- NFTs are supported by blockchain technology and each creation and sale of an NFT is recorded on the blockchain. As a buyer this means that you can track all previous sales and prices of NFTs. This is a huge upside in a market which is driven by price assymetries.
- But what are buyers getting when they purchase an NFT. Buyers acquire the token, which is linked to the digital art work, which allows them to look at it for their personal use but not trade it. That is right. They are therefore not acquiring the right to commercialise the digital art work. That is the result of heavily debated case-law of ECJ in relation to the trade in online books. That case-law, in turn, offers interesting opportunities for artists to block flipping of digital art and create a closed-end market. The question remains whether that feature outweighs the benefits of resale rights.
- NFT’s used in the context of fractional (digital) art can circumvent investor protection rules which most often subject participation rights in (digital) artwork to disclosure requirements under securities laws because of of the fungible nature of the participation rights. Indeed, fungability is a necessary condition for disclosure requirements to apply under certain jurisdictions. introducing non-fungible tokens on the art market, sets the door open to investment practices (in relation to fractional art structures of otherwise) that the financial regulator precisely wants to avoid.