A court in Hangzhou, China has ruled that Non-Fungible Tokens (NFTs) are considered virtual property and should be protected under Chinese law.

The Hangzhou Internet Court’s November 29 article, shared by crypto blogger Wu Blockchain on Dec. 5, indicated that China is taking a favorable stance on NFTs despite its crackdown on cryptocurrencies in 2021. This leaves NFTs in a legal gray area.

The article states that NFTs possess the same attributes of property rights, including value, scarcity, controllability, and tradability, and are classified as network virtual property which requires legal protection from the laws of the nation.

The court concluded that it was necessary to validate the legal status of the NFT digital collection for the case, acknowledging that Chinese laws currently do not explicitly address the legal characteristics of such collections.

In a case where two unnamed parties were involved, the court issued a decree when the company refused to finalize a sale and canceled the user’s purchase of an NFT from a “flash sale” because the user’s name and phone number did not match the information they had on file.

The court declared that NFTs encapsulate the creator’s authentic artistic expression and are endowed with the value of associated intellectual property rights.

Furthermore, it stated that NFTs are exclusive digital commodities constructed on the blockchain, which is supported by the mutual trust and consensus between blockchain nodes.

The court declared that NFT digital collections constitute virtual property, and that the transaction in the legal case was akin to the sale of digital goods via the internet, which should be regulated by the E-commerce Law.

In May, the Shanghai High People’s Court declared that Bitcoin (BTC) is subject to property rights laws and regulations in spite of the Chinese government’s ban on cryptocurrencies.

China has sought to differentiate Non-Fungible Tokens (NFTs) from cryptocurrencies by instituting a crypto ban and launching a government-backed blockchain initiative to enable the use of NFTs without crypto involvement.

This project will enable the purchase of NFTs with fiat money.