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While China is seemingly encouraging the ownership of NFTs, NFT prices have been down in the wake of a wider market rout.
A Chinese court in Hangzhou city has applied its property law to nonfungible token (NFT) collections. The court ruled that NFTs are like online virtual property and should be protected under Chinese law.
While noting Chinese laws are not clear on the features of NFTs, the court moved to establish its legal attributes. According to the case report, “NFTs have the object characteristics of property rights such as value, scarcity, controllability, and traceability”. Thus, the court affirmed they were like a network’s virtual property.
The need to define the legal attributes came as part of a developing legal case where an unmanned user of a technology platform sued the company for stopping a sale because the user provided incorrect information. Consequently, by defining an NFT as a virtual property asset, the court noted its sale would be treated as e-commerce and “regulated by the ‘E-commerce Law’.
Implications of China’s Stance on NFTs
Despite banning crypto, China has seemingly taken a softer stance on NFTS. Earlier in the year, the government began building critical blockchain infrastructure that will allow it to develop NFTs that can be purchased directly with fiat.
However, the Chinese government also issued an advisory warning about the hidden risks of investing in NFTs as speculative assets. By treating them as properties rather than tokens, NFTs in China seem to have a non-currency status.
NFT Trading Volumes Still Down
While China is seemingly encouraging the ownership of NFTs, NFT prices have been down in the wake of a wider market rout. From a peak of $17 billion in early 2022, the NFT market was down to $470 million in September 2022.
Data from DappRadar suggests the trading volume fell further in November, with most of the transactions happening on secondary markets. Interestingly, the trading volumes of the top NFT collections spiked. For example, about $63.8 million worth of Bored Ape Yacht Club was sold.
There are speculations China may have played a role in this directly or indirectly. However, this remains unclear. With a Singaporean High Court judge also applying the property law to NFTs in October, what is clear is that China’s stance on NFTs as properties may help move people to purchase more NFTs.