Chinese Court Rules That NFTs Are Legally Protected Virtual Property
In a case where the court had to confirm the legal properties of NFTs, it said that NFTs are “unique digital assets” that “belong to the category of virtual property.”
A Chinese court in the city of Hangzhou said that collections of nonfungible tokens (NFTs) are online property that should be protected by Chinese law.
An article posted on November 29 by the Hangzhou Internet Court, a specialized internet court, and shared by crypto blogger Wu Blockchain on December 5 shows the favorable language for NFTs after the country started cracking down on cryptocurrencies in 2021, leaving NFTs in a legal gray area.
The article says that NFTs “have the object characteristics of property rights, such as value, scarcity, controllability, and tradeability,” and that they “belong to network virtual property” that “should be protected by the laws of our country.”
For a case, the court decided it was important to “confirm the legal attributes of the NFT digital collection,” and it admitted that “Chinese laws currently do not clearly stipulate” what the “legal attributes of NFT digital collections” are.
In a case where the user of a technology platform and the company were not named, the user sued the company for not completing a sale and canceling their purchase of an NFT from a “flash sale” because the user gave a name and phone number that allegedly didn’t match their information. The court’s decree came out of that case.
“NFTs condense the creator’s original expression of art and have the value of related intellectual property rights,” the court said. It added NFTs are “unique digital assets formed on the blockchain based on the trust and consensus mechanism between blockchain nodes.”
Because of this, the court said, “NFT digital collections belong to the category of virtual property,” and the transaction in the legal case is seen as the “selling of digital goods through the internet,” which would be treated as an e-commerce business and “regulated by the ‘E-commerce Law’.”
It comes after the Shanghai High People’s Court said in a document in May that BTC is also subject to property rights laws and rules, even though cryptocurrencies are banned in the country.
China has worked to separate non-cryptocurrency NFTs from cryptocurrencies with a blockchain project backed by the government to help the deployment of non-cryptocurrency NFTs paid for with fiat money.
The government is still careful to make sure that its people don’t engage in “NFT speculation,” which was described in an April statement by the China Banking Association, the China Internet Finance Association, and the Securities Association of China, which warned the public about the “hidden risks” of investing in NFTs.
China is not the only country with property laws that cover NFTs. In a case from October, a Singaporean High Court judge used existing property laws to compare NFTs to luxury watches or fine wine. He said, “NFTs have emerged as a highly sought-after collectors’ item.”
