China Takes Decisive Action Against NFT Market Scammers
- China prosecutors plan to crack down on “pseudo-innovation” in NFT market due to risks and threats.
- NFTs may have potential but they bear financial, security, and legal risks.
- The proposed solution includes a crackdown on criminal activities, governance, and investment in risk research.
Supreme People’s Procuratorate of the People’s Republic of China, the national agency responsible for legal prosecution, shared its thoughts on the non-fungible token (NFT) market in an article published online.
The article, written by three authors, laid out the prosecutors’ vision of the market risks and the following reasons to enforce it more actively.
The authors pointed out that the trend of “securitization” of NFTs, which refers to the shared ownership of one copy by multiple users, no longer corresponds to the criteria of non-reproducibility, indivisibility, and uniqueness. They believe that this trend poses a great risk to the stability of the NFT market and needs to be addressed as soon as possible.
In addition, the prosecutors expressed their concern about the “inflation of prices” on NFTs, which has been triggered by the use of various marketing methods such as airdrops, blind boxes, and limited sales. The authors argue that the inflated prices of some non-fungibles are not backed by an “artistic beauty” and “reasonable pricing mechanism.” According to the procuratorate, marketing models such as rewards and dynamic rights and interests can also easily evolve into illegal pyramid schemes.
The proposed reaction to these risks includes a “crackdown on criminal activities”, equal emphasis on punishment and governance, and investment in risk research and law popularization. The article suggests that it is the national prosecutors who will take on the mission to separate a “true innovation” from the “pseudo” one and protect the former one.
China has not changed its anti-crypto stance, even despite the steady progress in crypto adoption by Hong Kong. Moreover, the country seems to take the same hostile approach toward Artificial Intelligence (AI). In early May, a suspect was detained by local authorities and arrested in the Gansu district of China after allegedly using ChatGPT to generate fake news stories.
Despite the potential of the NFT market, it bears financial, security, and “legal” risks, as Chinese prosecutors believe. Hence, the market needs not only comprehensive governance but also a crackdown on “pseudo-innovation.” However, it is important to keep in mind that this crackdown should not hamper the true innovation and creativity of the market.
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