Beijing regulator warns about NFT speculation, illegal fundraising. Crackdown coming?
Beijing’s market regulator warned that projects marketed in the country as non-fungible tokens (NFTs) or with metaverse-related concepts risk being involved in illegal fundraising or fraudulent activities.
See related article: China’s ‘Instagram’ gets NFT makeover with Conflux
Beijing Municipal Administration for Market Regulation said in a Tuesday notice that many of these projects lured investors with the concept of “metaverse investment” or NFTs that contain speculative elements and come with high risk.
“Stay alert for new patterns of illegal fundraising activities, and resist being influenced by hype and speculation,” the authority said.
China banned cryptocurrency transactions in 2021, but has yet to spell out hard and fast rules for NFTs. That hasn’t stopped the country’s consumers from buying and trading what are known as “digital collectibles” in China, and many platforms offer such services.
For example, Xiaohongshu, or “Little Red Book,” a popular social media platform described as the Chinese equivalent of Instagram, has developed its NFT section called “R-Space”, with a recent collaboration with layer-1 public blockchain Conflux Network.
Yifan He, chief of Red Date Technology, the developer of the state-backed blockchain infrastructure Blockchain-based Service Network, told Forkast last month that Chinese regulators are particularly strict about businesses that come with so-called unauthorized capital pools and Chinese NFT trading platforms process transactions through capital pools.
Last month, Hainan province, a popular tourist destination in South China, pledged to step up oversight of digital collectibles, which the provincial authorities said come with risks of fraud, money laundering and illegal fundraising.
In October, police in Shangqui city in eastern Henan province said that they arrested eight people on suspicion of conducting internet scams through digital collectibles to pocket over 2.65 million yuan (US$391,000).
See related article: China’s Hainan province to step up NFT supervision