Digital Collections Listed as Virtual Property in China

In a case of information sales contract dispute caused by a digital collection transaction heard by Hangzhou Internet Court in Zhejiang Province, China, it was pointed out that digital collections belong to virtual property that is protected by law.

The defendant, a digital technology company in Hangzhou, operates an e-commerce platform specializing in digital art sales, and the plaintiff is a user of the platform. In February this year, the company issued an announcement through the above platform, saying that a digital collection mystery box will be sold in limited quantities. The announcement records the details of the sale such as price, purchasing time, quantity, and a QR code of the purchase channel.

At the bottom of the announcement, it is shown that a user can only purchase a digital collection by his real phone number and the platform will eliminate invalid orders with pseudonyms and incorrect personal information.

The platform returned funds to the plaintiff ten days after the order (worth 999 yuan, about $143) was placed. The user thought that the company infringed upon his legitimate rights and interests, so he filed a lawsuit requesting the company to carry out the original contract. If the company failed to keep to the contract, it should compensate the user for the loss of 99,999 yuan. The lawsuit was rejected because the user submitted the wrong personal information while placing the order.

After the trial, the court held that the transaction object involved in the case is a digital collection that belongs to the realm of virtual properties, not non-fungible tokens. The contract involved did not violate the laws and regulations preventing financial risks from crypto transactions.

Digital collection transactions are a new industry born with the development of digital economy. According to the data reported by the Alibaba Research Institute, in 2021, a total of 4.56 million items were sold on digital collection platforms such as Ant Group’s Jingtan and Tencent‘s Huanhe, with an average price of 33.33 yuan and a total market value of about 150 million yuan. According to Soochow Securities’ data, the total number of existing users trading digital collections is about 3 million.

SEE ALSO: Chinese Digital Collection Platforms Retreat Under Strong Supervision

At present, there is no clear regulation on the legal attributes of digital collections in China. The current risks of digital collections include copyright issues and speculation risks. The nature of digital collection transactions, how to apply the law, and whether contract termination clauses unilaterally issued by digital collection operators are invalid, need to be clarified through referees.