Chinese Banking Associations Target NFTs
As the market heats up, the tokens are increasingly under the microscope in China.
Apr 13, 2022 at 11:53 a.m. UTCUpdated May 11, 2023 at 4:59 p.m. UTC
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China's Internet Financial Association, the China Banking Association and the China Securities Association want to "resolutely curb" the tendencies of non-fungible tokens (NFTs) to be made into financial products and securitized and to limit the risk of illegal financial activities related to the tokens, the group said in a statement published Wednesday.
- Two of these three self-governing bodies nearly one year ago presaged one of the most stringent crackdowns in China to date when they told their members that they are forbidden from conducting business with crypto companies. Just days later, the State Council – the country's chief administration body – called for a crackdown on crypto mining and trading.
- In Wednesday's statement, the three associations said that NFTs have the potential to promote "the digitalization of industries and digital industrialization," but warned against financial risks related to hyping the assets, money laundering and other illegal financial activities.
- Chinese authorities have previously called out financial risks resulting from hype and speculative trading as reasons for cracking down on crypto more broadly.
- The associations listed six behavioral principles to be followed: NFTs don't represent underlying assets like securities or precious metals; the non-fungibility of the tokens must not be weakened through methods like dividing them so that the distribution mechanism doesn't change; centralized trading shouldn't be provided; pricing and settlement of NFT transactions shouldn't include cryptocurrencies; platforms must perform real-name authentication and anti-money laundering check; financing support for investments in NFTs shouldn't be provided.
- Despite China's fight against crypto, NFTs continue to be issued by major firms and even government bodies. In October, Ant Group and Tencent, two of China's biggest tech companies, renamed their NFT products to "digital collectibles," likely to distance their offerings from NFTs and the associated market hype.
- State media and local authorities have also periodically issued warnings over the NFT market.
- Wednesday's statement also called on consumers to protect themselves by having the "correct consumption concept," resisting speculative investments and staying away from illegal financing activities.
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Eliza Gkritsi is a CoinDesk contributor focused on the intersection of crypto and AI.