There has been wide speculation around the stance of China on non-fungible tokens (NFTs) following its unfavorable views of cryptocurrencies as of 2021. However, recent comments from a Chinese court show some signs of optimism.
In a recent revelation, a Chinese court established in the city of Hangzhou stated that NFT collections are online property that must be protected under the country’s law. This statement from the court brought relief to many who were confused regarding the legal status of NFT.
The article was published by Hangzhou Internet Court, a court of special jurisdiction in China established in 2017, based on Hangzhou Railway Transport Court. It hears Internet-related cases like contract disputes involving online shopping, services, and copyright infringement.
As per the article, NFTs possess the “object characteristics” of “property rights” that should be protected by the laws of the country. The characteristics mentioned here were value, scarcity, controllability, tradability, and belonging to the virtual network property. The court also found it necessary to confirm the legal status of NFT digital collections and admitted that the laws currently do not clearly “stipulate” the “legal attributes” of NFT digital collections.
The comments from the Chinese court came in a case where the user of a technology platform, both anonymous, sued the tech company. The user accused the company of refusing to complete the sale and canceling their purchase of NFT during the sale on the grounds that the contact details provided by the user didn’t match the original information.
In its statement, the court also acknowledged the characteristics of NFTs and said that they “condense” the creator’s authentic “expression of art” and possess the “value of intellectual property rights.” The court further said that NFTs are “unique digital assets formed on blockchain on the basis of trust and consensus mechanism between blockchain nodes.”
Considering this, the court said, “NFT digital collections belong to the category of virtual property,” and the transactions in the legal case would be considered as the “selling of digital goods through the internet.” Hence, this would come under an “e-commerce business” and be regulated by the “E-commerce law.”
In May 2021, Shanghai High People’s Court issued a document in May stating Bitcoin to be a subject under property rights laws and regulations despite the nation’s ban on crypto. The Chinese government has made efforts to separate NFTs from crypto by launching a government-supported blockchain project to support the deployment of non-crypto NFTs paid for with fiat money.
The Chinese government has been keen to ensure that the citizens resist “NFT speculation” and described the same in April in a joint statement between the China Banking Association, the China Internet Finance Association, and the Securities Association of China. They also warned the citizens about the risk of investing in NFTs.
However, China isn’t the only country to announce NFTs under property laws. Earlier in October, a Singaporean High Court commenting on the existing property laws said that the NFTs are also subject to physical property like luxury watches or fine wine.