When the court had to affirm the NFTs’ legal characteristics, it stated that NFTs are “unique digital assets” that “belong to the category of virtual property.”
Nonfungible Token (NFT) collections, according to a Chinese court in the city of Hangzhou, are online virtual properties that must be protected by Chinese law.
A Dec. 5 post by cryptocurrency blogger Wu Blockchain disclosed the favourable language for NFTs when the nation started to crack down on cryptocurrencies in 2021, placing NFTs in legal limbo. The article was published on Nov. 29 by the Hangzhou Internet Court, a specialised internet court.
According to the article’s translation, NFTs “belong to virtual network property” and “should be protected by the laws of our nation” since they “have the object characteristics of property rights such as value, scarcity, controllability, and traceability.”
The court determined that it was essential to “confirm the legal qualities of the NFT digital collection” for the case and acknowledged that “Chinese laws presently do not clearly state” the “legal attributes of NFT digital collections.”
The ruling by the court was presented in a case where an anonymous technology platform user sued the business for refusing to complete a sale and cancelling 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 stated that “NFTs condense the creator’s original expression of art and have the value of associated intellectual property rights.”
NFTs are “unique digital assets produced on the blockchain based on the trust and consensus process between blockchain nodes,” the statement continued.
The sale in question is considered to be the “selling of digital goods through [the] internet,” which would be considered an e-commerce business and “regulated by the ‘E-commerce Law,'” according to the court. As a result, “NFT digital collections belong to the category of virtual property,” it said.
It follows the publication of a paper by the Shanghai High People’s Court in May claiming that Bitcoin BTC is subject to property rights laws and regulations, notwithstanding the country’s ban on crypto.
With its crypto prohibition, China has sought to keep NFTs apart from crypto by supporting the deployment of non-crypto NFTs paid 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.”
Other countries than China have property laws that apply to NFTs. In a case from October, a Singaporean High Court judge referred to existing property rules when he compared NFTs to tangible goods like fine wine or expensive watches.
After the comparison, they added that “NFTs have evolved as a highly sought-after collectors’ item.”