China proposes restrictions on non-fungible tokens (NFTs) as three industry bodies jointly issued guidelines to prevent the NFT market from overheating.
In a Wednesday notice, The China Banking Association, the China Internet Finance Association and the Securities Association of China issued a joint initiatives aimed at encouraging innovation and applications in NFTs that can promote digitalization of the cultural industries as well as resolutely curb the tendency of NFT financialization and securitization to reduce the risks around illicit activities.
The China Banking Association said institutions should not create NFTs whose underlying characteristic include bonds, insurance, securities previous metals or other financial assets.
Initial coin offerings (ICO) are already banned in the country. Not only this but transactions made in cryptocurrencies, and crypto mining are also banned in the country. Now, eliminating NFTs from several positive financial possibilities can certainly distance the country from Web3.0 developments.
China possesses a strong economic background and the supporting structure is its 1.4 billion population. In many ways, China can be a strong market for DeFi, GameFi, and other Web3.0 products in the industry.
According to the governing bodies of China, the NFTs are certainly the building blocks of digitization in the industry but they are influenced by the financial risk, money laundering probabilities, and illicit financial activities. The association has put down some stringent rules and guidelines listed below that must be followed by the users:
NFTs don’t represent underlying assets like securities or precious metals;
the non-fungibility of the tokens must not be weakened through methods like dividing them so that the distribution mechanism doesn’t change:
centralized trading shouldn’t be provided;
Cryptocurrencies must not be included in the pricing, buying, or selling of NFTs.
The guidelines aim to put a check on money laundering activities and therefore, real-time authentication should be followed by the platforms.
Organizations must not provide directly or indirectly funds to invest in NFTs.
Despite the years-long tough fight against crypto, some major tech firms like Ant Group, and Tencent have managed to showcase their NFT collection by creating a permission blockchain. The permissioned blockchain works separately from open-sourced Ethereum Blockchain and the NFT collection is available to limited participants only.