Just a few months ago, the concept of cryptoart or NFTs (non-fungible tokens) was practically foreign. Recent news related to the sale of digital art reaching millions of Dollars ($63M for “Everydays – The First 5,000 Days” by the artist Beeple) made the financial and art worlds take formal notice of such concept. Far from being pigeonholed as a novelty act, NFTs have the potential to become not only a new institutional art format but also a revolutionary currency for worldwide transactions.
- What is an NFT?
One way to describe an NFT is to think of it as a token that cannot be substituted for another token of the same species, quality or quantity. Therefore, this non-fungible token is not limited to artworks, but rather, it can be used for any kind of digital objects, such as GIFs, memes, tweets, articles, drawings, music or videos, resulting in a limitless market. Non-fungible tokens are created using blockchain technology, which acts like an incorruptible log that guarantees that the digital object in question is original and unique (like a digital certificate of authenticity, if you will). Although NFTs cannot be exchanged for other NFTs (due to the difference in value), they can be sold for a certain value to be paid for in cryptocurrency and such transaction would be registered in the corresponding blockchain.
It is important to point out that the NFT is not the artwork per se. An NFT is the digital information contained in a blockchain that grants access to the object or artwork.
- Legal Framework in Mexico
In Mexico, virtual assets such as NFTs and other cryptocurrencies are regulated by the Law for the Regulation of Institutions of Financial Technology, otherwise known as the Fintech Law. However, this article will focus on the legal framework of the artwork represented by NFTs and not in the legal implications of cryptocurrencies.
All artistic works are regulated by the Federal Copyright Law as “…those that are susceptible of being divulged or reproduced in any form or means.” Additionally, the aforementioned law defines the copyright as “…the acknowledgement of the State in favor of the author of artistic or literary works…by virtue of which it grants its protection in order for the author to benefit from personal and patrimonial exclusive prerogatives and privileges.” It is worth mentioning that such protection is granted from the moment that the author creates the artwork (affixed onto a material support). Following that train of thought, all artwork behind an NFT, as well as its authors, will have the rights and limitations currently established under the Federal Copyright Law, its regulations and secondary laws, respectively.
Under the Federal Copyright Law, authors have moral and patrimonial or economic rights. Moral rights are inherent, indefeasible, non-waivable and non-seizable, and grant the author the right to: a) decide if the artwork is to be divulged, b) the corresponding credit, c) demand respect of the work, d) modify the work, and e) retire the work from commerce, among other rights. Patrimonial or economic rights grant the author the authority to exploit the work commercially and to obtain a profit therefrom, as well as to transfer such rights to third parties.
The protection span of patrimonial or economic rights in Mexico is that of the life of the author plus one hundred years, and one hundred years after the work has been published.
- NFTs are not the artwork per se. NFTs are a link of digital information that gives an exclusive access to its owner to an artistic work within the cyberspace.
- NFTs, as virtual assets, are regulated in Mexico under the Fintech Law. However, the artwork represented by such NFTs falls under the protection of the Federal Copyright Law, as any other artistic work.
- The authors of artistic works can authorize or prohibit the commercial exploitation of their work through NFTs, or even, prohibit a third party from linking such work to an NFT.
- Given the protection granted to all authors under the Federal Copyright Law, individuals other than the author cannot modify or exploit the work of the former as NFTs.
- Although the value of some NFT transactions has been exorbitant, it is very difficult to determine at this point if this tendency will maintain its course in the following years or decades, or if NFTs will be remembered just as an unusual but interesting fad.
By Raul del Alto and Javier Uhthoff Rojo