A recent article by China’s Economic Daily has called for an urgent need of oversight with digital collectibles in the country.
The media outlet which is directly under the Chinese Communist Party (CCP), believes there to be a number of risks when it comes to investing into NFTs.
Highly speculative secondary market
The translated article began by underlining the speculative nature of NFT marketplaces in the secondary market. It went on to cite industry insiders, who remarked that buyers are hoarding digital goods in the early stages of the technology.
While there is a digital collectibles market, the report pointed out that most buyers are currently in it for the money, through high-risk trades. It went on to question the basis of price appreciation on these collectibles in the resale market, only to insinuate that NFTs are more often than not, risky and speculative.
In its piece, Economic Daily also called for a “joint regulatory mechanism” to overlook the sector, arguing that the ‘digital collectibles‘ have ‘attributes of a commodity, currency, and security.’
It subsequently referred to the additional risk of foreign servers that run the NFT platforms:
“There is also a layer of risk for domestic consumers: ‘NFT’ is essentially a token abroad, generally built on the public chain, and the value of the work is recognized.” The article continued, stating that most of the trading platforms are based on alliance chains, pointing to potential counterparty risk after a platform is shut down.
Chinese news media explores own NFT marketplaces
Recently, WeChat announced that it had banned several accounts of NFT marketplaces. The Chinese social media giant had argued that cryptocurrency speculation was the main reason for the ban, recently announcing that it would be joining the digital yuan pilot program.
Despite some of these legislative concerns, the Chinese television network, Broadcaster Shandong Television is reportedly developing an NFT marketplace. Previously, Xinhua News Agency had made a similar announcement, which highlighted the interest of government-owned media enterprises in the NFT space.
At its conclusion, the Economic Daily article advised consumers to move into the space with caution before a regulatory mechanism is put in place by the administration.
Meanwhile, China Business Law Journal has already highlighted the compliance risk of NFTs in China.
“If NFTs are offered to the public with a promise of liquidity and the issuer provides other services that increase their value, such NFTs may be seen as wrapped in an investment contract – and thus become the securities themselves,” explained Tony Wang, partner at Tian Yuan Law Firm.
The Journal continued by specifying that domestic trading of NFTs in the secondary market is subject to strict supervision.
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