The Chinese government has been discouraging investors from purchasing and selling NFTs in the country with the Economic Daily, a top-selling news agency in China, calling for a more stringent regulation on digital collectables.
China’s Internet Financial Association, the China Banking Association and the China Securities Association have set a warning in a joint statement directed to the local crypto enthusiasts that there are financial risks related to hyping the assets including money laundering and other illegal financial activities, according to a report by Coindesk.
‘NFTs must not be used in the issuance of financial assets such as securities, insurance, loans or precious metals,’ said in the statement published on the website of the China Banking Association.
NFTs are ownership certificates of unique digital items in the forms of video, recording or digital artwork. These collectables have gained traction in China and are then embraced by tech companies in the country like Ant Group and Tencent Holdings.
However, these marketplaces are not allowed to provide trading venues or financing services for NFTs.
Although cryptocurrencies are barred from use in China as well as initial coin offerings and block reward mining, NFTs are left untouched by the government and are continued to be in the circulation of digital markets for such tokens.
This presented a loophole for the crypto ban, especially since NFTs are sold and purchased through the use of digital currencies like Ether (ETH), Bitcoin (BTC), Tether (USDT) and Binance coins (BNB).
The regulating bodies mentioned above then warned against these practices and stated that Chinese investors who are interested in NFTs should not use virtual currencies as pricing settlement tools for transactions.
Moreover, banks are also required to carry out real-name authentication for the issuance of selling and purchasing entities. This is to ensure that the customer’s identity is properly preserved in case anti-money laundering checks are made.
Banks overseeing the transactions should not directly or indirectly invest in NFTs nor provide financing for investors to invest in these digital collectables, according to a report by Coingeek.
In addition to this, China’s largest messaging service WeChat has also banned accounts associated with the use of NFTs as a means to curb the enthusiasm for such assets.
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