China is cracking down on NFTs. China’s national agency responsible for legal prosecution, the Supreme People’s Procuratorate, has issued a document aimed at establishing a legal framework for NFTs. Let’s take a closer look at what this means for the digital asset market.
China and NFTs
The Procuratorate acts as a public prosecutor for criminal cases. It conducts both the relevant investigations and prosecutions of such cases, as is typical of inquisitorial systems used in civil law jurisdictions. Now, it has published guidelines addressing the handling of NFTs. Through this, it emphasizes the need for a thorough risk assessment and appropriate punishment for associated crimes.
In this document, Chinese authorities are particularly striving to differentiate “true innovation” from “pseudo-innovation.” The report elucidates from a legal standpoint that consumers, when they buy NFT digital assets, do not acquire ownership in the conventional sense as defined by civil law.
Furthermore, the document states that consumers are powerless in preventing others from accessing, copying, or sharing the digital assets signified by NFTs. What consumers do retain, however, is an exclusive privilege to safeguard the ownership record on the blockchain from any potential alterations.
The Supreme People’s Procuratorate has also expressed apprehension about NFTs, particularly due to their similarity to virtual assets. Those are prohibited in the country. Furthermore, authorities are highlighting the risks associated with NFTs and are particularly questioning the absolute ownership and control over digital art, as written by the supreme prosecution agency of China.
What Does This Mean for the Future?
The Chinese authorities are responding to the fact that NFTs are becoming increasingly popular in the country. This popularity is paradoxically boosted by the ban on cryptocurrency trading and associated services. Introduced in 2021, it has almost eradicated the local crypto industry.
According to them, you can duplicate NFTs. This can hinder consumers’ full enjoyment of ownership rights. The issue of true ownership in the virtual space remains a substantial challenge in their view. However, China recognizes the potential of blockchain technology and the development potential of NFTs.
Nevertheless, China looks interested in blockchain and its uses. But the government seems eager to control it and reserve it for nationalized use. Finally, the Chinese government is already planning to launch its own NFT marketplace enabling users to trade digital collectibles. It will run on the China Cultural Security Chain network.
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