China Launches Special Action to Combat Online Infringement Including NFTs

The 18th consecutive special action to combat online infringement and piracy including those related to non-fungible tokens (NFTs) has been launched in China by four government bodies. Put together by the National Copyright Administration of China (NCAC), the Ministry of Industry and Information Technology, the Ministry of Public Security, and the State Internet Information Office, the special action called the “Sword Network 2022” is to achieve key rectification in four aspects.

They include the literature area where the use and dissemination of literary works online such as short videos or other audiovisual articles without authorization are considered infringements to be rectified.

It is to rectify infringements that are related to product sales online, especially those that abuse the “safe haven” rule. This requires strengthening copyright supervision of online platforms, as well as investigating and dealing with how they carry out their main responsibilities. It seeks to help these platforms “promptly dispose” of infringing content and accounts in accordance with the law so that the rights of holders are safeguarded.

According to the NCAC’s public statement, another area to be rectified has to do with NFTs. A loose translation of the relevant part of the statement says it will “…strengthen the copyright supervision of new online formats such as NFT digital collections and “script killing”, and severely crack down on unauthorized use of other people’s art, music, animation, games, film, and television works to cast NFTs, produce digital collections, sell pirated script scripts through the Internet, and develop script image props without authorization.”

The last area is about the need to continue strengthening copyright protection and law enforcement for online works like live broadcasts, music, game animation, and audiobooks, as well as cinema films, sports events, and news works.

To run from September to November, the special action’s focus on copyright problems while promoting standardization and cracking down on punishment, is in line with welcoming the publicity and implementation of the 20th National Congress of the Communist People’s Party (CPP) slated for October 16. The Congress is where watchers look for clues to China’s future including an expected renewal of the mandate of Xi Jinping as the Chinese president and the CCP’s general secretary, as well as the continuation of his policies implementation.

NFTs, or digital collectibles as they are known in China, have grown tremendously under Xi. Their popularity soared in China as major tech giants including Tencent and Alibaba were able to show interest in the space and many entities filed multiple trademark patents in the country. One of the key factors that has worked for this growth is the Chinese NFT industry’s ability to separate its transactions from cryptocurrencies. China banned all crypto-related activities in September 2021 to discourage speculations, among other things, in its financial system.

The no-crypto message was widely spread across China including through three national financial industry associations in the country  which collectively cover almost all Chinese banks, brokerages, and fintech companies. The China Internet Finance Association, the China Banking Association and the China Securities Association asked members not to offer centralized trading platforms for NFTs, to refrain from investing directly or indirectly in NFTs, and to forbid using cryptocurrencies like Bitcoin or Ethereum in buying or selling NFTs, among other measures, to “prevent financial risks”.