In response to a surge in theft reports within digital collection platforms, particularly involving non-fungible tokens (NFTs), Chinese authorities are escalating enforcement actions. The controversy surrounding the legal characterization of digital collections has prompted a crackdown, emphasizing the multifaceted legal perspectives on these assets.
In China’s legal framework, the theft of digital collections, including NFTs, can fall under three distinct criminal categories based on how they were acquired. The first two categorizations view digital collections as either data or digital property, subjecting suspects to laws governing illegal procurement of computer information system data and property laws.
The third perspective combines electronic data and property elements, categorizing the theft of NFTs under existing theft laws through the concept of “co-offending.” This perspective has gained support from Chinese academics seeking to enhance the nation’s digital economy.
A Hangzhou court judgment in 2022 reinforced this perspective by describing digital collectibles as online virtual property, offering NFTs protection under Chinese property laws and placing them under the governance of the nation’s e-commerce laws.
The surge in NFT-related crimes in China since 2022, with 59,700 complaints reported to the State Administration for Market Regulation, is attributed to the absence of robust legislation and heavy reliance on industry self-regulation. Complaints range from asset theft and high transaction fees to price manipulation, representing a staggering 30,000% increase in less than a year.
As authorities intensify efforts to combat NFT-related crime, the Supreme People’s Procuratorate of China has issued a warning to residents about the risks associated with digital asset investments. The advisory cites challenges such as price manipulation, scams, and unauthorized fundraising, urging consumers to exercise caution.
Despite a blanket digital currency ban in 2021, NFT activity has gained popularity in China due to the potential for speculative activity and the government’s interest in driving digitization within this asset class.
