China drafts "Online Game Management Measures": Prohibition on speculation of virtual assets and high-value consumption.

On December 22nd, the Chinese government released a draft of the "Regulations on the Administration of Online Games" for public opinion, which includes several provisions that may not be favorable for the development of NFTs or blockchain-based games. [Link to the official document](https://www.nppa.gov.cn/xxfb/tzgs/202312/t20231221_823187.html)

China's Internet Game Regulations May Pose Challenges to Blockchain Gaming Economy

No Speculation or High-value Transactions for Virtual Items in Online Games

Article 18 of the "Regulations on the Administration of Internet Games" restricts high-value transactions in games. Internet game publishers are prohibited from providing or condoning virtual item trading at high prices through speculation or auctions. All online games must set user recharge limits and publicly display them in their service rules. Popup reminders should be used to warn users of irrational consumption behavior.

Players Must Complete KYC and Register with Real Names

Article 22 of the "Regulations on the Administration of Internet Games" requires internet game publishers to request users to provide authentic personal information when signing agreements or accessing services. Internet game publishers are not allowed to provide services to users who fail to provide authentic personal information. Strict implementation of user real-name registration and login rules should be enforced to ensure the authenticity and validity of user identity information.

Online Game Currency Can Only Be Used Within the Game

Article 23 states:

• The use of online game currency is limited to exchanging for the internet game products and services provided by the publisher. It cannot be used for payment, purchasing physical goods, or exchanging for products and services from other entities.
• Providing services to users that allow the exchange of online game currency for legal tender is prohibited.

Digital RMB Transactions for Game Currency Must Also Be Real-name Registered

Article 24 states:

• Digital RMB wallets used for online game currency transactions must be registered with real names. Providing anonymous digital RMB wallet transaction services to users is prohibited.

Publishers Cannot Convert Virtual Items into Legal Tender

Article 23 states:

Internet game publishers are not allowed to convert the virtual items obtained by users into legal tender. If publishers provide services to exchange virtual items for small physical goods, the content and value of the goods should comply with relevant laws and regulations.

Overseas Blockchain Games Are Subject to Jurisdiction of the Country Where Illegal Activities Occur

The "Regulations on the Administration of Internet Games" states that if websites or game servers are located overseas, they are subject to the jurisdiction of the country where illegal activities occur.

Penalties for Illegal Operations: Fine Up to 10 Times the Revenue

The "Regulations on the Administration of Internet Games" imposes requirements on game operators regarding qualification acquisition, consumer protection, protection of minors, dispute resolution, etc. Units responsible for promoting online games also have the joint responsibility of verification. Game operators need to submit annual reports to the registered government authorities.

If operating without approval, the maximum penalty can be a fine up to 10 times the revenue, as well as relevant criminal and civil liabilities.

Media Hype about China's Openness to Web3 and NFT, Is It True?

Recently, the media speculated that the Chinese government was actively opening up the Web3 and NFT industries based on the content of proposals on the development of the Web3 industry at the National People's Congress. However, the response from the Ministry of Science and Technology of China still emphasizes the need to comply with the "Chinese national conditions." All blockchain applications must meet the requirements of existing laws, such as KYC, avoiding involvement with legal tender, and preventing speculation.

If China has compliant blockchain games, they should also comply with the requirements of the "Regulations on the Administration of Internet Games," which may differ from the expectations within the industry.

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