The Ministry of Economic Development is developing NFT (non-fungible token) market regulations. To protect the buyers, it is proposed to amend the Civil Code of the Russian Federation and the law “On Digital Financial Assets.” Deputies from the New People party have already proposed to extend the application of intellectual property law to NFTs. However, market players fear that the proposed changes may limit the range of tokens’ applications.
Amendments to the law regarding the legal definition of NFTs were discussed at the meeting of the normative regulation work group held on July 21 at ANO Digital Economy. The meeting was held at the initiative of the Ministry of Economic Development and attended by the Central Bank representatives and members of the business community, such as VK representatives. According to the presentation made at the meeting, the ministry proposed, among other things, to amend the normative legal acts regarding the regulatory regime for NFTs.
Current Russia’s legislation does not provide clarifications around NFT regulation, use, the possibility of NFT issuance, protection of NFT purchasers or the relationship between NFTs and intellectual property rights, the presentation says. The Ministry of Economic Development intends to amend the Civil Code of the Russian Federation and the law “On Digital Financial Assets” as well as the federal project “Normative Regulation of the Digital Environment” by the end of 2024.
“In the course of deliberations, the initiative was generally supported,” the ministry stated. VK representatives pointed out that legal uncertainty hampers the segment development. The social network started developing an NFT marketplace in May.
However, the initiative may face resistance from other regulators. In her letter dated July 21, Deputy Director of the Financial Technology Department of the Central Bank Ekaterina Vikhareva stressed that the question falls within the competence of the Ministry of Finance and Central Bank. The Central Bank did not comment on the matter. The Ministry of Finance said NFT regulations “are currently not under elaboration.”
This is not the first attempt at promoting market regulations. In late spring, Anton Tkachev and Vladislav Davankov, parliamentarians of the State Duma and members of the New People faction, also proposed to enshrine the concept of NFT technology in the Civil Code and extend the application of intellectual property law to NFTs. The consideration of the bill is scheduled for October.
The Ministry of Economic Development is adopting a “more proper course,” believes Yaroslav Schuetzle, head of the IT & IP Litigation Practice at Rustam Kurmaev and Partners. Dmitry Kirillov, a lecturer at Moscow Digital School, specifies that the NFT turnover is currently regulated by the law on crowdfunding (i.e., Federal Law No. 259-FZ), which provides for an option to acquire utility digital rights, including the rights to the proceeds of intellectual activity and the rights to use the results of it, on investment platforms. The second relevant document is the law “On Digital Financial Assets,” which primarily serves to prohibit Russian residents from accepting digital financial assets as a means of payment for goods and services, including utility digital rights, the expert adds.
As for NFT market players, they are wary of the idea to change market regulations. “The range of applications for NFTs has long been extended beyond digital art. NFTs can serve as event tickets, the proof of virtual property ownership, or securities,” specifies Andrey Tugarin, Managing Partner of GMT Legal. The changes can limit the range of applications for NFTs significantly, basically reducing it to artworks, the expert warns, stressing that the “industry requires a more flexible and precise kind of legal regulation.”