China’s Court Recognizes NFTs as Virtual Property Protected by Law

    China’s court located in the city of Hangzhou has recognized non-fungible token (NFT) collections as online virtual property, which should be protected by Chinese law.

    On 29th November 2022, an article was published by the Hangzhou Internet Court, in which the court hears a case about an information network sales contract dispute. The reason for this dispute was a transaction of NFT digital collections.

    In that case, the local digital art platform cancelled a sale of NFTs on the behalf of the client. Later, the client sued the company as according to his claim the operation was terminated without taking his consent on the matter.

    On the other hand, the platform explained that it had taken this action because of the inaccurate personal information it received from the plaintiff. They had issued a refund too. As per their know-your-customer procedures, orders that are placed without a real name authentication have to be cancelled.

    The court declared that NFT collections have the characteristics of property rights such as tradability, value, scarcity, and controllability, while digital collectibles are considered as virtual properties.

    Regarding the above-mentioned dispute, on 5th December 2022, the Chinese crypto journalist Colin Wu, who is also widely known as Wu Blockchain reported on Twitter –

    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.

    Furthermore, the court elaborated that “as a virtual artwork, an NFT digital collection itself condenses the creator’s original expression of art and has the value of related intellectual property rights. At the same time, NFT digital collections are unique digital assets formed on the blockchain based on the trust and consensus mechanism between blockchain nodes.”

    Hence, the Hangzhou court of China came to the conclusion that NFT collections belong to the category of virtual property. The judiciary system explained that the transaction in this particular case represents the business activity of selling digital goods via the internet, therefore, it belongs to the e-commerce activities. Thus, it should be regulated under China’s “E-commerce Law.”

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