Stealing NFTs in China is criminal offense

Authorities in China are ramping up enforcement actions against the rising reports of theft in digital collection platforms amid a controversy surrounding the vague legal characterization governing digital collections, including non-fungible tokens (NFTs).

Stealing NFTs means more than just a simple theft in China, given authorities’ differing views on the technology. In China’s existing legal framework, the robbery of digital collections falls under three types of crimes, depending on how they were acquired.

The first two categorize digital collections as either data or digital property, thus subjecting suspects to laws governing the illegal procurement of computer information system data and property laws.

The third view encompasses the perspective of digital collections, combining electronic data and property elements. Under this perspective, the theft of NFTs brings the crime within the purview of existing theft laws under “co-offending.”

“When an actor steals digital collections by hacking into the system or other technical means, he commits the crime of illegally obtaining computer information system data and the crime of theft at the same time, and establishes the crime of imaginary competition,” read the report.

The third perspective appears to have gained the support of several Chinese academics as attempts to improve China’s digital economy rolls in full gear.

“Since property is the object of property crime, digital collections can obviously become the object of property crime,” the report noted. “If digital collections are stolen by intruding into the system or other technical means, it is illegal to obtain data, disrupt the public network order, and infringe on data legal rights.”

Chinese courts are adopting a similar stance toward NFTs, underscored by the judgment of a Hangzhou court, describing digital collectibles as online virtual property. The 2022 decision indicates that it offers NFTs protection under Chinese property laws and that they will be governed under the nation’s e-commerce laws.

NFT-related crimes have surged to new highs in China since 2022, with the State Administration for Market Regulation receiving 59,700 complaints. The complaints range from asset theft, high transaction fees, and price manipulation, rising by a staggering 30,000% in less than one year.

Pundits say the rise of NFT-related crimes in China is linked to the absence of robust legislation and the heavy reliance on “self-regulation” by industry-leading players.

A warning against NFT investments

Amid the push by authorities to crack down on NFT crime, the Supreme People’s Procuratorate of China has issued a warning to residents to be wary of investments in digital assets. In a public advisory, the regulator cited challenges of price manipulation, scams, and unauthorized fundraising as risks faced by unsuspecting consumers.

However, the warning noted that while NFTs offer a measure of use cases, a proper framework has to be established to identify the distinction “between real innovation and criminal activities.”

Despite a blanket digital currency ban in 2021, NFT activity has surged in popularity in China, given the prospects of speculative activity and government interest in the asset class to drive digitization.