China, the world’s most populous country, has suggested a ban on non-fungible tokens (NFTs). China’s banking, securities, and internet finance organization revealed plans to ‘curb’ NFT-based transactions in the country on Wednesday, April 13th.
The three regulating bodies, namely the China Internet Financial Association, China Banking Association, and China Securities Association, have voted to restrict illicit financial activity involving cryptocurrency.
In the country, initial coin offers (ICO) are already prohibited. Not only that, but cryptocurrency transactions and mining are also prohibited in the country. Now, excluding NFTs from a number of lucrative financial opportunities can help the government distance itself from Web3.0 advancements.
China has a strong economic foundation, which is bolstered by its 1.4 billion-strong population. In many aspects, China has the potential to be a strong market for DeFi, GameFi, and other Web3.0 products.
According to China’s governing organizations, NFTs are undoubtedly the industry’s building blocks of digitalization, but they are influenced by financial risk, money laundering risks, and illicit financial activities.
The association has established several strict regulations and requirements for users to follow, which are given below:
NFTs do not represent real assets such as stocks or precious metals; instead, they act as a proxy for them.
To ensure that the distribution mechanism does not change, the tokens’ non-fungibility must not be compromised by methods such as dividing them:
The provision of centralized trading should be avoided.
Cryptocurrencies are not permitted to be used in the pricing, purchase, or sale of NFTs.
The recommendations are designed to prevent money laundering; thus platforms should use real-time authentication.
Organizations must not contribute funds to invest in NFTs, either directly or indirectly.
Despite the years-long battle against crypto, several large internet companies, such as Ant Group and Tencent, have created a permission blockchain to promote their NFT collection.
The permissioned blockchain operates independently of the open-source Ethereum Blockchain, and the NFT collection is only accessible to a select group of users.
To read our blog on “Cryptocurrencies are increasingly being avoided by NFT merchants”, click here.
