China’s Supreme People’s Procuratorate has turned its attention to the legal challenges associated with non-fungible tokens (NFTs), amidst the booming digital economy, according to an announcement made on its website.
As new-age technologies like blockchain and concepts like the “metaverse” gain global traction, emerging applications like NFTs have become the focus of market attention. NFTs, essentially digital asset certificates recorded on the blockchain, represent a new area of application for blockchain technology and have significant development potential.
However, as an emerging field, the laws and regulations related to it are still in nascent stages. Alongside the burgeoning interest in NFTs, there are increasing concerns about potential financial, management, and cyber security risks, with legal risks being a particular focus for procuratorial agencies.
Wang Xiafang, one of the experts cited in the report, urged judicial authorities to accurately discern between innovative development and unlawful activities. It is crucial to both protect genuine innovation and promptly identify and penalize fraudulent activities masquerading as innovation, to prevent the phenomenon of “bad money driving out good”.
Sun Shan, another expert, highlighted the role of copyright compliance governance on trading platforms, especially in situations where the creator and the minter of NFTs are not the same entity. The ideal scenario is when the creator and the minter are the same, but if not, it’s essential for the platform to ensure copyright compliance.
Ruan Shenyu, also contributing to the discussion, clarified the ownership rights of consumers in terms of NFTs. From a property rights perspective, consumers do not have full ownership of the NFT digital assets in the traditional legal sense. They cannot prevent others from accessing, copying, or disseminating the digital assets linked to their NFTs. What consumers do have is an exclusive right that prevents others from unauthorized alteration of the NFT’s ownership recorded on the blockchain.
The Supreme People’s Procuratorate is keen to engage experts and practitioners in a broad discussion on the legal status and risk management of NFTs, highlighting the significant interest and concern surrounding this emerging technology in China’s legal circles.