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China’s top prosecution agency is warning NFT users of possible economic exploitation through price gouging
The Chinese government pushed the country to embrace the digital economy after the global COVID-19 pandemic. The country has largely launched the digital yuan in anticipation of broader adoption of its currency as a global reserve. The digital yuan is expected to significantly help improve the overall liquidity of cryptocurrencies in the Asian continent. Moreover, Hong Kong is preparing to adopt crypto-friendly regulations next month, which has greatly attracted Chinese banks to invest in cryptocurrency startups.
China in the NFT market
According to a theoretical research work published by the Supreme People’s Procuratorate of the People’s Republic of China, the NFT market requires appropriate regulations to ensure safe innovation and ultimate investor protection. The blog post “NFT Legal Features and Risk Management Against the Background of the Digital Economy” recommended risk research and accurate sentencing and punishment of crimes. However, the publication pointed out the importance of NFTs in the development of cultural repository resources.
“As a form of NFT application, digital pools themselves have the attributes of virtual assets. Blind and uncontrolled development can easily lead to illegal fundraising, and multiple risks such as fraud and malicious hype should be paid attention to urgently.” male.
Chinese prosecutors note that investors should be wary of NFT projects buzzing about their projects just to raise money through ICO-like programs. Notably, the Chinese central bank banned initial coin offerings after the hype for the Ethereum ICO, deeming it an illegal fundraising practice. Over the years, the People’s Bank of China (PBoC) has issued numerous bans on cryptocurrency exchanges among other related activities in its jurisdictions.
According to Chinese prosecutors, NFT creators are hiding in plain sight through the use of airdrops, blind funds, limited sales, and tuning. The authors further added that the initial hype for the NFT takes advantage of the fact that there is no reasonable pricing mechanism and sufficient value support behind the inflated prices.
With NFT creators able to create smart contracts with rules that enable them to collect taxes for each transaction, Chinese prosecutors have noted that most NFT projects develop into illegal pyramid schemes.
As a result, prosecutors have urged NFT creators to report all financial activity in accordance with the law in order to prevent NFT-related crimes.
The bigger picture
As the infrastructure for NFTs expands with the adoption of cryptocurrency, countries around the world are working to craft relevant tax frameworks. Moreover, the NFT market is expected to touch several industries including the fashion market, food supply chain, automotive industries, and more. In this regard, the overall trading volume and market valuation are expected to increase significantly in the coming years.
However, China has not yet outgrown its position on crypto assets despite the growing demand from the mainland population.
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China’s top prosecution agency is warning NFT users of possible economic exploitation through price gouging