China Continues to Tighten Its Digital Asset Market

China is further tightening its digital asset market as the regulators warn of criminals using the space for illicit activities.

NFT market is getting increasingly “hot”

Days after a Chinese media outlet had called for an urgent need for oversight of digital collectibles, three industry bodies have jointly issued guidelines in the country.

China’s government-managed bodies, namely, the National Internet Finance Association of China, China Banking Association and the Securities Association of China have warned financial institutions against facilitating ‘illegal’ NFT trading on Wednesday.

Last year, these state-backed associations had also taken a stringent stance when it came to curbing the Chinese crypto market. Subsequently, China had banned initial coin offerings, crypto mining and cryptocurrency transactions.

The three regulators also highlighted risks like speculation, money laundering and illegal financial activities associated with non-fungible tokens (NFTs), according to recent reports.

China’s banking, securities, and internet finance associations acknowledged that

“In recent years, China’s NFT market is getting increasingly hot. But, institutions are now asked to not provide a financing platform or even a centralized exchange for NFT investments,” the statement noted.

China’s lack of a framework

However, China is yet to lay down a regulatory framework that could govern NFT exchange in the country. Even with current guidelines, the watchdogs cautioned that NFTs should not be used for the issuance of financial assets like securities, insurance, loans, or precious metals.

“Cryptocurrencies such as bitcoin, ether and tether should not be used for the pricing and settlement of NFTs,” the notice said.

There is also a need to authenticate the real names of NFT issuers, buyers, and sellers, for anti-laundering purposes, however, this may not majorly affect the art market.

“The guidelines may not have too much of impact on NFTs of an art nature for now. As long as they are not divided into shares, art NFTs are generally non-homogeneous and they are far from financial products,” China-based NFT artist Charles He told SCMP.

Despite some of these legislative concerns, the Chinese television network, Broadcaster Shandong Television is reportedly developing an NFT marketplace. Previously, Xinhua News Agency had made a similar announcement, which highlighted the interest of government-owned media enterprises in the NFT space.

Curbing criminal activity

However, guidelines around NFTs and the risks associated with them weren’t the only warnings that came out of China lately.

Wen Xinxiang, director of the payment and settlement department of PBoC also emphasized the need for better regulating fields like crypto to curb criminal activity.

Xinxiang also expressed the view that “criminals forge fraudulent funds into normal corporate and personal capital transactions, or use virtual currencies, underground banks, and other channels to find ways to circumvent monitoring and interception.”

Officials from the Chinese Ministry of Public Security have also gone ahead to state that USDT is most commonly used by the Chinese fraud groups.

Xinxiang continued that had also remarked that the general public should ensure the safety of their own funds by firmly establishing a sense of law. The translated statement said, the public should “use accounts according to law, refuse to rent, lend, sell accounts, and help others transfer money, and must not covet small profits and become accomplices of criminals.”

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