The China Internet Finance Association, China Banking Association, and China Securities Association have launched a shared initiative to mitigate the risks associated with NFTs. While praising the innovation ushered by blockchain technology, the authorities also warned about “hidden threats.”
Unlike their hardline attitude on cryptocurrencies and mining, China’s governmental organisations seem to be somewhat more receptive to NFTs, at least for the time being.
The China Internet Finance Association, the China Banking Association, and the China Securities Association announced their collaboration on a non-fungible token effort. Despite acknowledging that the country’s NFT market has “continued to heat up,” and the “innovative application of blockchain technology,” the Chinese regulating bodies have mandated compliance with various measures to mitigate the potential NFT-associated risks.
The first initiative stressed the importance of innovation, urging entrepreneurs to pursue innovation with integrity to improve the economy. This was followed by an explanation of what this meant, which included guidelines on the standardisation of blockchain technology applications.
The second initiative emphasised the need of approaching technology with human nature in mind, including the propensity for speculation. This involves restraining the increasing financialisation and securitisation of non-fungible token assets and deterring criminal conduct.
Afterwards, the group published six codes of conduct that industry participants should adhere to. NFTs do not consist of underlying assets such as precious metals or securities and fractional ownership. Centralised trading for NFTs (e.g., market makers) would be prohibited. Before requiring anti-money laundering and know your customer measures, the authorities also said that cryptos should not be utilised for the pricing and settlement of NFTs and that non-fungible tokens are not financed.
Additionally, the authorities urged customers to adopt personal risk management measures, such as rejecting the temptation to engage in rampant speculation and adequately protecting one’s digital assets.
