China's Supreme People's Procuratorate, the nation's top legal prosecution agency, has issued a warning regarding non-fungible tokens (NFTs), stating that these digital collections possess attributes similar to virtual assets, which are banned in China. The agency's guidelines, published recently, emphasize the need for thorough risk assessment and punishment for related offenses.
Ever since China imposed a ban on cryptocurrency trading, the local crypto industry had virtually disappeared. However, NFTs emerged as a new trend, gaining popularity as digital collectibles that were seen as distinct from high-risk cryptocurrencies. Nevertheless, the prosecution agency's latest report challenges this perception.
The report acknowledges the rising popularity of NFTs but highlights their potential for financial risks, management risks, network security risks, and legal risks. Prosecutors are closely monitoring the situation, as the agency believes that the ownership of NFTs, especially digital art, does not grant true ownership since the assets can still be copied and distributed.
According to one author of the report, consumers do not enjoy full ownership rights over the NFT digital assets they purchase under civil law. They cannot prevent others from accessing, copying, or disseminating the digital assets associated with NFTs. Instead, consumers possess an exclusive right to protect the integrity of ownership records on the blockchain.
Despite China's cautious stance on cryptocurrencies, the country recognizes the potential of blockchain technology, which underlies virtual assets like NFTs. The prosecution agency acknowledges that NFTs have developmental possibilities as a new application of blockchain technology.
While NFTs continue to captivate the global market, China's prosecution agency reminds individuals and businesses of the risks involved, signaling a need for tighter regulation and supervision to mitigate potential financial and legal challenges associated with these digital assets.
