Court in China grants legal protection to NFTs in landmark cases
A Chinese court in Hangzhou declared that non-fungible tokens (NFTs) are online virtual property and can enjoy protection under Chinese law.
The Hangzhou Court of China pointed out that digital NFT collections have the characteristics of value, scarcity, controllability and tradability, and belong to online virtual property, which should be protected by Chinese laws.
— Wu Blockchain (@WuBlockchain) 5 December 2022
The court’s decision has been hailed as removing ambiguity for the asset class following the blanket ban on digital assets. This sets a precedent for the Chinese legal system regarding the treatment of NFTs.
In the case, the plaintiff sued an unnamed company for canceling the sale of an NFT because the user provided personal information that did not match their information. The defendant refunded the plaintiff’s funds based on incorrect personal information, which the court ruled “there was no breach of contract or illegality in the decision.”
In its decision, the court placed digital collectibles in the category of virtual property, comparing it to “the sale of digital goods through the Internet.” As a result of the categorization, the court ruled that NFTs will be governed by the country’s e-commerce laws.
“NFT digital collections have the object characteristics of property rights such as value, scarcity, controllability and tradability. At the same time, they also have the unique characteristics of virtual network property such as network virtuality and technology, and belong to virtual network property,” the court said.
China’s legal system appears to have taken a similar stance on Bitcoin by placing it under property rights despite the blanket ban. While the legal system may have shown a favorable attitude towards digital collectibles, the country’s regulators have made no secret of their reluctance towards speculative investments in NFTs.
In April, the trio of China Banking Association, Securities Association of China and China Internet Finance Association issued a joint statement warning citizens against the inherent risks of sinking funds into NFTs.
“We solemnly urge consumers to establish correct consumption concepts, raise their awareness of self-protection, consciously resist NFT speculation and speculation, be vigilant and stay away from NFT-related illegal financial activities, and effectively safeguard their own property security,” the statement read.
A global trend
Zooming out from China, it is easy to see a new trend with different jurisdictions choosing to place NFTs under property laws. In a landmark case, the High Court of the Republic of Singapore designated digital collectibles as physical property on a par with luxury items such as watches and wine.
The case involved the court granting an application to prevent the sale of a Bored Ape Yacht Club (BAYC) NFT on the grounds that it would attack the principles of existing Singapore property rights.
Globally, NFT prices have fallen from their previous highs reached in 2021, with transaction volumes for November at just $643 million.
See: The presentation of the BSV Global Blockchain Convention, Buzzmint: Elevating NFTs
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