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Chinese Prosecutors Issue Warning on NFTsIn recent days, China’s top procuratorial agency, the Supreme People’s Procuratorate of China, issued a warning alongside some guidelines on non-fungible tokens (NFTs).The Supreme People’s Procuratorate is the highest office in China charged with the mandate of upholding legal integrity, safeguarding citizens’ rights, and where necessary, conducting criminal investigations. In a statement published on Monday, the agency set out an advisory, together with additional recommendations, pertaining to NFTs.Photo by Markus Winkler on PexelsNFT status in ChinaWhile all and sundry are aware of a multi-year crack-down by the Chinese authorities on crypto in recent times, exemplified by a ban on crypto trading and the operation of crypto mining facilities within the country’s borders, the status of NFTs has been discussed to a much lesser degree.NFTs remain legal within the country. When the crypto trading ban came into play in 2021, much of the local industry connected with that trading activity disappeared. However, in its place, a newly emergent trend came to the fore in the form of NFTs. With cryptocurrencies perceived as being high risk and sanctioned by the authorities, attention turned to NFTs and there has been a surge of adoption of the digital collectibles within China as a consequence.NFT risksThe procuratorial agency highlighted a number of attributes as well as risks in relation to NFTs in the report that it published. The agency finds the issue of ownership of NFTs as a troublesome one. It cites the fact that NFTs can be replicated and distributed at will on this basis as being particularly problematic. The legitimacy of the right source of the work itself is the decisive factor for the healthy and orderly development of digital works NFT transactions,” it states.It appears that the agency, like many in traditional professional circles before them, have a difficulty recognizing the model of asset ownership that NFTs incorporate. That ownership is not defined by civil law or in accordance with centralized systems but by simply the possession of the requisite private key pertaining to a given NFT within a decentralized system.Blockchain, not cryptoThe agency acknowledged that NFTs do present a novel application of blockchain technology. This is not surprising as while there might be an ongoing clampdown on decentralized cryptocurrencies in China, officials at a national level and in numerous instances within regional administrations, are demonstrating a strategy of leveraging blockchain technology for the betterment of the Chinese economy in the future.Public prosecutor Wang Xia-fen, one of the authors of the report, stated: “It’s widely recognized that digital collectibles have the potential to protect intellectual property rights, boost content creation and enrich the digital economy.” Wang encouraged public prosecutors to “find the distinction between real innovation and criminal activities” where NFTs are concerned.The upshot of its report though, is that the procuratorial agency is uncomfortable with the similarity of many of the attributes of NFTs when compared with decentralized cryptocurrencies. It issued a warning on that basis, emphasizing a need for risk assessment to be carried out and further consideration of the legal risks that are implicated.

Korea Joins OECD’s CARF initiative to enhance crypto tax complianceThe South Korean Ministry of Economy and Finance issued a press release to declare the country’s involvement in the Crypto-Asset Reporting Framework (CARF). This program, developed by the Organization for Economic Co-operation and Development (OECD), is designed to promote tax compliance and combat tax evasion in the realm of cryptocurrency. The initiative brings together 48 countries and jurisdictions, such as France, Germany, Japan, the United Kingdom and the United States.Photo by Nataliya Vaitkevich on PexelsTarget year of 2027In the joint statement released on Nov. 10, the participants of the CARF expressed their commitment to its widespread and timely implementation, aiming to enhance the effectiveness of the regime. They plan to align their domestic laws and enforce agreements by 2027, the year targeted by the OECD for exchanging relevant information. The statement also encouraged other jurisdictions to participate in this global effort.Updating laws and activating agreementsKorea’s commitment to international cooperation, as indicated in the joint statement, shows its intention to update domestic laws and activate exchange agreements. This preparation will pave the way for the exchange of crypto-asset transaction information to commence in 2027, adhering to the OECD’s proposed timeline. Such a step is anticipated to significantly contribute to the broad implementation of the CARF. The Economy Ministry stated that Korea is committed to ongoing participation in international efforts aimed at preventing tax evasion and enhancing tax transparency.In September, during a tax administration forum in Seoul, experts suggested that Korea’s potential participation in the OECD’s CARF would require more than just legislative amendments. They highlighted the necessity for Korea to develop a cooperative system involving both virtual asset service providers (VASPs) and regulatory authorities, explaining that this approach would ensure a smooth and effective implementation of the CARF in Korea.

Hong Kong Lawmaker Explores Digital Asset Links With MainlandIn a move aimed at bolstering its position as a rising global Web3 hub, Hong Kong Legislative Council member Johnny Ng has expressed his aspiration to foster greater collaboration between digital asset platforms in Hong Kong and a Shanghai-based exchange.Photo by Simon Zhu on UnsplashDigital asset exchange interconnectivityAs Hong Kong continues to position itself as a key player in the emerging Web3 landscape, Ng envisions a future where licensed virtual asset exchanges in Hong Kong could be interconnected with their counterparts in Shanghai.Ng’s remarks came during an interview with Chinese media outlet The Paper. Drawing a parallel with the established Shanghai-Hong Kong Stock Connect program that seamlessly connects the stock markets of both cities, Ng raised the question of whether a similar connection could be established for licensed digital asset exchanges. Ng’s idea hinges on the potential to bridge appropriate platforms in Shanghai with those licensed in Hong Kong for virtual asset trading.Interconnected talent poolThe lawmaker’s enthusiasm for interconnectivity also extends to the talent pool. He expressed his desire for more Web3 talent exchanges between Hong Kong and the mainland, recognizing Shanghai’s status as a financial hub boasting numerous exceptional financial enterprises.Hong Kong’s approach to the Web3 landscape stands in contrast to mainland China’s stringent cryptocurrency regulations. While China banned cryptocurrency transactions in 2021, Hong Kong has embraced crypto firms, even encouraging partnerships between these firms and local banks.This year, Hong Kong authorities unveiled a series of cryptocurrency-related policy statements, aimed at fortifying its stature as a global financial center. A significant step followed in December, when the Hong Kong Legislative Council passed an amendment introducing a comprehensive licensing framework for virtual asset service providers (VASPs).In a recent development underscoring Hong Kong’s pro-crypto stance, HashKey and OSL have become the pioneering recipients of licenses for retail trading under the new regulatory regime, which commenced on June 1.Differing policy approachesPeople following developments in crypto and Web3 in China and East Asia have been speculating if the strategic positive shift in Hong Kong towards developing as a regional hub relative to the sector is indicative of a softening in the approach of mainland China towards the industry. It appears that Hong Kong’s pursuit of crypto business has been sanctioned by Beijing.Commentators have been monitoring the emergence of further encouraging signals. In May, Chinese state television featured a segment that covered cryptocurrency and in particular Bitcoin. Binance CEO Changpeng Zhao (CZ) was sufficiently encouraged by the development to suggest that it was “a big deal,” although the clip was later removed from the broadcaster’s website.Ng’s proposal aligns with the broader narrative of Hong Kong’s ambitious push into the Web3 landscape, capitalizing on its favorable regulatory environment to attract crypto-related ventures. As discussions evolve around the potential interconnectivity between Hong Kong and Shanghai’s digital asset exchanges, the global cryptocurrency community watches with interest to see if there are any emerging signs that Beijing will reciprocate positively.