Introduction to NFT-related Legal Issues in Mainland China – Centered on Digital Collectibles

February 2023

Karl Zhang and Teresa Huang

1. Definition of NFT and Digital Collectibles

(1) Digital Collectibles and NFT 

Since 2022, the concept of digital collectibles in China has been much sought after, and many companies have launched various digital collectibles products or platforms.  For example, Alibaba has launched the “Topnod” digital collectibles platform, Netease has launched the “NetEase Planet NFT”, which supports the purchase of digital collectibles and the uploading of materials to create digital collectibles, and Xinhua News Agency also launched digital collectibles related to the Qatar World Cup based on the images of football stars.  Recently, China’s first digital asset trading platform was also launched in Beijing, with the varieties to be traded in the platform including intellectual property rights, digital copyrights, digital collectibles, etc., making it possible for digital collectibles to be traded in the secondary market[1].

The digital collectibles or NFT digital works mentioned here refer to digital works such as digital music, digital pictures, digital images, video animations, etc., which are sold as NFTs on the trading platform.[2] NFTs, fully known as “Non-Fungible Tokens”, translated as “非同质化通证” in Chinese, are built based on blockchain technology with characteristics such as indivisible, irreplaceable and unique.  Compared with general NFTs, digital collectibles currently permissible in China may be regarded as a branch of NFT subject to specific regulation where its financial and investment attributes are eliminated and its value is mainly derived from the field of art collection.  The NFTs mentioned in this article also mainly refer to digital collectibles in the Chinese context.

 (2) NFT and Virtual Currencies 

Virtual currencies such as Bitcoin and Ether, as opposed to NFT, are fungible in nature, which means that each unit of a virtual currency is identical in nature and divisible, thus providing the basis for them to be virtual currencies as a universal equivalent.  It is also because of this financial characteristic that virtual currencies are easily breed gambling, illegal fund raising, fraud, pyramid schemes, money laundering and other illegal acts.  Therefore, China’s current attitude toward virtual currencies is severe, and the Notice on Further Preventing and Disposing of Risks in Virtual Currency Trading and Speculation (Yin Fa [2021] No. 237), jointly issued by ten departments in September 2021, clearly qualified virtual currency-related business activities as illegal financial activities.  In contrast, China’s current attitude toward NFTs or digital collectibles can be considered much more tolerant.

2. Current Status of Legal Regulation on Digital Collectibles

(1) Digital collectibles are property in the legal sense 

At present, although NFT or digital collectible has not been clearly defined in any law, there are relevant cases discussing their nature and characteristics.  On November 29, 2022, the Hangzhou Internet Court issued brief introduction of an information network sales contract dispute case arising from the trading of NFT digital collectibles through its WeChat Official Account[3], in which the Court held that “NFT digital collectibles have property right object characteristics such as value, scarcity, disposability and tradability, and also have the unique attributes of network virtual property such as network virtuality and technicality, and thus belong to network virtual property.  The contract involved does not violate the provisions of China’s laws, nor does it violate China’s current policies and regulatory direction of preventing economic and financial risks, and should be protected by China’s laws.”

At the same time, in another dispute case of the infringement of a copywriter’s right of communication to the public through information networks announced by the Hangzhou Internet Court on April 20, 2022[4], the Court held that “from the process of creating the NFT digital work, there is the act of uploading the work, which makes the digital work stored in the terminal devices of the caster to be copied to the network server” and that “the creation and trading of the NFT digital work includes three acts of copying, selling of such digital work and communication to the public through information networks.”

From the above cases, it can be seen that the Court has now tended to treat digital collectibles as a kind of network virtual property, which is protected by law, and the acts of reproduction, sale and information network transmission of the work involved in the process of its casting and trading should also be regulated by law.

 (2) The risk of financialization of NFT 

At the same time, NFT, a hot concept at the moment, also has risks of irregularities such as hype and financialization, and with the deepening of awareness, relevant authorities have issued regulations to prevent the risk of irregularities.  On April 13, 2022, the National Internet Finance Association of China, the China Banking Association and the Securities Association of China jointly issued the Initiative to Prevent Relevant Financial Risks of Non-Fungible Tokens (NFTs) to their members, stating that the tendency of financialization and securitization of NFT should be resolutely curbed and the risk of illegal financial activities should be strictly prevented:

  • Firstly, not to include securities, insurance, credit, precious metals and other financial assets in the NFT underlying commodities for the purposes of issuing and trading financial products in a disguised manner;
  • Secondly, not to weaken the non-fungible characteristics of NFTs by splitting ownership or bulk creation for the purpose of initial coin offering (ICO) in a disguised manner;
  • Thirdly, not to provide centralized trading, continuous listed trading, standardized contract trading and other services for NFT trading for the purpose of illegally establishing a trading venue in a disguised manner;
  • Fourthly, not to use Bitcoin, Ether, Tether and other virtual currencies as the valuation and settlement tools for the issuance and trading of NFTs;
  • Fifthly, to perform real-name authentication of the issuers, sellers and buyers, properly preserve client identity information and issuance and trading records, and actively cooperate with anti-money laundering measures;
  • Sixthly, not to invest directly or indirectly in NFTs, and not to provide financing support for investment in NFTs. [5]

In addition, Fujian Province issued the Reminder Letter of Fujian Provincial Working Group for the Clean-up and Rectification of All Types of Trading Venues on the Prevention of Risks of NFT Irregularities in June 2022, which clearly prohibits trading venues from establishing the NFT secondary market, and prohibits these venues from engaging in NFT trading without approval or from illegally participating in NFT activities in a disguised manner[6].

From the attitude of industry associations and relevant local departments, it can be seen that China is more alert to the risk of financialization of digital collectibles, and the relevant digital collectibles platforms also restrict secondary trading, making digital collectibles not have the attributes of financial investment.

 (3) Industry self-regulation of digital collectibles 

In addition to relevant court cases and regulations of some local government agencies, some Chinese companies involved in digital collectible business have also spontaneously established relevant self-regulatory organizations or jointly launched self-regulatory conventions, such as the China Digital Collectible Self-Regulation Convention jointly initiated by redcave.com.cn, wenhuarener.com, and lingjing3.cn, etc.[7] , the Self-regulatory Requirements on Regulating the Healthy Development of the Digital Collectible Industry jointly issued by the Metaverse Industry Committee of the China Mobile Communications Association and the Blockchain Professional Committee of the China Communications Industry Association[8], and these related self-regulatory conventions also mostly involve the prevention of speculation and financialization.

3. Conclusion

From the separation of NFT and digital collectibles in the Chinese context, to the recognition of property attribute of digital collectibles, to the initiatives of relevant industry organizations for preventing financialization, we can see that the newborn concept of digital collectibles is developing rapidly in China, and people’s understanding of it is deepening.  Moreover, many enterprises, including state-owned enterprises like Xinhua News Agency, are optimistic about digital collectibles and have invested in them, which indicates that digital collectibles are a highly anticipated industry.  At the same time, the compliance of NFT or digital collectible business is very much worthy of attention.  How to prevent the risk of financialization, how to avoid the risk of intellectual property disputes, how to treat the rights and interests of consumers, etc. are the issues that practitioners should pay attention to, and our firm will stay focused on the relevant legal regulation trends.


[1] China Digital Asset Trading Platform (https://www.cdex.cn/) is currently in the reservation of cooperation applications.  Please see the related introduction from China Daily “The First State-sanctioned Secondary Trading Platform for Digital Assets ‘China Digital Asset Trading Platform’ Will be Launched Soon” at https://cn.chinadaily.com.cn/a/202212/27/WS63aa9a36a3102ada8b22887c.html (last viewed on January 17, 2023).

[2] Please see the article from the WeChat Public Account of the Hangzhou Internet Court “Should the Metaverse Platform be Liable for a User’s Publishing of Any Infringing NFT Work? The Court Has Made a Decision” at https://mp.weixin.qq.com/s/IQwjcF_a5EoYdc5CFkaQpA (last viewed on January 17, 2023).

[3] Please see the article from the WeChat Public Account of the Hangzhou Internet Court “The ‘NFT Digital Collectible Blind Box’ Purchased in a Hurry was Refunded, and the Buyer Claimed for Compensation of over RMB90,000, The Court Has Made a Decision” at https://mp.weixin.qq.com/s/WWnZAxqiIVJ-dHO90eoBVw (last viewed on January 17, 2023).

[4] See endnote 2.

[5] Please see the Initiative to Prevent Relevant Financial Risks of Non-Fungible Tokens (NFTs) jointly issued by the National Internet Finance Association of China, the China Banking Association and the Securities Association of China at https://www.sac.net.cn/tzgg/202204/t20220413_148867.html (last viewed on Jan. 17, 2023).

[6] Please see the article quoted in the People’s Daily Online “Digital Collectibles = NFT? There are Connections but also Essential Differences between Them” at http://art.people.com.cn/n1/2022/0616/c41426-32447926.html (last viewed on January 17, 2023).

[7] Please see the article from the Xinhua Net “The China Digital Collectible Self-Regulation Convention Released” at http://www.news.cn/enterprise/20220412/1e329c5c5b9644299eea00634737329b/c.html (last viewed on January 17, 2023).

[8] Please see the article from zqrb.cn “Two Associations Jointly Release Six Self-Regulatory Requirements for Regulating the Healthy Development of the Digital Collectible Industry” at http://www.zqrb.cn/finance/hangyedongtai/2022-04-14/A1649920497985.html (last viewed on January 17, 2023).


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