Chinese court says NFTs are virtual property protected by law

A Chinese court in the city of Hangzhou has said that collections of non-fungible tokens (NFTs) are online virtual property that should be protected under Chinese law.

A November 29 article posted by the Hangzhou Internet Court – a specialist internet court – shared by crypto blogger Wu Blockchain on Dec. 5 reveals favorable language for NFTs after the country began cracking down on cryptocurrencies in 2021, leaving NFTs in a legal gray area.

Translated, the article says that NFTs “have the object properties of property rights such as value, scarcity, controllability and tradability” and “belong to virtual network property” which “should be protected by the laws of our country.”

The court ruled that it was necessary to “confirm the legal characteristics of the NFT digital collection” for a case and admitted “Chinese laws do not currently clearly determine” the “legal characteristics of NFT digital collections.”

The court’s decree came in a case where the user of a technology platform, both unnamed, sued the company for refusing to complete a sale and canceling the purchase of an NFT from a “flash sale” because the user provided a name and phone number that allegedly did not matched their information.

“NFTs condense the creator’s original expression of art and have the value of related intellectual property rights,” the court said. It added that NFTs are “unique digital assets formed on the blockchain based on the trust and consensus mechanism between the blockchain’s nodes.”

For this reason, the court said, “NFT digital collections belong to the category of virtual property” and the transaction in the lawsuit is seen as “sale of digital goods through [the] internet,” which would be treated as an e-commerce business and “regulated by the ‘E-Commerce Act’.”

It comes after the Shanghai High People’s Court issued a document in May stating that Bitcoin (BTC) is similarly subject to property rights laws and regulations despite the country’s ban on crypto.

Related: Could Hong Kong really become China’s proxy in crypto?

With its crypto ban, China has worked to separate NFTs from crypto with a government-backed blockchain project to support the deployment of non-crypto NFTs paid for with fiat money.

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

China is not the only jurisdiction to place NFTs under property laws. A Singapore High Court judge drew on existing property laws in a case in October that compared NFTs to physical property such as luxury watches or fine wine, saying “NFTs have emerged as a highly sought-after collectible.”