**2. The private-law characterization and EU regime applicable to non-fungible tokens (NFTs)**

The diversity of imaginable contractual configurations and technical standards apt and suitable for the creation of NFTs -on real assets or intellectual rigths, *inter alia-*, does not has uniform and consolidated legal boundaries in many jurisdictions yet.

Thus, the technical characterization of NFTs as traded assets in markets is possible even if the token represents non-replicable or individually predetermined or preconfigured rights derived from the specificity of the token or from the uniqueness of the represented rights or assets. In the US laws, NFTs are conceived as digital certificates representing ownership of a unique asset, or of other rights created or granted on a unique asset or good, or on contracted services or obligations. A massive negotiation of the token or parts of the represented asset is technically possible, though not always desirable from a private-law policy perspective, or even from the viewpoint of public order or macroeconomics.

In order for tokenization to be an efficient way to generate and trade credit rights on the issuer, moreover, it is necessary that the legal regime for tokenized assets adequately protects investors. Otherwise, the NFT token market will lose its still weak legal credibility, on the one hand; and on the other, the decentralized financial (DeFi) market will be affected as a whole to the extent that NFT token markets are linked with the whole DeFi system and all DLT financial markets. Ultimately affecting as well traditional capital markets linked with DeFi by the available mechanisms of digital currencies and associated payment systems (electronic money tokens or EMTs, payments in bitcoin and other digital assets, and mechanisms for exchanging or exchanging digital money for fiat money).

The triple regulation of the European Parliament and Council proposed on 24 of September 2020 (MiCA, operative resilience Act – DORA, and market infrastructure regulation – MIR) composes the so-called European digital finance strategy within the framework of the single digital market. The main regulation is MiCA, concerning crypto-asset markets and token intermediaries to establish efficient market rules and investor-protective new supervisory mechanisms, partly by analogy with respect to the classic protective regulation typical of the MIFIR/MIFID 2 context.

The concern of the legislator in this field is twofold from the point of view of the orientation of the new European regime in the international context of the proliferation of new tokenized markets like NFT markets:


Without prejudice to this, NFTs that could be qualified as stablecoins (or fungible tokens derived from NFTs by means of division or fractioning of represented rights on NFTs) would be submitted to severe requisites applicable to ARTs (Title III, Chapter I, arts. 15 et seq MiCA).

In the US, securities laws regime may be applicable if the NFTs represent presales of digital assets intended for use on a platform that is not yet built and the proceeds of the sale are used to build the platform (in the EU MiCA regime these tokens should be considered in general as "utility tokens"). And securities regulation is also applicable in cases of "pooling" or "fractionalization" of digital assets by artists or composers who share revenues with investors owning multiple NFTs representing fractional ownership of an asset, or shares of the revenue obtained from the asset (e. g., sale percentages of represented songs or poems). Amendments of the Proposal by EU Parliament written in 19.10.2021 (Nrs. 50 to 52 from Members of the EU Parliament KAILI and LALUCQ, sub *MiCA Draft Compromises by MEP Berger*, Compromise L) suggest in a new recital (8a) that MiCA Regulation applies only to cryptos "transferable among holders without the issuers' permission." Thus,

### *NFT Legal and Market Challenges in Permissioned Blockchain Networks DOI: http://dx.doi.org/10.5772/intechopen.106460*

NFTs will be excluded from MiCA if they are "unique and not fungible with other crypto-assets, which are not fractionable and are accepted only by the issuer, including merchant's loyalty schemes, IP rights, guarantees, certificate of authenticity of a unique physical asset, or any other right not linked to the ones that financial instruments bear and are not accepted to trading at a crypto-asset exchange ..." Thus, securities laws would apply to fractionable NFTs, or to NFTs accepted by other than the issuer, particularly when NFTs encompass rights linked to those born be financial instruments. In the case that such instruments were negotiable in regulated markets, MiFID 2 Directive (2014/65/EU) would apply. As recital (8a) also states, the fractions of an NTF "should not be considered unique and not fungible," unlike the -multiple and fungible- investment or security tokens ruled by MiFID 2 and related EU Directives (AML, anti-money laundering, 2015/849, and 2014/57) and by Regulations (EU) 2017/1129 on Prospectus and 596/2014 on market abuse. KAILI and LALUCQ believe that "the sole attribution of a unique identifier to a cryptoasset is not sufficient to classify it" as NFT. Anyway, NFTs representing services, digital or physical assets that are unique, indivisible and not fungible (like product guarantees, personalized products or services, or real estate) should not be subject to MiCA, except if the NFT grants to the holder or its issuer "specific rights linked to those of financial instruments, such as profit rights or other entitlements." The reason is clear: in such case, NFTs have been voluntarily (contractually) converted into securities. Indivisible NFTs solely "accepted by the issuer" (new recital 8c proposed), and not accepted to exchange trading, should be subject to a wide bespoke or tailored regime (agreeing, KAILI and LALUCQ, ibid.).
