Officials in China’s Hainan province are upping the ante for non-fungible tokens (NFT) supervision in the region. Provincial authorities say they are interested in preventing misuse of the asset class by criminal elements seeking to defraud unsuspecting victims.
The regional markets regulator, the Hainan Provincial Market Supervisory Administration, and nine other regulatory bodies published a memorandum tell NFT providers to seek registration with authorities before offering them to the public.
The disclosure noted that the measure is designed “to promote the healthy development of the digital collection industry and effectively prevent related risks.” Going forward, a license requirement has been put in place for market participants, while regulators are committed to standardizing the NFT market in accordance with existing laws.
The laws include the Auction Law of the People’s Republic of China, the Regulations on Administration of the Registration of Market Entities of the People’s Republic of China, the Administrative Measures for Telecommunications Business License, and the Information Service Management Regulations of Blockchain, among others.
Furthermore, regulators have warned NFT companies to remove advertising content that is misleading consumers in an attempt to sanitize the industry. The memo notes that players who provoke consumers with “whitelisting” or high rewards can be treated as fraud It is suspected that security agencies were urged to “maintain a high pressure, crackdown situation”.
The market regulator also urged law enforcement agencies to collaborate to prevent copyright infringement incidents and prevent large-scale financial risks to politics. Through the Hainan Provincial Department of Tourism, Culture, Radio, Television and Sports, NFT providers must give priority to digital collectibles with Chinese characteristics.
The State of NFTs in China
After the infamous China virtual currency ban in 2021, the communist nation has failed to come up with concise rules for NFTs in the country. Relying on the absence of strict regulations, NFT adoption has continued to increase, fueled by the incursion of government agencies into the industry.
In December, local media reported that the country was inching towards launching a national platform for NFT trading. The platform, a collaboration between state-owned Art Exhibitions China, Huban Digital Copyrights Ltd and the Chinese Technology Exchange, has been touted to serve as a secondary marketplace for NFTs.
While Chinese courts have ruled that digital collectibles are protected under existing proprietary laws, regulators have continued to frown on its use in speculation.
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