NFT Regulation: Chinese Court says NFTs are Online Virtual Property by Law

NFT Collections In China Should Be Protected By Property Laws, According to Chinese Court in Hangzhou.
Despite banning crypto, China has seemingly taken a softer stance on NFTS.

According to the latest reports, It is revealed that the Chinese court based in Hangzhou city has applied its property law to non-fungible token (NFT) collections. The Hangzhou court states that NFTs are like online virtual property and should be protected under China law.

In the judgment, the court shared its views on several copyright issues in relation to NFTs, as well as the obligations of NFT platforms while questioning the legal attributes of NFTs.

The announcement came after there was a dispute between a user and an NFT platform. The user of a technology platform accused the latter of turning down completing the sale and canceling his NFT purchase from a flash sale, on the basis that his name and phone number didn’t go with their records.

While noting Chinese laws are not clear on the features of NFTs, the court moved to establish its legal attributes. The Hangzhou court of China pointed out that NFTs possess the mentioned characteristics of property rights such as value, scarcity, controllability, and traceability. Thus, the court affirmed they were like a network’s virtual property and should be regulated by E-commerce law.

The contract involved does not violate China’s laws and regulations, nor does it violate the realistic policy and regulatory orientation of China’s national defense economic and financial risk, and should be protected by Chinese law.

In China, similar to markets elsewhere, the NFT market is booming and has huge growth potential. However, aside from the regulations and restrictions from a financial perspective, neither the Chinese authorities nor the Chinese courts had ever formally responded to any other key legal issues pertaining to NFTs, especially in relation to copyright, until now.

A #Chinese court ruled that #NFT collections are virtual online property that must be protected under Chinese law.
The government remains vigilant to ensure that its people resist "NFT speculation," as described in a statement from the China Banking Association. pic.twitter.com/FZPIr20qk2

— Sequel (@sequelspace) December 6, 2022

However, the Chinese government also issued an advisory warning about the hidden risks of investing in NFTs as speculative assets. Much of the NFT industry is rife with scams and bad actors. By treating them as properties rather than tokens, NFTs in China seem to have a non-currency status.

This past April, a court in China’s eastern city of Hangzhou handed down the country’s first landmark ruling on a case involving NFTs. The ruling made marketplaces accountable for users that create nonfungible tokens from stolen artwork.

Meanwhile, Malta a financial service authority seeks to remove NFTs and their providers from its Virtual Financial Assets (VFA) law passed in 2018 which requires firms to issue investors with product whitepapers before issuance. . Malta concludes that the uniqueness of NFTs prevents them from being used for payment purposes or as investments.

Malta, one of the European Union’s smallest member states, was one of the first to set its own crypto registration regime. Its existing law includes most NFTs.