According to Chinese prosecutors, NFT creators hide in plain view through the use of airdrops, blind boxes, limited sales, and synthesis.
The Chinese government has pushed the country to digital economy adoption post-Covid-19 global pandemic. The country has significantly rolled out the digital yuan in anticipation to widen the adoption of its currency as a global reserve. The digital Yuan is expected to significantly help improve the overall liquidity of cryptocurrencies in the Asian continent. Moreover, Hong Kong is preparing to adopt crypto-friendly regulations next month, which has significantly attracted Chinese banks to invest in crypto startups.
China on NFT Market
According to a theoretical research work published by the Supreme People’s Procuratorate of the People’s Republic of China, the NFT market requires proper regulations to ensure safe innovation and ultimate investors’ protection. The blog post titled “The Legal Attributes and Risk Governance of NFT under the Background of Digital Economy” recommended risk research and judgment and accurately punishing crimes. Nevertheless, the post pointed out the importance of NFTs in the development of cultural stock resources.
“As an application form of NFT, digital collections themselves have virtual asset attributes. Blind and disorderly development can easily lead to illegal fundraising, Multiple risks such as fraud and malicious hype must be paid attention to urgently,” the post noted.
The Chinese prosecutors noted that investors should be wary of NFT projects that hype their projects only to raise money through ICO-like programs. Notably, the Chinese central bank banned ICOs after the Ethereum ICO hype, deeming it an illegal fundraising practice. Over the years, the People’s Bank of China (PBoC) has issued several bans on crypto exchanges among other related activities in its jurisdictions.
According to Chinese prosecutors, NFT creators hide in plain view through the use of airdrops, blind boxes, limited sales, and synthesis. The authors further added that the NFT’s initial hype takes advantage of the fact that there is no reasonable pricing mechanism and sufficient value support behind the inflated prices.
With NFT creators able to create a smart contract with rules enabling them to collect taxes per transaction, the Chinese prosecutors noted that most NFT projects evolve into illegal pyramid schemes.
As a result, the prosecutors urged NFT creators to report every financial activity in accordance with the law in order to prevent NFT-related crimes.
As the infrastructure for NFTs widens with cryptocurrency adoption, countries worldwide are working on formulating related tax frameworks. Moreover, the NFT market is expected to touch many industries including the fashion market, food supply chain, and automotive industries, among others. In this regard, the overall trading volume and market valuation are expected to skyrocket in the coming years.
However, China is yet to overrun its stance on crypto assets despite the increased demand from mainland residents.