A court in the Chinese city of Hangzhou has ruled that non-fungible tokens, or NFTs, are virtual property protected by the People’s Republic’s laws. The decision stems from a dispute between a customer and a platform hired to sell a group of tokens.

Hangzhou Internet Court Hears Property Rights Over NFTs Case
A court in Hangzhou, the capital of the eastern Chinese province of Zhejiang, has heard a case involving a client and a local digital art platform that canceled an NFT sale on his behalf. The user filed a lawsuit against the company, claiming that the operation was terminated without his permission.

The platform, which issued a refund, explained that its decision was prompted by inaccurate personal information provided by the plaintiff. Orders placed without real-name authentication should be canceled, according to the company’s know-your-customer policies, according to an announcement.

According to the Hangzhou Internet Court, NFT collections have property rights characteristics such as value, scarcity, controllability, and tradability, whereas digital collectibles are virtual properties. The judicial authority also emphasized in the statement, which was quoted by Chinese crypto journalist Colin Wu, also known as ‘Wu Blockchain’ on Twitter:

The contract in question does not violate our country’s laws and regulations, nor does it violate actual policy and regulatory guidance to prevent economic and financial risks, and it should be protected by the law.

According to the court, “as a virtual artwork, an NFT digital collection itself condenses the creator’s original expression of art and has the value of associated intellectual property rights.” Simultaneously, NFT digital collections are one-of-a-kind digital assets formed on the blockchain through the trust and consensus mechanism between blockchain nodes.

As a result, the Hangzhou court concluded that NFT collections fall under the category of virtual property. It also stated that the transaction in the case represents the business activity of selling digital goods over the internet, so it falls under e-commerce and should be regulated as such under China’s “E-commerce Law.”

Last year, the Chinese government launched a nationwide crackdown on crypto-related activities such as digital coin issuance, trading, and mining. While allowing the issuance of NFTs, regulators attempted to limit speculation with them. To avoid association with the cryptocurrency space, they are frequently referred to as “digital collectibles” rather than “non-fungible tokens.

According to reports, the popular Chinese messaging app Wechat is suspending accounts associated with NFTs in April of this year. In September, it was revealed that China’s National Copyright Administration (NCAC) had launched a campaign to combat copyright infringement and piracy via digital collectibles.