NFTs are Virtual Property Protected by Law, Says Chinese Court
A Chinese court based in Hangzhou city has termed NFTs as unique digital assets belonging to the virtual property category. The definition was established in an event where it had to determine the legal attributes of NFTs.
NFTs Should be Protected under Chinese Law
The court ordered that non-fungible tokens (NFTs) should be classified as online virtual property and ought to be protected.
NFT digital collections possess the object characteristics of other properties, for instance, value, controllability, and scarcity. Moreover, they have unique traits like those of virtual network property, such as the network virtuality technology, and are part of the virtual network property.
The Case that Started it all
In February this year, a digital technology company located in Huangzhou city issued a rush purchase announcement through their e-commerce platform, perpetrating that an “NFT digital collection blind box” shall be sold though in limited quantities.
This announcement captured sale details, for example, snap-up time, price, and the limited purchase quantity. They then made an attachment of the QR code of the purchase channel.
The announcement also indicated that the mobile number and the real name must be filled in, and each mobile number can only snap once. The platform was also set to eliminate orders with wrong personal information and lack of real name authentication and will force refunds for invalid orders.
Wang, who happens to be the plaintiff in this case, claims that he snapped up the “NFT Digital Collection Blind Box” sold by the digital technology company through the e-commerce platform, and they credited 999 yuan after getting his personal information and mobile phone number.
However, the company did not deliver the goods to Wang as expected, so he sued the company because it had violated its legitimate rights by not performing the contract.
In its defense, the digital technology company argued that to prevent users from using plug-in software to snap up digital collections, the company’s e-commerce platform gave a snapping-up announcement before selling the products started and clearly stated the precautions.
The platform refunded Wang because the ID numbers and the phone numbers provided by Wang did not match hence the termination of the contract as per the agreement set. Mr. Wang accepted the refund, and the Digital Blind Box has been sold out, and he cannot continue to perform the contract.
The E-commerce Law
In this scenario, the transaction involved here is done through the internet information, and the NFTs belong to a virtual network which is part of the network’s virtual property.
Bearing that in mind, it means that this kind of transaction is the business activity of selling digital goods via internet information. Internet information belongs to a category of e-commerce and must be regulated by the “e-commerce law”.
Regarding the validity and legality of the dispute between these two parties that NFT digital collection operators have the right to terminate the contract unilaterally, it needs to be investigated comprehensively with industry compliance needs, legal regulations, and specific needs of individual cases. Termination of the contract should be on the mandatory provision of related laws in the country.