A court in the Chinese city of Hangzhou has issued a one-of-a-kind ruling against the NFT token market for allowing a user to create (or mint) NFTs of stolen art.
The NFT market verdict came after Shenzhen-based Qice filed a lawsuit against NFTCN parent company BigVerse, the South China Morning Post reported. The lawsuit alleged that an NFTCN user stole a copyrighted work by Ma Qianli, a Chinese artist specializing in drawing and printing. NFT platform user allegedly poaching one of Ma’s cartoons.
Based on the evidence collected, the court found the NFTCN platform guilty of not checking for theft or registration of intellectual property (IP) before allowing users to mint NFTs. As a result, NFTCN was charged with facilitating the violation of “the owner’s right to distribute works through information networks.”
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The artwork in question was a cartoon tiger receiving a vaccination that was sold for 900 Chinese yuan (approximately $137) to an unknown user on the NFTCN platform. However, BigVerse was ordered to pay Qice a fine of 4,000 yuan (or $611) in addition to stopping circulation of the stolen NFT artwork by sending it to a “consumer address.”
Eater addresses stop the transfer of NFTs because they are not inherently private addresses, which fundamentally works similar to the burn mechanism in cryptocurrencies. Despite China’s aggressive stance towards the crypto ecosystem, the country was wary of an NFT ban. While China has refrained from imposing a total ban on NFTs despite being aggressively anti-cryptocurrency, the three Chinese authorities have jointly issued a public warning about the “hidden risks” of investing in NFT tokens.
The China Banking Association, the China Internet Finance Association, and the China Securities Association have taken initiatives to encourage innovation in the NFT-focused crypto and blockchain space, as well as “strongly curbing the trend of NFT financialization and securitization” to mitigate the risks associated with illegal activity. The government has also warned citizens against using Bitcoin and other cryptocurrencies such as Ether or Tether to sell or buy NFTs.