China Warns of Money Laundering Risks Arising from NFTs
China has warned of the financial risks associated with non-fungible tokens (NFTs) as three industry bodies issued guidance to prevent crime in the digital asset market.
Non-fungible tokens (NFTs) are ownership certificates of a unique digital item such as a video, recording, or cyber artwork. These digital collectables are gaining traction in China like the rest of the world and have been embraced by tech companies including Ant Group and Tencent Holdings.
“In recent years, China’s NFT market is getting increasingly hot,” China’s banking, securities and internet finance associations said in a joint statement.
Although NFTs could contribute to China’s digital economy, they could also lead to speculative trading, money laundering, and illegal financing, said the trio, who also issued a joint ban on cryptocurrency trading last year.
NFTs must not be used in the issuance of financial assets such as securities, insurance, loans or precious metals, said the statement published on the website of the China Banking Association.
The associations also barred members from providing trading venues, or financing, for NFTs.
In addition, the associates said that cryptocurrencies must not be used to price, or settle NFTs. According to the statement, real-name authentication is required for NFT issuers, buyers and sellers, for anti-laundering purposes.
Chinese technology giants including Jack Ma’s Ant and video-games developer Tencent have opened online marketplaces, while a growing number of companies are exploring NFTs.
Last month, Xtep International released its first digital collection of running shoes, and last year, the official Xinhua news agency issued a digital media photo collection via NFTs.