Chinese regulators have seen a spike 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. NFT remains in a legally gray zone 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 submitted 59,700 complaints about NFTs in 2022. The figure is up 30,000% compared to the earlier year, which saw less than 200 complaints regarding digital collections.
The complaints were mainly focused on the non-delivery of purchased items, non-refund, maliciously driving up prices, charging high fees, and random banning of consumer accounts. The report noted that supervision would be more difficult with new fields such as digital collections (NFT).
The report comes ahead of the annual World Consumer Rights Day in China. Held on March 15, the event has become a major television and social media occasion in China, where some domestic and foreign brands are singled out for high-profile criticism.
Are NFTs Even Legal in China?
Despite the growing popularity of NFTs and digital art in China, these digital assets are still a gray area. Despite introducing 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 like Bitcoin and Ethereum.
It is worth noting that a Chinese court in Hangzhou declared that NFTs are online virtual property and can enjoy protection in December last year. The decree by the court was brought forward in a case involving the purchase of NFTs.
In an article, the court said NFTs “have the object characteristics of property rights such as value, scarcity, controllability, and tradability” and “belong to network virtual property” that “should be protected by the laws of our country.”
However, Beijing introduced a strict ban on secondary markets for digital collectibles last year. The harsh stance has already harmed the industry, forcing some NFT marketplaces to shut down.
Huanhe, the NFT marketplace of Chinese social media giant Tencent Holdings, will shut in June and has started refunding its users, according to Huanhe’s mobile app on March 9. Some NFT platforms in China are also moving their businesses to Hong Kong over compliance concerns.
Meanwhile, Feng Qiya, a member of parliament, plans to propose a regulatory framework for NFT during China’s ongoing “Two Sessions,” the nation’s most important 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 surge in NFT-related complaints indicates that more and more Chinese users are buying digital collectibles.
This article originally appeared on The Tokenist
Sponsored: Find a Qualified Financial Advisor
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.