NFTs are considered virtual property in China, according to a court ruling
Nonfungible Token (NFT) collections, according to a Chinese court in Hangzhou, are online virtual properties that need to be protected by Chinese law.
A Dec. 5 post by cryptocurrency blogger Wu Blockchain reveals the favourable language for NFTs when the country began cracking down on cryptos in 2021, effectively putting NFTs in legal limbo. The article was published on November 29 by Hangzhou Internet Court, a specialized internet court.
NFTs, according to the article’s translation, “belong to network virtual property” and “should be protected by our nation’s laws” because they “have the object qualities of land ownership such as worth, scarcity, controllability, and traceability.”
The court acknowledged that “Chinese laws presently do not clearly state” the “legal qualities of NFT digital collections,” but concluded that it was necessary to “affirm the legal characteristics of the whole NFT digital collection” to proceed with a lawsuit.
The court’s ruling was presented in a case where two anonymous technology platform users sued the business after it refused to finalize a sale and cancelled its acquisition of an NFT from a “flash sale” because the user’s identity and phone number were allegedly incorrect.
The court stated: “NFTs have the value of relevant intellectual property rights and encapsulate the creator’s genuine expression of art.” NFTs are “unique digital assets produced on the blockchain relying on trust as well as a consensus process between blockchain nodes,” the statement continued.
Due to this, the court ruled that “NFT digital collections fall into the category of digital property” and that the transaction in question is considered to be the “selling of digital goods via the internet,” which is considered to be an “e-commerce firm” and is “regulated by the E-commerce Law.”
It comes just after the Shanghai High People’s Court declared in a paper published in May that, despite the nation’s prohibition on cryptocurrencies, Bitcoin is equally governed by property rights rules and regulations.
With its crypto prohibition, China has sought to keep NFTs apart from crypto by supporting the implementation of non-crypto NFTs compensated for with fiat money through a government-backed blockchain initiative.
A joint statement issued in April by the China Banking Association, the China Internet Finance Association, and the Securities Association of China warned the public about the “hidden risks” of investing in NFTs. The government is still on guard to ensure that its populace does not engage in “NFT speculation.”
There are other countries than China that have property laws that apply to NFTs. In a case from October, a Singaporean High Court justice referred to existing property rules when he compared NFTs to tangible goods like fine wine or expensive watches, adding that “NFTs have evolved as a highly desirable collector’s item.”
