Wednesday, September 28

NFTs and their legal aspects: how to protect them and use them for our economic objectives

When thinking about a person’s wealth or fortune, it is usual to relate it to cash, investments, properties, cars, jewelry, art, among others.

 

However, for some time now a new type of asset has begun to take center stage, the so-called digital assets, among which NFTs are the most recent to be incorporated as an objective of people’s wealth planning.

 

NFT is the acronym in English for what is known as “Non-Fungible Tokens”. They can be created from digital assets, such as a drawing, music or video clip, a tweet, among others, represent an existing tangible asset or even a future one. Virtually any physical or virtual asset can be represented by an NFT.

 

Daniela Baldovino, global head corporate & funds de Untitled SLC, a legal services boutique specializing in international estate planning and setting up investment funds, explains that “These assets come with their own set of risks and specific considerations, in terms of their preservation, protection, transaction costs and the possibility of legacy within, for example, an inheritance.”

 

NFTs are different from generic or fungible tokens, which are interchangeable with each other without any distinctive feature or particularity in what they represent. “Both, however, are types of crypto assets that will be stored in a wallet or virtual wallet, on which we must pay special attention when planning our assets given the great value they can reach,” Baldovino added.

 

Read more: These are the 10 most expensive NFTs of the year

 

NFTs came to the crypto world a couple of years ago thanks to the use of the same technology that allows the creation of cryptocurrencies. Only OpenSea, the world’s most recognized NFT marketplace, has sold $2.5 billion worth of NFTs, while the market as a whole continues to rise. The value of virtual goods is estimated to exceed $1 billion in the United States alone, according to a report published last year, cited by the Financial Times.

 

Legal aspects

 

Collectors from all over the world are digitizing their items to be able to store them more efficiently, but also tempted by the robustness of the blockchain to corroborate the authenticity and ownership of their collections.

 

“Soon we will be able to see the application of NFTs to the ownership of even more valuable and complex goods. As long as its condition of being an instrument to guarantee the sole ownership of any asset expands, the perspective is that it will increasingly transcend the art market and even beyond it, enabling new business models (real estate, e-sports, investments, etc.) suma Baldovino.

 

This year there were different novelties that made the existence of NFTs even more popular: Lionel Messi presented his collection of NFTs called “Messiverse” that represents digital works, and Cristiano Ronaldo also launched his own collection. There are already some music bands that released, or are about to release, their new works directly in NFT format and there are others that are offering them without intermediaries, through the use of blockchain technology.

 

According to Baldovino, before acquiring an NFT the interested party has to exhaustively analyze its content, basically to know if you are only acquiring the work or if it includes or does not include rights of patrimonial exploitation. In the first case, the NFT will be an object to collect, while in the second case, it must be taken as an asset for economic exploitation.

 

While NFTs are a tokenized digital representation of a real work, It must be taken into account that when a digital work is transmitted, the rights that the author has over the work are not necessarily transmitted, in the same way that whoever sells a painting does not transmit to the buyer the exploitation rights of the painting, except that has made, for example, a contract of assignment of rights.

 

In these conditions, it is important, then, to attribute to the token those exploitation rights of the work that you want to transmit and the way to do it, if it is exclusive or not, even if it is valid for the whole world or only for some jurisdictions, for how long. the rights and the costs or commissions for each transfer are transferred”, apunta Baldovino.

 

There are two main categories here:

 

 

  1. The NFTs that have the status of utility token and serve to intervene in a platform to acquire goods and services on it, such as airline miles.
  2. The other is made up of NFTs that represent an existing asset, tangible or non-tangible, digital or material, be they shares, works of art, music, rights, a drawing, among others.

 

First, it must be defined how to structure the issuance of the tokens: who is going to be the initial owner of the project that is going to issue them, how will the operation of their sale to third parties be, if that activity will be regulated or not, that is, if it needs a license, or a permit from the regulatory body of each jurisdiction, which must surely be requested if the activity that this NFT involves is an investment.

 

Among the different options being considered for these cases, Baldovino stresses that it is also key to define whether the company that issues the tokens on the specific platform is going to be the same one that is in charge of selling them or if they are going to be transferred to another to take on this task: “All this is because the regulations are changing or there are no regulations, so we do not know for sure the regulatory changes that countries can implement to allow all activities related to NFTs. At least at this stage, we recommend separating the activities involved: issuance, sale, holding of intellectual property rights, among others, in different structures to reduce the risks of the project”.

 

 

Keep reading:

► How to create and sell your own NFTs

► Marvel adds Captain America to its NFTs

► Turn your meme into NFT and earn more than 450 thousand dollars

 

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