China sees 30,000% increase in NFT complaints amid growing adoption
Chinese regulators have seen an increase in complaints about non-fungible tokens (NFTs) over the past year, amid the growing popularity of digital art in the country. There were around 60,000 NFT-related complaints in 2022, compared to only 198 in 2021. NFTs remain in a legal gray area in China, which banned the use of cryptocurrencies in late September 2021.
NFT complaints increased by 30,000% annually in China
According to a recent report by China’s State Administration for Market Regulation (SAMR), Chinese users filed 59,700 complaints about NFTs in 2022. The number is up 30,000% compared to previous years, which saw less than 200 complaints regarding digital collections.
The complaints were mainly focused on non-delivery of purchased items, non-refunds, malicious price gouging, high fees and random banning of consumer accounts. The report noted that oversight would become more difficult with new fields such as digital collections (NFT).
The report comes ahead of the annual World Consumer Rights Day in China. The event, held on March 15, has become a major television and social media event in China, with some domestic and foreign brands being singled out for high-profile criticism.
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Are NFTs even legal in China?
Despite the growing popularity of NFTs and digital art in China, these digital assets remain a gray area. Despite imposing a blanket ban on cryptocurrencies, the Chinese government offers some leeway for digital collectibles to exist as long as they do not involve crypto-assets such as Bitcoin and Ethereum.
It is worth noting that a Chinese court in Hangzhou declared that NFTs are online virtual property and can enjoy protection last December. The court’s decree was filed in a case involving the purchase of NFTs.
In an article, the court said that NFTs “have the object characteristics of property rights such as value, scarcity, controllability and tradability” and “belong to virtual network property” which “should be protected by the laws of our country.”
However, Beijing imposed a strict ban on secondary markets for digital collectibles last year. The harsh stance has already hurt the industry, forcing some NFT marketplaces to close.
Huanhe, the NFT marketplace of Chinese social media giant Tencent Holdings, is shutting down in June and has begun refunding its users, according to Huanhe’s mobile app on March 9. Some NFT platforms in China are also moving their operations to Hong Kong due to compliance concerns.
Meanwhile, Feng Qiya, a member of parliament, plans to propose a regulatory framework for NFTs during China’s ongoing “Two Sessions,” the nation’s main annual political gathering. According to a recent report, the proposal includes establishing a clear legal definition of NFTs, introducing market access rules for NFT trading platforms and offering copyright protection.
The increase in NFT-related complaints indicates that more and more Chinese users are buying digital collectibles.
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About the author
Ruholamin Haqshanas is an accomplished crypto and financial journalist with over two years of experience writing in the field. He has a solid grasp of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi), and the emerging market for non-fungible tokens (NFT). He is an active user of digital assets for money transfers.