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On May 15, the Supreme People’s Procuratorate of the People’s Republic of China, the national agency responsible for prosecution, shared its thoughts on the non-fungible token (NFT) market. In a published article, the three authors outlined the prosecution’s vision of market risks and the following reasons for more active enforcement of this provision.
The article draws attention to the trend of “securitization” of NFTs, i.e., shared ownership of one copy by several users, which, according to the authors, no longer meets the criteria of irreproducibility, indivisibility and uniqueness.
Among other threats, prosecutors see “price inflation” on NFTs caused by marketing practices such as airdrops, blind boxes and limited sales. Taking an ambitious view of aesthetic and economic analysis, the authors note the lack of “artistic beauty” and “reasonable pricing mechanism” behind the inflated prices of some non-fungible goods. According to prosecutors, marketing models such as rewards and dynamic rights and interests can also easily turn into illegal pyramid schemes.
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Suggested responses to these risks include “criminal suppression”, an equal focus on punishment and governance, and investment in risk research and promotion of the law. Judging by the article, it is the national prosecutors who will take on the task of separating the “real innovation” from the “pseudo” and defending the former.
China has not changed its anti-crypto stance even as Hong Kong has made steady progress towards cryptocurrency adoption. Moreover, the country seems to be just as hostile to artificial intelligence (AI). In early May, local authorities detained and arrested a suspect in the Gansu region of China after he allegedly used ChatGPT to create fake news.
While the NFT market “has some potential,” it carries financial, security, and “legal” risks, according to Chinese prosecutors. Therefore, the market needs not only comprehensive management, but also the suppression of “pseudo-innovation”.
