Non-Fungible Tokens (or NFTs) have been a hotbed of discussion all around the world, with debates ranging from the ethics of their usage to re-engineering of our understanding of intellectual property. Read on to unpack the mystery behind NFTs and their usage!
NFTs come under the ‘digital asset’ umbrella borne through block-chain technology. Most commonly regarded as modern-day collectibles, they signify a relationship between a unique physical or digital product and its owner; the product could be in the form of art, music, or clothing, which is stored on the Ethereum network, a leading blockchain platform (but not the only one). A frequently asked question is the feasibility of purchasing other tangible items through NFTs as well, such as immovable property/land.
In recent times, the FSRA (Financial Services Regulatory Authority) of the Abu Dhabi Global Market published a proposal aimed at amending the existing Rules of Market Conduct, and recommended certain revisions to the Virtual Asset regulatory framework. Considering that property transactions (buying, selling, and transfer) of both, virtual land (in the Metaverse) and physical land has the potential to transform the real estate landscape, the question remains if governments should take on a shared ideology similar to this.
Reportedly, TechCrunch founder Michael Arrington’s Kyiv Apartment sold in the world’s first NFT real estate auction through the platform Propy for $93,000. Another real estate developer, Prometheus, sold two luxury units via Cardano crypto currency in Portugal with ownership offered through NFTs. What is noteworthy is that a key component to Prometheus’s deal was the creation of an agreement along with the provisions for the registration of title deeds and the transfer of property as per local regulations.
The Indian sub-continent seems to have had a fairly open response to the idea of block-chain technology. The Financial Express cites a NASSCOM report on how a majority of all Indian states have driven and supported block-chain based projects, while another news report highlights growing interest among Indian citizens in acquiring virtual land through the Metaverse, as observed by technology companies and real estate developers.
However, current laws might have to play catch-up with the technological advancements, as is evident with the introduction of the ‘Banning of crypto-currency and Regulation of Official Digital Currency Bill’ in 2019, which has been left unconsidered, with no provisions introduced since. The Supreme Court’s latest judgment on the ban of crypto currencies (via the Internet and Mobile Association of India V. Reserve Bank of India case) has displayed the judiciary’s neutral stand until further official announcements.
Given investor concerns and the vastly polarizing public opinions on the topic, a few major areas that witnessed a juggle of implications, both socially and economically, were in the fields of financial security, national safety, and land (alongside its relative schemes). For example, the NCAER’s Land Records and Services Index tracks the digitalization progress of land records and its quality across all states and union territories. With complexities including legacy issues and the limited capacity of the administration, its likely implications are that the additional documentation might pose a huge administrative challenge to the land and revenue departments of state governments.
This state of uncertainty serves as a deterrent for risk-averse investors as well as a window of opportunity for those who seek to dabble in the NFT division without worrying about procedural requirements and statutory demands. Until then, one could argue in circles on its necessity – akin to the disputes concerning its hi-tech predecessors, those that have witnessed and perhaps even changed the virtual network from social applications to game-changing mediums of Artificial Intelligence.
Mohit Kapoor is Founder & Senior Partner, Universal Legal. The author would like to thank Neng Bora for the assistance rendered on this article.