Major Chinese companies including JD.com, Baidu, Ant Group, and Tencent will now require ID verification in order to purchase and sell NFTs, according to a report published in the South China Morning Post.
Called a “self-disciplined development proposal”, the move is designed to protect the “digital collectible industry” by introducing real-name authentication. This comes after the country took the bold step of announcing that it does not welcome NFTs.
More about the New Restriction
Users who wish to buy or sell NFTs will be required to submit a valid identity document before they can be permitted to do so. Examples include passports, national ID cards, and driving licenses.
This self-imposed restriction will allow businesses to adhere to the country’s ban on digital currencies and ensure there’s no existence of secondary markets for cryptocurrencies.
Despite limitations and controversies, a large number of platforms offer digital collectibles or NFTs in China. While NFTs can be bought and sold in the country, the law requires that payment for the same cannot be made using digital currencies.
The China Cultural Industry Association issued a statement regarding the latest developments and said that the companies are aware of “existing regulations” and companies “only support legal tender as the denomination and settlement currency.”
In addition, NFT platforms are required to be in possession of all relevant regulatory certifications and licenses. They must take steps to protect underlying blockchain technologies and secure intellectual properties.
The main purpose of this change is to resist speculation and reduce the risk of secondary marketplaces for NFTs. The document, however, doesn’t talk about the resale of digital tokens or NFTs.
“Different from most foreign platforms that apply NFT technology as financial products, domestic digital collections are more regarded as the category of digital cultural creativity,” said the document issued by the China Cultural Industry Association.
NFTs in China: What’s the Situation?
NFTs are bought and sold in China but there are a lot of regulations that marketplaces have to follow. This new change comes from private companies and is not legally binding; however, users may not be able to trade NFTs if they fail to submit the required documents. Also, this change could be a major step toward regulatory clarity.
State agencies that look into cryptos and NFTs have yet to comment on the proposal, however, they may take it into consideration. Once this happens, the requirement will be legally binding and no company will be able to offer NFT-related services (buying and selling) in the country without proper verification documents.
China is known to be stringent when it comes to cryptocurrencies and was in the news for banning digital coins and cracking down on businesses that offer the buying and selling of digital currencies. This forced many businesses to shut down or move abroad.
The crackdown, fortunately, did not extend to the NFT space and the country is now working on announcing its own tokenized digital collectibles. Even big names including Baidu and Tencent have launched their own marketplace built on different blockchains that allow users to buy and sell NFTs using the local currency. China, however, has banned local banks from facilitating NFT-related investments.