China establishes criminal charges for stealing NFTs

China establishes criminal charges for stealing NFTs

The Chinese government announced on November 10 that stealing digital collections, such as nonfungible tokens (NFTs), will be legally considered theft, subjecting perpetrators to criminal sentences. This declaration marks a significant shift in how digital assets are viewed and protected under Chinese law.

Criminalizing NFT theft

The statement issued by the government outlines three perspectives on the nature of digital collection theft. The first two views categorize it as a breach of either data or digital property. However, the emphasis lies on the third perspective, which treats digital collections as both data and virtual property, thereby categorizing such acts under “co-offending.”

Elaborating further, the government’s declaration explained that the act of stealing a digital collection constitutes an intrusion into the system where it is stored. This action simultaneously commits the crime of illegally obtaining computer information system data and theft. This dual violation underlines the seriousness with which the Chinese government views the theft of digital assets.

Recognizing NFTs as property

In its detailed statement, the government referred to digital collections as “network virtual property”, emphasizing their status as property in the criminal law context:

“Since property is the object of property crime, digital collections can obviously become the object of property crime, (…) If the digital collection is stolen by intrusion into the system or other technical means, the act also damages the property law.”

The statement specifically mentioned NFTs, which use blockchain technology to map specific assets with unique, non-copyable, tamper-preventing, and permanent storage characteristics.

Despite not having opened a “secondary flow market” for digital collections, the declaration noted that consumers in China can rely on trading platforms for purchasing, collecting, transferring, destroying, and otherwise managing digital collections, thereby achieving exclusive possession, use, and disposal capabilities.

Regulatory landscape in China

The announcement comes despite China’s stringent stance on crypto-related activities. Since 2021, the country has officially banned nearly all crypto-related transactions and activities, except for owning cryptocurrencies. However, recent developments indicate a growing interest in NFTs within the country.

On October 25, a report from a local Chinese media outlet revealed that Xianyu, an Alibaba-owned peer-to-peer marketplace, had lifted its censorship on search keywords related to “nonfungible tokens” and “digital assets.”

Earlier, on October 6, China Daily, an English-language newspaper controlled by the Chinese government, announced its plans to establish its own NFT platform. The government allocated 2.813 million Chinese yuan (approximately $390,000) to a third-party contractor for designing the platform to its specifications.

This shift in policy and growing interest in NFTs signal a new chapter in China’s approach to digital assets, potentially paving the way for broader acceptance and integration of blockchain-based technologies, including a CBDC (Central Bank Digital Currency), into its economy.

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