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Visitors take photos at an NFT-themed coffee shop during the China International Fair for Trade in Services (CIFTIS) at Shougang Park in Beijing on September 5, 2022. Photo: EPA-EFE
TechPolicy

NFT complaints in China surge 300-fold in 2022 as crypto market faces regulatory, commercial risks

  • Pricing and service issues were among the top complaints to China’s market regulator about non-fungible tokens, but were a small fraction of the total
  • NFTs present a challenge to regulators as Beijing has sought to reduce risk exposure while bolstering the domestic blockchain industry
NFTs
Coco Feng
Coco Fengin Beijing
Why you can trust SCMP
Consumer complaints in China about non-fungible tokens (NFTs) over pricing and service problems surged 300-fold in 2022, exposing a problem that has become increasingly difficult to address, according to the State Administration for Market Regulation (SAMR), the country’s top market regulator.

The number of NFT-related complaints filed through an official SAMR platform reached 59,700 last year, a significant jump from the 198 cases in 2021, when hype around the technology was at its peak but Chinese tech firms were still testing the waters with so-called digital collectibles. The complaints cover refund refusals, price manipulation and extra fees, according to the regulator.

“Problems arise in nascent business models, which makes it increasingly difficult for regulators,” the SAMR said.

China to launch exchange for trading NFT-like digital collectibles

In mainland China, most NFTs are referred to as digital collectibles and can only be bought with legal tender, typically yuan, because of Beijing’s ban on cryptocurrencies. The national government has routinely cracked down on the blockchain-based assets for years, seeing crypto as a threat to financial stability.

Industry leaders have started to retreat from the strictly-regulated sector. Last summer, Tencent Holdings announced it was shutting down Huanhe, its NFT platform. It discontinued sales last year and will cease all operations in June.
Globally, NFTs have also been rocked by recent scandals and business upheaval. The collapse of cryptocurrency exchange FTX in November sent asset prices plummeting. Then this past week the insolvency of Silicon Valley Bank (SVB) in California and Signature Bank in New York hit a number of crypto firms.
Some of the biggest names in NFTs had assets in SVB, including Bored Ape Yacht Club creator Yuga Labs. The US Federal Deposit Insurance Corporation announced on Sunday night that all depositors would be made whole.
Still, Beijing has remained committed to developing blockchain after President Xi Jinping endorsed the technology in 2019. In January, China launched a fully-regulated “digital asset trading platform” to facilitate transactions of intellectual property and NFTs.
Despite some negative attention around NFTs, related complaints in China made up a small fraction of the 13 million cases the SAMR received last year. Many more negative comments targeted other internet and tech business segments, including cross-border e-commerce, which was the subject of 334,500 complaints, up 42.6 per cent year on year. Many complaints were about counterfeit products and sellers’ failure to meet warranty commitments.

Complaints about live-streaming e-commerce, a popular business model that allows people to shop online while watching live videos, were up 115 per cent to 220,900. Many comments focused on poor-quality products and false advertising.

The SAMR received another 16,000 complaints about new energy cars, up 62.8 per cent. Many comments were about problems with contracts and quality issues like sudden stalls, engine rattling and battery damage.

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