LEGAL DIMENSION OF NUN-FUNGIBLE TOKENS

     I.            INTRODUCTION – WHAT IS NUN-FUNGIBLE TOKENS?

 It has become very difficult to follow the innovations that it has added to our world with the incredible speed of the digital world. Especially in the last decade, many innovations born through the agency of blockchain technology, which can be described as a digital revolution, and these innovations have started to be effective in many aspects of human life. In this context, one of the innovations that has been very popular recently and has started to become widespread is the technology called Nun-Fungible Tokens (“NFT”). Although there is no short name for Turkish yet; it can be pronounced as unchangeable digital assets or unchangeable crypto assets. In other words; NFT crypto assets can be defined as unique, rare, non-substitutable, indivisible. NFT crypto assets contain detailed information (including ownership information) of the related asset on the blockchain. With this feature, it provides the convenience of proof of ownership in the basic sense.

NFT assets, which are very suitable to be interpreted as works of art, make an essential contribution to the authenticity of work or product. The inclusion of NFT technology in human relations, which creates a completely divergent world for humanity, has made it necessary to examine its legal dimension. NFT technology will be discussed from different legal perspectives within the scope of this article.

II.            LEGAL DIMENSION OF NFT TECHNOLOGY

As mentioned briefly above, NFT assets have great importance in terms of proof of ownership in the legal perspective through the feature of NFT that contain the right of ownership on the blockchain. In case the information recorded on the assets is disseminated to a wider framework; many documents and information including intellectual and industrial rights, licenses, trademark and patent rights, land registry records, financial information can be found on the assets. However, in such a case, relevant institutions and organizations will need to work in an integrated manner with these records because, in many rights and authorization transfer transactions, such as change of ownership of the real estate in Turkish Law, the formal conditions required by the relevant laws must be complied with. In this regard, all rights and authorization to be recorded on NFT crypto assets must comply with the requirements of the law. Otherwise, these records will not be legally valid.

However, it can be easily interpreted that NFT crypto assets with a unique quality will be especially significant for intellectual property law. NFT technology will solve major legal problems, especially in terms of authorship and identification of the owner. The identification of the owner of a work of art using NFT technology can be directly detected with blockchain technology. It will be possible to determine whether the work of an artist is real or a copy thanks to the convenience of NFT technology. However, owning a work of art does not mean owning all the rights of that work. In simpler terms, when you buy a painting, you will have ownership of the painting but you do not have the right to reproduce and distribute it. For this reason, if a work created with NFT is sold by the owner of the work to someone else, the owner of the work will continue to protect the copyright on the work, unless they have decided to transfer the financial rights. Therefore, the buyer will be the owner of the work which is created with NFT technology.[1]

Besides reviewing the works of art created with NFT technology in terms of intellectual property law, selling NFT assets very great amount of price may also cause possible disputes. In this context, it is reflected in the press that there are sales that make a sound in the world. For instance, the first tweet of Twitter founder Jack Dorsey was purchased for 2.9 million dollars as an NFT asset. At this point, the creation of illegal products with NFT or the sale of NFT assets created without the permission of the copyright holder or the selling with a high price as stated above may cause legal disputes to arise.

From another point of view, there are serious uncertainties in terms of taxation of income from assets produced as NFT and subject to sale. While there is not even regulation regarding the crypto money markets, which is very common in our country, it is estimated that it will take a lot of time to bring a regulation on NFT technology. An even more ambiguous situation arises when considering the purchase of NFT assets with cryptocurrencies like Ethereum cryptocurreny, Ether. As a result of this context, it can be stated that a technological innovation that requires regulation has come into being in tax legislation area.

From another point of view; it can be stated that personal data protection legislation is also important in terms of NFT technology. As stated in detail above, it is also possible for an NFT asset created with blockchain technology to contain personal data. At this point, considering that the blockchain is immutable, it can be stated that there is no possibility for the person who has personal data on the NFT asset to correct this wrong information.

III.            CONCLUSION

To sum up, it is clear that NFT technology needs a legal definition with the innovations it brings. Even though this article has only been examined in terms of a few legal issues, the reflections of NFT technology will be seen in many various areas. In conclusion, it is foreseen that the legal regulations to be brought about the blockchain technology and the crypto money markets where it is used most effectively will be a guide for NFT technology. However, in any case, it is obvious that NFT technology will bring about many exciting developments in the law as a result of the innovations it brings to human life.

Kılınç Law & Consulting

[1] Dr. Özgür Arıkan, NFT Sanat Eserleri ve Telif Hukuku, https://fikrimulkiyet.com/nft-sanat-eserleri-ve-telif-hukuku/ (Date of access: 05.08.2021)

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