NFTs ruled virtual property in China, its sales protected by law

The Hangzhou Internet Court has ruled that non-fungible tokens (NFT) are virtual properties protected by law, according to the court’s summary of a recent case posted on its official Wechat account on Nov. 29.

See related article: China’s diktat against NFT trading spawns an ingenious industry 

Fast facts

• Located in China’s southeastern province of Zhejiang, the Hangzhou Internet Court is the first court in the mainland to adopt blockchain technology in legal procedures.
• In the case, the plaintiff sued a Hangzhou-based digital art platform for canceling an NFT sale and issuing a refund without the consent of both transacting parties. 
• The defendant said this decision was made due to the plaintiff providing inaccurate personal details during the platform’s know-your-customer (KYC) verification process.
• The court ruled against the plaintiff and said the Hangzhou-based firm had rightfully terminated the NFT sales contract.
• “The sale contract of the NFT does not violate the Chinese laws, nor does it violate regulatory guidance in China to prevent financial risks, so Chinese laws should protect it,” the court said. 
• “As a virtual artwork, NFT collectibles condenses the creator’s original expression of art and has the value of related intellectual property rights,” the Hangzhou court said. “NFT is a unique digital asset on the blockchain based on trust and consensus mechanisms among blockchain nodes. Therefore, NFT falls into the category of virtual property.”
• The court suggested NFTs be regulated by the E-commerce Law.
• In April, three Chinese finance lobby groups issued a joint announcement on preventing “financial risks related to NFTs” to urge NFT platforms to adopt KYC standards to comply with money laundering requirements.

See related article: Tencent’s Huanhe allows NFT refunds, halts further sales