China Criminalizes Theft of Digital Collections and NFTs

On November 10, the Chinese government issued a statement in which it was declared that individuals found guilty of stealing digital collections, including nonfungible tokens (NFTs), would be subject to larceny sentences.

The text delineates three perspectives regarding the classification of theft of digital assets as a crime, the initial two categorize it as digital property or data.

Nevertheless, the assertion emphasizes that the third perspective, which considers digital collections to be both virtual property and data, would be classified as “co-offending.”

The statement went on to say that stealing a digital collection means getting into the system that hosts it without permission, which is also illegally getting computer information system data and stealing.

“The theft of digital collections violates the protection law and interests of the crime of illegally obtaining computer information system data.”

It stresses that “collections should be recognized as property” in the context of criminal law and further defines digital collections as “network virtual property.”

The discussion centered on non-fungible tokens (NFTs), establishing that digital collections are founded on the notion of NFTs “abroad” and “map specific assets” with “unique, non-copyable, tamper-preventing, and permanent storage characteristics” via blockchain technology.

“Since property is the object of property crime, digital collections can obviously become the object of property crime. If the digital collection is stolen by intrusion into the system or other technical means, the act also damages the property law.”

The declaration states that “consumers can rely on trading platforms to complete purchases, collections, transfers, destruction, and other operations to attain exclusive possession, use, and disposal capabilities,” even though China has not yet opened the “secondary flow market” for digital collections.

There has been recent interest in NFTs despite China’s official prohibition on nearly all crypto-related activities and transactions beginning in 2021, except for cryptocurrency ownership.

Local Chinese media reported on October 25 that the peer-to-peer marketplace Xianyu, which is owned by Alibaba, lifted its search censorship of “nonfungible tokens” and “digital asset”-related keywords.

Before that, China Daily, an English-language newspaper owned by the Chinese government, announced on October 6 that it would award a third-party contractor 2.813 million Chinese yuan ($390,000) to design its own NFT platform according to its specifications.