Chinese Court States That NFTs are Legally Protected Virtual Property

Nonfungible Token (NFT) collections, according to a Chinese court in the city of Hangzhou, are online virtual properties that must be protected by Chinese law.

The Hangzhou Internet Court, a specialized internet court, published a document on November 29 that was shared by cryptocurrency blogger Wu Blockchain on December 5. The report discloses the favorable language for NFTs after the country started to crack down on cryptocurrencies in 2021, placing NFTs in a legal grey area.

According to the article's translation, NFTs “have the object characteristics of property rights such as value, scarcity, controllability, and tradability” and “belong to network virtual property” that “should be protected by the laws of our country.”

The court stated: “NFTs condense the creator's original expression of art and have the value of related intellectual property rights”. NFTs are “unique digital assets formed on the blockchain based on the trust and consensus mechanism between blockchain nodes”, the statement continued.

Due to this, the court ruled that "NFT digital collections belong to the category of virtual property" and that the transaction in question is considered to be the "selling of digital goods through [the] internet," which is considered to be an e-commerce business and is "regulated by the 'E-commerce Law'".

It comes after the Shanghai High People's Court declared in a paper published in May that despite the nation's ban on cryptocurrencies, Bitcoin is similarly governed by property rights rules and regulations.

With its crypto ban, China has attempted to keep NFTs apart from crypto by supporting the deployment of non-crypto NFTs paid for with fiat money through a government-backed blockchain project.

There are other countries besides China that have property laws that apply to NFTs. In a case from October, a Singaporean High Court judge referred to existing property laws when he compared NFTs to tangible goods like fine wine or luxury watches, adding that “NFTs have emerged as a highly sought-after collectors’ item.”

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