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China's Top Prosecution Agency Says Although Not Banned NFTs Have Crypto-Like Attributes
NFT collections, targeted in new published guidelines, have been gaining popularity in China since the country prohibited the trading of cryptocurrencies.
Updated May 18, 2023, 3:49 p.m. Published May 17, 2023, 9:21 a.m.
China's highest national agency responsible for legal prosecution has warned non-fungible token (NFT) digital collections share "the attributes of virtual assets," which are banned in the country.
The Supreme People's Procuratorate of the People's Republic of China published its guidelines for the treatment of NFTs on Monday, recommending stronger "risk research and judgment" and to "accurately punish crimes."
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After China cracked down on local crypto trading and cut off banks from offering crypto-related services in 2021, the local industry all but vanished – until NFTs stormed the scene, and started gaining popularity in China as "digital collectibles," that didn't fall into the same basket as high-risk crypto. But the prosecution agency's new report warns otherwise.
"While it has high popularity, it is very likely to cause financial risks, management risks, network security risks, etc., especially the legal risks. Prosecutors are paying close attention," the report from Monday said.
NFTs attach a unique digital identifier to virtual or real items, that allows proof of ownership to be recorded on a blockchain. China's prosecution agency argues owners cannot really "enjoy" the ownership, particularly of digital art, which can still be replicated and distributed.
"From the perspective of property rights, consumers do not enjoy the ownership of the NFT digital assets they purchase in the sense of civil law, and consumers cannot prohibit others from accessing, copying or disseminating the digital assets mapped by NFT," one author of the report said. "What consumers enjoy is only an exclusive right to prohibit others from tampering with the ownership of the NFT recorded on the blockchain."
Despite China's aversion to crypto, the country is looking to harness the blockchain technology that underlies virtual assets to build out national digital infrastructure.
"As a new application of blockchain technology, NFT has certain development potential," the prosecution agency said.
Read more: A Peculiar Flavor of NFTs Is Thriving in China – One Regulators Can Abide
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