Author : Zack
Date : Dec 05,2022
Court stated that NFTs are "unique digital assets" that "belong to the category of virtual property."
In a case where it had to confirm the legal characteristics of NFTs, the court 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 need to be protected by Chinese law.
A Dec. 5 post by cryptocurrency blogger Wu Blockchain discloses the favorable language for NFTs after the country started to crack down on cryptocurrencies in 2021, placing NFTs in a legal limbo. The article was published on Nov. 29 by the Hangzhou Internet Court, a specialized internet court.
According to the article's translation, NFTs "belong to network virtual property" and "should be protected by the laws of our country" since they "have the object characteristics of property rights such as value, scarcity, controllability, and tradability."
The court acknowledged that "Chinese laws currently do not clearly state" the "legal qualities of NFT digital collections," but concluded that it was necessary to "affirm the legal attributes of the NFT digital collection" in order to proceed with a case.
The court's ruling was presented in a case where two anonymous technology platform users sued the business after it refused to complete a sale and canceled their purchase of an NFT from a "flash sale" because the users' name and phone number were allegedly incorrect.
The court stated: "NFTs have the value of relevant intellectual property rights and condense the creator's original expression of art." NFTs are "unique digital assets produced on the blockchain based on the trust and consensus process between blockchain nodes," the statement continued.
Due to this, the court ruled that "NFT digital collections belong to the category of virtual property" and that the transaction in question is considered to be the "selling of digital goods through [the] internet," which is considered to be an e-commerce business and is "regulated by the 'E-commerce Law'".
It comes after the Shanghai High People's Court declared in a document published in May that despite the nation's ban on cryptocurrencies, Bitcoin is similarly governed by property rights laws and regulations.
With its crypto ban, 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 project.
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."
There are other countries besides China that have property laws that apply to NFTs. In a case from October, a Singaporean High Court judge referred to existing property laws when he compared NFTs to tangible goods like fine wine or luxury watches, saying that "NFTs have emerged as a highly sought-after collectors' item."