In a recent development, China’s highest national agency responsible for legal prosecution, the Supreme People’s Procuratorate, has raised concerns about non-fungible tokens (NFTs) and their resemblance to virtual assets, which are banned in the country. The agency published guidelines aimed at addressing the treatment of NFTs and emphasized the need for thorough risk assessment and appropriate punishment for related crimes.
The Rise of NFTs in China
Following China’s ban on cryptocurrency trading and related services in 2021, the local crypto industry largely disappeared. However, NFTs emerged as a new trend, gaining popularity as digital collectibles that were considered distinct from high-risk cryptocurrencies. This resulted in a surge in NFT adoption within China.
Attributes and Risks of NFTs: The report released by the prosecution agency highlights the attributes of NFTs and the associated risks. While NFTs enable the attachment of unique digital identifiers to virtual or real items, providing proof of ownership through blockchain technology, the agency argues that true ownership and control over digital art are still problematic. NFTs can be replicated and distributed, limiting consumers’ ability to fully enjoy ownership rights.
The legitimacy of the right source of the work itself is the decisive factor for the healthy and orderly development of digital works NFT transactions.
Legal Implications and Consumer Protection
From a legal perspective, the report clarifies that consumers do not possess ownership of the NFT digital assets they purchase in the traditional sense defined by civil law. Additionally, consumers lack the ability to prohibit others from accessing, copying, or disseminating the digital assets represented by NFTs. Instead, consumers possess an exclusive right to prevent tampering with the ownership record on the blockchain.
China’s Stance on Blockchain Technology: Despite China’s cautious approach to cryptocurrencies, the country recognizes the potential of blockchain technology, which forms the foundation of virtual assets. The prosecution agency acknowledges that NFTs, as a novel application of blockchain technology, hold development potential. This suggests that China is interested in leveraging blockchain for national digital infrastructure projects.
Conclusion: China’s Supreme People’s Procuratorate has issued a warning regarding the attributes of NFTs and their similarity to banned virtual assets. While NFTs have gained popularity in China as digital collectibles, their financial, management, network security, and legal risks should not be overlooked. The report emphasizes the importance of comprehensive risk assessment and appropriate punishment for crimes related to NFTs. Despite its reservations about cryptocurrencies, China acknowledges the potential of blockchain technology, including its application in NFTs and national digital infrastructure.