key takeaways
- A joint group of Chinese regulators has released regulatory initiatives for the non-fungible token space.
- The authorities pointed to the innovative aspects and potential of the technologies, but also warned of the risks.
- The group presented many initiatives that industry participants should adhere to.
The China Internet Finance Association, the China Banking Association and the China Securities Association have launched a joint initiative with the aim of managing the risks associated with NFTs. While acknowledging the innovation that has given way to blockchain technology, the group of authorities warned of “hidden risks”.
Chinese authorities approach NFTs with caution
Unlike its hard-line stance on crypto and mining, China’s governing bodies seem a bit more open to NFTs, at least for now.
Today, the China Internet Finance Association, the China Banking Association, and the China Securities Association jointly released their initiative on non-fungible tokens. Writing that the country’s NFT market has “continued to heat up” and acknowledging the “innovative application of blockchain technology,” the governing bodies nonetheless mandated adherence to a variety of different initiatives aimed at managing the technology’s perceived risks.
The first initiative emphasized the need to promote innovation, calling for approaching innovation with integrity so that the economy could benefit. An explanation of what this means followed, including guidance such as standardizing applications of blockchain technology.
The second initiative highlighted by the authorities was the need to approach technology taking into account human nature, such as the tendency to speculation. The details of this included moderating the increasing financialization and securitization of token non-fungible assets, as well as preventing illicit activities.
The association then went on to list six codes of conduct that industry participants should follow. Underlying assets such as precious metals or securities are not included as part of NFTs, nor is fractional ownership. In addition, centralized trading (eg market makers) of NFTs would be prohibited. Cryptocurrencies should not be used for NFT pricing and settlement, authorities also wrote before listing anti-money laundering measures and knowing your customers as requirements. Lastly, the group mentioned that non-fungible tokens will not be funded.
Additionally, the agencies jointly called on consumers to demonstrate personal risk management practices, such as resisting the urge of rampant speculation and adequately protecting one’s digital assets.
Disclosure: At the time of writing, the author of this article owned BTC, ETH, and several other cryptocurrencies.
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