A joint initiative aiming to prevent risks associated with non-fungible tokens (NFTs) was issued by the China National Internet Finance Association, China Banking Association and Securities Association of China on 13 April 2022.
The Initiative to Prevent relevant Financial Risks of Non-fungible Tokens is the first NFT-themed official document involving compliance since recent rapid development of NFTs in China.
The initiative is only a self-regulatory statement and not mandatory regulatory rules.
But considering the special status of the three associations as official industry self-regulatory organisations, to a great extent it still represents the regulatory attitude and trend of supervision.
Affirms positive role of NFTs and points out related risks. The initiative mentions that “China’s NFT market is getting increasingly hot in recent years”, and translates “NFT” into “非同质化通证” instead of “非同质化代币”. Not only does this give an official Chinese translation for NFT for the first time, but it also affirms the application of an NFT concept in China, and explicitly distinguishes it from cryptocurrencies (tokens, or “代币”), which are strictly prohibited.
It also defines an NFT as an innovative and distinct application of blockchain technology, and confirms it has a certain value in contributing to China’s digital economy, while promoting the development of cultural and creative industries.
It also points out that NFTs may be accompanied by potential risks of speculation, money laundering and other illegal financial activities.
Encourages innovation and uses NFTs to motivate the real economy. The guideline advises adopting a reasonable selection of application scenarios, and to standardise application of blockchain technology to give full capacity for the positive role of NFTs in promoting a digital economy.
It proposes that the value of NFT products should have a sufficient pricing basis, and a…
