Chinese Court Rules That NFT Are Legally Protected Virtual Property

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Last Updated on December 5, 2022 by Bitfinsider

A court in the Chinese city of Hangzhou has ruled that nonfungible token (NFT) collections constitute online virtual property that must be protected by Chinese law.

An report published on November 29 by the Hangzhou Internet Court — a specialized internet court — and uploaded by crypto blogger Wu Blockchain on December 5 contains positive language for NFTs when the nation begins cracking down on cryptocurrencies in 2021, placing NFTs in a legal gray area.

The translated paper states that NFTs “possess the object qualities of property rights, such as value, scarcity, controllability, and tradability” and “belong to network virtual property,” which “should be protected by our country’s laws.”

The court determined that it was required to “confirm the legal qualities of the NFT digital collection” for a particular instance and acknowledged that “Chinese laws do not yet clearly state” the “legal attributes of the NFT digital collection.”

In a case where the user of a technological platform sued the corporation for refusing to finish a sale and canceling their purchase of an NFT from a “flash sale” because the user gave a name and phone number that allegedly did not match their information, the court issued the judgement.

The court stated, “NFTs condense the creator’s unique artistic expression and have the value of relevant intellectual property rights.” It noted that NFTs are “unique digital assets created on the blockchain based on a process of trust and consensus amongst blockchain nodes.”

Due to this, the court ruled that “NFT digital collections fall to the category of virtual property” and that the transaction in question is viewed as the “sale of digital commodities via the internet,” which would be considered an e-commerce enterprise and “controlled by the ‘E-commerce Law’.”

In May, the Shanghai High People’s Court published a document declaring Bitcoin illegal.

China has tried to segregate non-cryptocurrency NFTs from cryptocurrencies through a government-backed blockchain initiative to facilitate the deployment of non-cryptocurrency NFTs paid for with fiat currency.

The government remains vigilant to ensure its population resists “NFT speculation,” as described in a joint statement issued in April by the China Banking Association, the China Internet Finance Association, and the Securities Association of China, which warned the public of the “hidden risks” of investing in NFTs.

China is not the only nation to include NFTs into its property laws. In an October case, a Singaporean High Court judge drew on existing property rules to compare NFTs to tangible property such as expensive watches or fine wine, stating, “NFTs have become highly sought-after collectors’ items.”


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