This past year has seen widespread excitement about non-fungible tokens (NFTs), with a plethora of players ranging from newspaper agencies to celebrities releasing their own NFTs. NFTs can take the form of songs, tweets, GIFs, virtual land, or images. Headlines report handsome profits from the sale of NFTs reaching millions of dollars, while naysayers view the craze over NFTs’ price as a bubble waiting to burst. This LawFlash discusses the legal issues surrounding NFTs in Singapore.
WHAT ARE NFTS?
NFTs are one-of-a-kind tokens that exist on a digital blockchain. NFTs often include representations of works of art or design, or other creations that were previously created and subsequently captured in a different form or medium. NFT projects, which have been on the rise, are a bet on the rise of the “metaverse”—an all-encompassing digital world that will eventually have its own forms of identity, community, and governance.
In Singapore, the Payment Services Act (PSA) of January 2020 seeks to regulate digital payment or cryptocurrency service providers, but it remains to be seen whether NFTs fall under the PSA’s ambit.
“Digital payment tokens”—which the PSA regulates—are defined as a digital representation of value that
- is expressed as a unit;
- is not denominated in any currency, and is not pegged by its issuer to any currency;
- is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services, or for the discharge of a debt;
- can be transferred, stored, or traded electronically; and
- satisfies other characteristics as the Monetary Authority of Singapore (MAS) may prescribe.
Arguably, the PSA does not directly regulate NFTs, as they have yet to be used as payment for goods or services. Nevertheless, depending on an NFT’s use and attributes, the PSA may be applicable where the NFT “constitutes digital payment tokens.”
An NFT buyer typically has ownership rights over such token, however, what the buyer will own will depend on the smart contract governing the transaction of the NFT sale. It should be noted that the buyer generally does not own the ownership right or copyright to the underlying art, as this is generally retained by the artist or the issuer.
An NFT buyer may acquire a license for the underlying intellectual property rights from the artist of the original work to obtain a right to reproduce the original work itself. Those who own such rights might prefer granting a license along with imposing other constraints on how an NFT can be used, and by what means.
Further, IP rights are generally jurisdictional, depending on whether such right has been registered with the applicable IP authority. Thus, how and whether IP rights (if any) are licensed through the sale and subsequent transfer of the NFT depends on the details of the governing smart contract.
Copyright issues may also arise where artists have had their work replicated and sold as an NFT without their permission.