On 13 Apr. 2022, the National Internet Finance Association of China, China Banking Association, and Securities Association of China jointly issued an Initiative to prevent financial risks related to non-fungible tokens (NFTs).
China’s NFT market has been heating up in recent years. As an innovative application of blockchain technology, NFTs are accompanied by potential risks of speculation, money laundering, and other illegal financial activities.
The Initiative seeks to curb any financialization and securitization tendency of NFTs and strictly prevent the risk of illegal financial activities. It proposes the following six codes of compliance conduct:
(1) Not to include financial assets (e.g., securities, insurance, loans, and precious metals) in any underlying asset of NFTs, i.e., not to use NFTs in the issuance and trade of any financial product.
(2) Not to undermine the NFT’s non-fungibility through methods like dividing the ownership or creating batches, i.e., not to facilitate initial coin offering (ICO) covertly;
(3) Not to provide centralized trading (centralized bidding, electronic aggregation, anonymous trading, market makers, etc.), continuous listing transactions, standardized contract trading, and other services for NFT trade, i.e., not to set up any trading venues in violation of regulations.
(4) Not to use cryptocurrencies such as Bitcoin, ETH, and USDT in pricing or settling NFTs.
(5) To conduct real-name authentication for NFT issuers, buyers and sellers, properly keep customer identity information and issuance transaction records, and actively cooperate with anti-money laundering efforts.
(6) Not to invest in NFTs directly or indirectly, or provide any financing support for such investment.
Cover Photo by Yetepireg ILes on Unsplash
Contributors: CJO Staff Contributors Team
