Normative evaluation of dual attributes of stolen digital collectibles

Normative Assessment of the Dual Characteristics of Stolen Digital Collectibles

Authors: Chen Wei, Ye Jing, Source: People’s Court newspaper

As a blue ocean field of the digital economy, digital collectibles have a variety of categories and considerable potential, attracting many players, but they may also become targets of criminal activities. There have been cases in China where vulnerabilities in digital collectible platforms were exploited to steal users’ accounts and digital collectibles. Currently, due to the ambiguous legal nature of digital collectibles, there is a serious divergence in the criminal law theory and judicial practice regarding how to determine the act of stealing digital collectibles. This actually involves the question of which protection path should be chosen for emerging digital assets in virtual space in the Web3.0 era.

1. Disputes regarding the act of stealing digital collectibles

Within the existing legal framework, based on different understandings of digital collectibles, there are three main viewpoints regarding the criminal nature of the act of stealing digital collectibles: The first viewpoint holds that digital collectibles are essentially electronic data in computer information systems and should be regulated under the logic of cybercrimes. In the digital context, digital collectibles are inherently dependent on data carriers, and their origin can be traced back to the externalization of data files. Stealing digital collectibles through unauthorized access to systems or other technical means constitutes the crime of illegally obtaining computer information system data. The second viewpoint argues that digital collectibles are virtual properties in the online environment, and the approach of criminalizing the act of stealing them should follow the logic of property crimes. The act of stealing digital collectibles breaks the original exclusive ownership and establishes a new monopoly control, which meets the constitutive elements of theft. By recognizing it as theft, it not only does not violate the basic principles of legality in criminal punishment but also conforms to the layout planning for the protection of the digital economy. The third viewpoint holds that digital collectibles have a dual nature of both data and virtual property, and therefore should be dealt with through the approach of imagining a combination of crimes. When individuals steal digital collectibles by intruding into systems or using other technical means, they simultaneously commit the crimes of illegally obtaining computer information system data and theft, thus constituting an imagined combination of crimes. According to the principle of sentencing for the most serious offense, it should be dealt with as theft.

In my opinion, the first two viewpoints mentioned above are too singular in their perspectives and lack a comprehensive evaluation of digital collectibles. On the other hand, the third viewpoint, which takes into consideration the “data + property” comprehensive judgment, is more appropriate. It addresses the qualitative challenge of cracking down on the act of stealing digital collectibles through the concept of an imagined combination of crimes. Whether it is based on the logic of cybercrime regulation, the approach of criminalizing property crimes, or the path of dealing with an imagined combination of crimes, a thorough analysis is needed based on the technical characteristics and legal nature of digital collectibles.

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2. Technical characteristics and legal nature of digital collectibles

Technical Characteristics: Non-fungible tokens (NFTs). Digital collectibles originate from the concept of NFTs abroad and are the application of NFTs in China’s digital industry. From a technical perspective, digital collectibles are non-fungible tokens that map specific assets using blockchain technology. They have the characteristics of uniqueness, non-replicability, tamper resistance, and permanent storage. Each digital collectible is recorded on the blockchain, creating an immutable unique hash value. Compared to cryptocurrencies, the “non-fungible” aspect means that digital collectibles cannot be divided or exchanged. Compared to physical certificates, the term “token” indicates that digital collectibles exist as trusted digital rights certificates in the form of unique metadata codes on the blockchain. The key difference between digital collectibles and ordinary internet images lies in the process of on-chain authentication of the value of digital assets.

Legal Nature: Virtual property on the internet. Virtual property refers to assets with economic value that exist in data form in cyberspace. From a legal perspective, digital collectibles fit the characteristics of virtual property. First, digital collectibles have virtuality. In the internet, digital collectibles are represented by intangible digital codes, free from the constraints of physical forms. Second, digital collectibles have economic value. Based on their immutable nature, digital collectibles have unique codes that contain detailed transaction information. This highlights the scarcity of digital collectibles, which have both utility and exchange value. Third, digital collectibles have disposability. Although secondary trading markets are not yet open in our country, consumers can use trading platforms to complete operations such as purchasing, collecting, gifting, and destroying, thereby achieving exclusive possession, use, and disposal rights.

III. Legal Evaluation of the Dual Attributes of Stolen Digital Collectibles

As mentioned earlier, digital collectibles have both the technical characteristics of non-fungible tokens and the legal nature of virtual property. When evaluating the act of stealing digital collectibles, both attributes need to be considered comprehensively. Based on this, the perpetrator simultaneously commits the crimes of illegally obtaining computer information system data and theft, constituting imagined competition. From the perspective of statutory punishment, the punishment should be determined based on the more severe crime of theft.

Aligning with the principle of unity of legal order and achieving effective coordination between civil and criminal law. Faced with this emerging phenomenon of digital collectibles, our country’s criminal law has not yet provided a clear definition. Guided by the principle of unity of legal order, criminal law needs to refer to the provisions of the preceding civil laws and draw lessons from precedents in the civil field in order to achieve coordination and provide normative guidance for criminal identification.

The interpretation of digital collectibles in criminal law needs to refer to the regulations on virtual property in the Civil Code. According to Article 127 of the Civil Code: “If there are provisions in the law on the protection of data, virtual property on the internet, they shall be applied accordingly.” It can be seen that, from the perspective of civil law, virtual property on the internet is considered as a right object distinct from property rights, creditor’s rights, intellectual property rights, etc., and is protected by civil law. This provision belongs to the principled regulations on property relations in the network virtual society and provides legal support for the protection of digital collectibles, which are virtual properties on the internet.

The recognition of digital collectibles in criminal law needs to draw lessons from the arguments made in civil precedents regarding digital collectibles. According to judgments from the China Judgments Online database, civil cases involving digital collectibles have been continuously appearing, mainly related to disputes over infringement of internet communication rights and contracts for buying and selling on the internet. In terms of the reasoning of the judgments, for example, the Hangzhou Internet Court has generally adopted the view that digital collectibles belong to virtual property on the internet. These civil judgments have typical reference value for the accurate positioning of the virtual property nature of digital collectibles.

Upholding the function of protecting legal interests and encompassing the dual core of digital collectibles. The essence of a crime is the infringement of legal interests, and the purpose of criminal law is to protect legal interests. According to the function of protecting legal interests, the qualification of the act of stealing digital collectibles should include all the cores of digital collectibles, namely, the legal interests of data and property. The two are not in conflict and should not be neglected, otherwise, the function of protecting legal interests will be limited.

The act of stealing digital collectibles violates the protection of the crime of illegally obtaining computer information system data. This crime belongs to Chapter 6 “Crimes of Disturbing Social Order” of the Criminal Law, and the target of the behavior is the data in ordinary computer information systems. According to the implementation method, the consortium chain is the underlying technical architecture of digital collectibles. Although it has strict access mechanisms and specific permission scopes, it still relies on computer systems and network environments. If digital collectibles are stolen by intruding into the system or other technical means, it falls under illegal data acquisition, disrupts the public network order, and violates data rights.

The act of stealing digital collectibles violates the protection of the crime of theft. Theft is a key crime in the violation of property crimes, and the target of the crime is public and private property. In a broad sense, the property in our country’s criminal law includes tangible and intangible property and property interests. Digital collectibles belong to virtual property on the internet, and virtual property on the internet belongs to intangible property in the sense of criminal law, so digital collectibles should be recognized as property. Because property is the object of property crimes, it is evident that digital collectibles can also be the object of property crimes. If digital collectibles are stolen by intruding into the system or other technical means, this behavior also damages property rights.

Conformity to basic principles of criminal law and achieving proportionate punishment. The basic underlying meaning of the principle of proportionality is that serious crimes are punished severely, while minor crimes are punished lightly, and the punishment fits the crime. According to this principle, different types of criminal behavior need to be strictly distinguished and punished differently; otherwise, it deviates from the balance between crime and punishment. Regarding the act of stealing digital collectibles, according to the concept of joint offense by imagination, one major crime should be chosen for sentencing, and the punishment should be based on the crime of theft, which is in line with the principle of proportionality between crime and punishment.

The imbalance in sentencing for the crime of illegally obtaining computer information system data fails to reflect the distinction in protection between digital collectibles and other non-property attribute data. The target of this crime is the data stored, processed, or transmitted in the computer information system outside of national affairs, national defense construction, and cutting-edge science and technology fields. The difference in social harm between the act of stealing general data and stealing valuable digital collectibles by using technical means is enormous. If it is simply judged as the crime of illegally obtaining computer information system data, it may overlook the economic value of digital collectibles, resulting in overall lenient sentencing and creating a punishment loophole.

Appropriate sentencing based on the crime of theft can reflect different punishment intensities corresponding to different amounts of property. This crime focuses on the illegal possession of various types of public and private property, and its sentencing levels are determined based on the combination of the amount and circumstances. Digital collectibles have the characteristic of being non-reproducible, indicating that the holder has exclusive control. If digital collectibles are stolen by someone else, the holder loses exclusive control. Digital collectibles have property value, which is reflected in different prices on trading platforms. For digital collectibles of different values, the crime of theft has made provisions in the sentencing levels, which conforms to the principle of proportionality between crime and punishment.

This article is a phased achievement of the National Social Science Fund project “Research on the Value Establishment and Practice Operation of the Exit Mechanism for Criminal Penalties” (17XFX009).

(Author’s Affiliation: Southwest University of Political Science and Law)

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