Chinese Prosecutors Target NFT Market “Pseudo-Innovation”

On May 15, the Supreme People’s Procuratorate of the People’s Republic of China shared its thoughts on the nonfungible token (NFT) market. This national agency is responsible for legal prosecution.

Three authors outlined the prosecutor’s perspective on market risks and the reasons for combating them more aggressively in an article.

The article focuses on the trend of “securitization” of non-fungible tokens, i.e., the shared ownership of one copy by multiple users, which, in the opinion of the authors, no longer satisfies the criteria of non-reproducibility, indivisibility, and uniqueness.

Prosecutors see, among other dangers, the “inflation of prices” caused by marketing techniques such as airdrops, blind boxes, and limited sales.

The authors attribute the inflated prices of certain nonfungibles to a lack of “artistic beauty” and a “reasonable pricing mechanism,” using a peculiar blend of aesthetic and economic analysis.

According to the agency, marketing models like rewards, dynamic rights, and interests can rapidly morph into illegal pyramid schemes.

The proposed response to these risks consists of a “crackdown on criminal activities”, an equal emphasis on punishment and governance, and investments in risk research and law dissemination.

According to the article, national prosecutors would be tasked with distinguishing between “true innovation” and “pseudo” and protecting the former.

China’s anti-crypto stance has not changed despite Hong Kong’s consistent crypto adoption growth. Additionally, the nation appears to have the same hostile attitude toward artificial intelligence.

A suspect was detained and arrested in the Gansu district of China at the beginning of May on suspicion of using ChatGPT to generate fake news stories.

Chinese prosecutors believe that the NFT market, despite having “certain potential,” poses financial, security, and “legal” risks. Consequently, the market requires not only comprehensive governance but also a crackdown on “pseudo-innovation.”