One of the long-running debates that have endured within the blockchain space is what exactly digital assets ‘are’. From a legal perspective, especially, there has been back-and-forth about whether they are investments, legal tender, property, and so on. But as NFTs, in particular, are being more widely used, we have seen several landmark cases that establish legal precedents for their status and protection.
After UK and Singaporean courts set legal precedents for NFTs as property this year, a Chinese court has followed suit. According to local media, the Hangzhou Internet Court in China declared that NFTs fall under the category of ‘virtual property’. As such, NFTs should be protected by law in the same way others are.
NFTs Status in China
This ruling came as a result of a recent case in China. The case involved a digital technology company in Hangzhou and one of its users. Back in February, the company held a flash NFT sale on its platform which promoted some limited edition “NFT digital collection blind box” that would be sold out very soon.
As part of the sale process, customers were instructed to input a phone number for authentication and that NFT redemption was limited to one asset per customer. The user, who was identified by the alias ‘Wang’, provided this information and paid 999 yuan for the asset.
However, the platform did not give him any assets and instead, gave him an unwanted refund. This then led Wang to file a court case. As he puts it, the company violated the terms of their agreement and backed out from giving him what he paid for.
In the court case, Wang asked that the company fulfil its obligations and give him an NFT or give 99,999 yuan as compensation. But the company has hit back, stating that Wang’s mobile phone number and ID did not match and as such, his order was cancelled. Furthermore, the company claims that he did not incur any losses since he was given a refund.
In the end, the court chose to side with the company, claiming that due to the non-matching details, it was within its rights to terminate the sale. But this case goes beyond just a platform and a disgruntled user.
What This Means
This case sets the precedent that NFTs are indeed properties that can form the basis of a lawsuit. This is especially impressive given China’s strict treatment of NFTs in the past. As the court said in its ruling, “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.”
Moving forward, those who deal in NFTs, whether by purchasing or selling, will have legal backing that can protect them and their assets. While around the world, NFT-focused regulation has some ways to go, it is refreshing to see that the law is catching up and giving these assets the recognition they deserve.