Prosecutors In China To Tighten Down On ‘Pseudo-Innovation’ In The NFT Business

May 17, 2023

China NFTs Xinhua News Agency e1649317458401

The Supreme People’s Procuratorate of the People’s Republic of China, the national institution in charge of legal prosecution, issued a statement on the non-fungible token (NFT) market on May 15. Three writers wrote a paper in which they described the prosecutors’ view of market risks and the following grounds for more aggressive enforcement. It  focuses on the “securitization” of NFTs, i.e. the shared ownership of one copy by numerous users, which, according to the authors, no longer adheres to the requirements of non-reproducibility, indivisibility, and uniqueness.

Prosecutors view “inflation of prices” on NFTs as one of the concerns, induced by marketing strategies such as airdrops, blind boxes, and limited sales. Using an ambitious combination of aesthetic and economic research, the writers point to a lack of “artistic beauty” and a “reasonable pricing mechanism” as the causes of some non-fungibles’ excessive costs. Marketing concepts such as incentives and dynamic rights and interests, according to the procuratorate, can readily morph into unlawful pyramid schemes.

A “crackdown on criminal activities,” equal focus on punishment and governance, and investment in risk research and law popularisation are among the recommended responses to these concerns. According to the report, it would be up to national prosecutors to discern a “true innovation” from a “pseudo” one and safeguard it.

Despite Hong Kong’s continuous development in crypto acceptance, China’s anti-crypto attitude has not altered. Furthermore, the country appears to have the same unfavorable attitude towards Artificial Intelligence (AI). In early May, a suspect was apprehended and imprisoned in China’s Gansu area after reportedly utilizing ChatGPT to manufacture false news reports.

While the NFT market “has certain potential,” Chinese prosecutors feel it is fraught with financial, security, and “legal” hazards. As a result, the market requires not just thorough control, but also a crackdown on “pseudo-innovation.”

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