Several Chinese business organizations made a warning in the middle of April about the potential financial risks of non-fungible tokens (NFTs).
As stated by China’s banking, internet finance, and securities organizations, NFTs provide some risks that anyone must be aware of. According to the warning, NFTs can not be traded alongside cryptocurrencies or used to develop securitized products.
Decision-makers continue to take industry groups seriously despite the fact that they lack regulatory authority. However, there is a fear in the cryptocurrency industry. Many fear that China’s decision to ban NFTs is the end of the road for further growth of NFTs. Nevertheless, Tech Crunch reported on May 4 that China’s tech titans are showing an increased amount of curiosity.
In light of operations, NFTs can only operate in limited capacities. The main reason for this limitation is that crypto trading is illegal in China. Moreover, instead of calling them NFTs, technology companies call them “digital collectibles.” This way, they highlight the use case’s aim of establishing ownership and authenticity.
The Advantages of NFTs Utility
A key function of NFTs is to support the growth of the creative and cultural sectors. This importance is highlighted by the financial associations’ statement.
Furthermore, NFTs are minted on Ethereum or other public chains and exchanged with cryptocurrency on open exchanges. On the contrary, digital collectibles generated in China are typically released on “permissioned blockchains.” In addition, they are sold through the channels of local tech firms.
Following the process of the purchase of the collectibles with Yuan fiat currency, consumers must first establish their authenticity on these sites. In regard, users would be prohibited from reselling the collectibles once they had bought them.
As per regulations, regulators in China treat digital collectibles as a separate sector from the global NFT market. This makes them extremely difficult to trade. Despite all difficulties, Chinese tech giants are pushing forward the development of digital collectibles. With this in mind, some have gone so far as to sell NFTs outside of China.