Non-fungible tokens or NFTs have been declared “virtual property” holding “value” for intellectual property rights, and might even benefit from regulation under China’s e-commerce laws, according to China’s Hangzhou Internet Court. The special jurisdiction courts were created to investigate internet-related issues in 2017 and were the first in China to use blockchain.
In February, an NFT platform in the Chinese port city of Hangzhou was sued by an unnamed individual for revoking and refunding the sale of an NFT, citing the fact that the buyer had not accurately provided their name and other identifying details. The individual sued the platform for refunding the 999 yuan (more than $140) he had paid for the sale of a limited-edition “NFT digital collection mystery box,” claiming that the seller did not obtain his permission before revoking the sale.
Ultimately, the Hangzhou Internet Court said that the company was within its rights to cancel the sale: “The sale contract for the NFT does not violate Chinese laws, nor does it violate regulatory guidance in China to prevent financial risks, so Chinese laws should protect it,” the court said.
“As virtual artworks, NFT collectibles condense the creator’s original expression of art and have the value of related intellectual property rights,” said the court. “NFTs are a unique digital asset on the blockchain, based on trust and consensus mechanisms among blockchain nodes. Therefore, NFTs fall into the category of virtual property.”
Although the Middle Kingdom instituted a sweeping ban on cryptocurrency last year, there is no explicit ban on NFTs, allowing the industry to remain optimistic that Beijing may one day regulate NFTs and bring it into the legal fold. Many interpret the lack of hostility toward NFTs in China, and the court decision itself, as indication that NFTs may be recognized as legitimate digital goods in the country.
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