Non-fungible tokens (NFTs) are considered online virtual property and are therefore entitled to protection under Chinese law, according to an Hangzhou-based Chinese court.
The Hangzhou Court of China pointed out that NFT digital 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) December 5, 2022
Following the sweeping prohibition on digital assets, the court’s ruling has been lauded as clearing up any uncertainty for the asset class. This establishes a precedent for how NFTs will be handled by the Chinese legal system.
As a result of the user’s failure to supply personal information that matched their information, the plaintiff in the case sued an unnamed corporation for canceling the sale of an NFT. According to the court, there was “no breach of contract or illegality in the decision” when the defendant repaid the plaintiff’s funds since the plaintiff had provided erroneous personal information.
In reaching its decision, the court placed digital collectibles in the category of virtual property, likening it to the “selling of digital goods through the internet.” Flowing from the categorization, the court decided 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 credibility. At the same time, they also have the unique attributes of network virtual property such as network virtuality and technology, and belong to network virtual property,” the court said.
China’s legal system appears to have adopted a similar stance toward Bitcoin by placing it subject to property rights despite the blanket ban. Although the legal system might have shown a favorable stance toward digital collectibles, the country’s regulators have not hidden their dislike for speculative investments in NFTs.
In April, the trio of the China Banking Association, Securities Association of China, and the China Internet Finance Association issued a joint statement warning citizens against the inherent risks of sinking funds in NFTs.
“We solemnly call on consumers to establish correct consumption concepts, enhance 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 property safety,” the statement read.
A global trend
Zooming out from China, it is easy to see an emerging trend of different jurisdictions opting to place NFTs under property laws. In a landmark case, the High Court of the Republic of Singapore designated digital collectibles as physical property akin to luxury items like watches and wine.
The case involved the court granting a motion to bar the sale of a Bored Ape Yacht Club (BAYC) NFT because it would impugn the principles of existing property rights of Singapore.
Globally, NFT prices have fallen from the previous highs they attained in 2021, with transaction volumes for November standing at a mere $643 million.
Watch: The BSV Global Blockchain Convention presentation, Buzzmint: Elevating NFTs
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