Chinese Court Likens NFTs to Online Virtual Property
Hangzhou city-based court considered nonfungible tokens (NFT) as digital assets within the virtual property category duly protected by Chinese law.
The article published on November 29 by Hangzhou Internet Court captured proceedings in a suit where the NFTs’ legal attributes were questioned. The crypto enthusiast Wu Blockchain conveyed the pronouncement of the specialist internet court in a December 5 tweet.
The Court noted ambiguity in the language applied to NFTs since 2021 when China imposed a crackdown on cryptocurrencies. The action left NFTs within gray areas of Chinese law.
The translation of the article by Wu Blockchain acknowledges NFTs to possess object characteristics that mirror property rights. In particular, NFTs portray tradability, value, scarcity, and controllability. The Court observed NFTs as network virtual property, thereby a reason for their legal protection.
Ascertaining NFT Legal Attributes
The article indicates the Court admitted the necessity of ascertaining the legal attributes possessed by the NFT digital collection. Further, the bench unanimously regretted the failure of the Chinese laws to identify legal attributes inherent in NFT digital collections.
The Court’s decree featured in the case involving an unnamed tech platform user alleging the company denied sale completion. The user alleges the company canceled the NFT purchase in a flash sale since the name and contact submitted by the user differed from the information in their possession.
The Court observed NFTs as condensing the expression the art’s creator intended to convey. The Court likened NFT value to that possessed in intellectual property rights. Furthermore, the Court noted the unique nature of NFTs as digital assets established on the blockchain ecosystem through nodes’ consensus and trust.
The consideration of the above facts convinced the Court to liken the NFT transaction to disposing of digital products via the internet. Consequently, transactions involving NFT digital collections are similar to e-commerce business; their regulation is stipulated in the existing E-commerce Law.
Crypto Legality in China
The Hangzhou city-based court definition echoes the pronouncement by the Shanghai High People’s Court that held Bitcoin should be treated within the property rights laws despite the existing crypto ban.
The crypto ban arises from China’s ongoing project to separate NFTs from other cryptos. The efforts have bored a g blockchain project backed by the government in rolling out non-crypto NFTs one can acquire using fiat money.
Chinese government vigilance targets protecting the population against NFT speculation. The joint statement from the China Banking Association, Securities Association of China, and the China Internet Finance Association revealed NFTs investment feature hidden risks.
The decision by Hangzhou city-based Court matches the determination issued by the Singaporean High Court in October to liken NFTs to physical properties. Further, the Singaporean judge admitted NFTs are attracting demand spikes like fine wine and luxury watches.
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