Chinese Court Recognises NFTs as Legally Protected Virtual Property

NFT collections are virtual property protected by China’s current law. A court in Hangzhou issued such a ruling.

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. https://t.co/VONcSp0319

— Wu Blockchain (@WuBlockchain) December 5, 2022

According to the ruling, NFTs possess property-rights characteristics such as value, rarity, controllability, and the ability to trade. The court described the assets’ virtual nature and the technology underpinning it as their unique attributes.

The case concerned the sale of NFT collections by the defendant company. The plaintiff provided personal information for the purchase to the firm and transferred 999 yuan (~$144). However, the company did not deliver the goods and refunded the money a few days later, citing incorrect identification data. The buyer valued his claim at 99,999 yuan (~$14,380). The court ruled in favour of the seller, confirming the unreliability of the information.

The court noted that NFT trading is a developing sector and Chinese law does not clearly define the legal attributes of token collections.

“As a virtual work of art, a digital NFT collection itself combines the original expression of the artist and has value corresponding to the relevant intellectual property rights. At the same time, these are unique digital assets formed on the blockchain based on a mechanism of trust and consensus among nodes. Therefore NFT collections belong to the category of virtual property,” the ruling states.

On that basis, the court held that the rules governing online trading apply to deals with such assets.

In May, the Shanghai High Court classified Bitcoin as virtual asset with economic value protected by law. In Hangzhou, digital gold received a similar status in 2019.

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