for NFT treatment, it seems China is now taking a more cautious approach.

The Supreme People’s Procuratorate has called for stronger risk research and judgment, and for the accurate punishment of crimes relating to NFTs. The report published on Monday states that NFTs, despite their popularity, carry multiple risks, including financial, management, and network security risks. Notably, legal risks are among the main concerns. Prosecutors are reportedly keeping a close watch on the situation.

One of the arguments presented by the agency revolves around the inability of NFT owners to fully “enjoy” the ownership of digital art. Although NFTs provide unique digital identifiers to virtual or real items, allowing for proof of ownership on a blockchain, the agency argues that digital assets mapped by NFTs can still be replicated and distributed. In the eyes of the law, consumers do not enjoy full ownership of NFT digital assets, as they cannot prohibit others from accessing, copying, or disseminating the digital assets.

The report explains that consumers only have an exclusive right to prevent others from tampering with the NFT ownership recorded on the blockchain, not the actual digital assets associated with it. This legal perspective challenges the common understanding of NFT ownership and calls into question its future in the Chinese market.

Despite the new cautionary stance on NFTs, China acknowledges the potential of blockchain technology and is exploring ways to utilize it for national digital infrastructure development. The prosecution agency recognizes that NFTs have certain potential as a new application of blockchain technology.

As the Chinese government adopts a more skeptical view of NFTs, enthusiasts and collectors within the country must remain vigilant and consider the possible legal ramifications stemming from this latest report. It remains to be seen how these developments will impact the broader NFT ecosystem and if it will lead to further regulatory scrutiny around the world.

Source: Coindesk

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