China court rules that CLNs are virtual property

Following a lawsuit in which the legal attributes of non-fungible tokens were in dispute, the court issued a decision giving its position on the matter.

China has been analyzing non-fungible tokens, as well as their link with the country’s legal regime, for many months. In April this year, various organizations were working on mechanisms to curb their commercialization in the country. Then, in July, the Shanghai government launched an initiative to establish the commercial and economic benefits that NFTs can provide.

On this occasion, a Chinese court based in the city of Hangzhou concluded that NFT collections are online virtual property that should be protected by Chinese law.

This news was communicated in the last days of November, and was made known by means of the official Wu Blockchain Twitter in the last hours.

Through this resolution, it reveals language in favor of non-fungible tokens, following multiple controversial decisions adopted by the country from 2021 to date.

By virtue of several translations, it is concluded that this resolution was motivated by a dispute between a technology platform and a user, whereby the latter sued the company due to the refusal to make a sale, and its subsequent cancellation of an NFT.

The platform published an advertisement for the quick purchase of random NFT boxes. But the main issue lies in the bottom section of the ad, where it stated that the user’s real name had to be entered and only one box could be purchased per phone number. It then stated that the platform would delete invalid orders, for example, because of incorrect information.

The platform argued that the user provided a name and cell phone number different from the real information, so the user was reimbursed and no NFT box was delivered.

After hearing both parties, the Court stated that the transaction involved NFT digital collections, but the legal attribute of the NFT collection must first be confirmed. no NFT rights certificatesThe legal attribute of the NFT collection must first be confirmed.

The court established that NFT digital collections possess the characteristics of scarcity, value, control and trade, in addition to belonging to online virtual property, which it considered should be protected by Chinese law.

Thus, the court determined that it is necessary to confirm the legal attributes of NFT digital collections in a particular case, and stated that China’s laws currently do not have a clear reception on the legal attributes of this type of digital tokens.

The court stated that just as with digital artworks, an NFT collection contains the creator’s expression of art and has the value of intellectual property rights attached to it. It further ruled that “NFT collections are unique digital assets that are developed on blockchain and are based on trust and consensus among the various nodes in the network.”

Thus, it determines that NFT digital collections are part of the category of Virtual Property; being a new type of this group and should have legal protection of the country as an object of transactions between parties.

The subject matter of the transaction in the case at hand is the virtual property of the network. The court states that in case of transactions of NFT collectibles having the form of the e-commerce contract, it could be regulated with a reference to the applicable legal regulation concerning e-commerce contracts.

Finally, the court concluded that the transaction brought to litigation consists of a business activity of selling digital goods through the internet, which is part of the category of e-commerce, with its own regulation.

It is worth noting that despite China’s ban on cryptocurrencies, it has simultaneously worked for many NFT projects that are developed separately from cryptocurrencies themselves, so it seeks to support NFT projects not linked to cryptocurrencies.

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Written by Luciano Garriga (TW:@luchogarriga) for NFT Express