On May 15, the Supreme People’s Procuratorate of the People’s Republic of China — the national agency responsible for legal prosecution — shared its thoughts on the nonfungible token (NFT) market. In an article, three authors outlined the prosecutors’ vision of the market risks and the reasons to combat them more actively.
The article pays attention to the tendency of “securitization” of NFTs, i.e., the shared ownership of one copy by multiple users, which, in the authors’ opinion, no longer corresponds to criteria of non-reproducibility, indivisibility and uniqueness.
Among other threats, the prosecutors see the “inflation of prices” on NFTs triggered by marketing methods such as airdrops, blind boxes and limited sales. Taking a strange blend of aesthetic and economic analysis, the authors mention a lack of “artistic beauty” and “reasonable pricing mechanism” behind the inflated prices of some nonfungibles. According to the agency, marketing models such as rewards, dynamic rights and interests can also quickly evolve into illegal pyramid schemes.
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The proposed reaction to these risks includes a “crackdown on criminal activities”, equal emphasis on punishment and governance and investment in risk research and law popularization. According to the article, the national prosecutors would take on a mission to separate “true innovation” from “pseudo” and protect the former.
China has not changed its anti-crypto stance despite the steady progress of crypto adoption by Hong Kong. Moreover, the country seems to take the same hostile approach toward artificial intelligence. In early May, a suspect was detained by local authorities and arrested in the Gansu district of China after allegedly using ChatGPT to generate fake news stories.
While the NFT market “has certain potential,” it bears financial, security and “legal” risks, Chinese prosecutors believe. Hence, the market needs not only comprehensive governance; it needs a crackdown on “pseudo-innovation.”