Dupont Partners recently returned to the situation of NFTs and digital assets like cryptocurrency in the Middle East. In a long post, the law firm took an inventory of the local art scene and did not omit to mention the laws in force in the region. Zoom!
The Middle East, a booming art scene
The Middle East, and more specifically the United Arab Emirates, is currently home to a booming art scene. Many observers confirm this state of affairs. Art Dubaï, Brjeel Art Foundation, Alsrkal Avenue and a multitude of actors contribute to the revitalization of this sector. The arrival of international galleries such as Galleria Continua, Perrotin Art Gallery is seen as a catalyst in this system.
Furthermore, Dubai is showing a very strong resurgence of regional and international creators and buyers, to the point of elevating it to the rank of a cryptocurrency and NFT hub. In a short time, the city will become a world leader in digital art.
Its geographical location, situated between East and West, also makes things easy for lovers of physical and digital art. This was corroborated by the first Christie’s auction in 2006 and continues to this day. Didn’t Art Dubai open a digital pavilion to promote digital media and NFTs last March?
The challenges of NFT art in the Middle East
As you know, non-fungible tokens (NFTs) are unique, encrypted, blockchain-based digital assets. In general, they can be minted, bought and sold in a number of markets such as Rarible, Coinbase, Binance and OpenSea.
NFT art, an extension of NFT?
The strengths of NFTs lie in their uniqueness, that is, in the impossibility of substituting them with another asset of equal value. The icing on the cake, NFTs differ from physical works of art in that they assign a digital authentication certificate. As the latter can be backed by a physical or digital asset and benefit from a high level of storage, it is not easy to replace them with anything.
The list of benefits does not end there. For example, there is the fact that NFTs and NFT art can represent any asset, be it virtual or physical. Such is the case of Andrès Reisigner, an Argentine artist who exchanged NFT furniture for cryptocurrencies, worth a total of $450,000. Please note that your collection phygital (physical+digital) was presented in Dubai in March. Middle Eastern art lovers thoroughly enjoyed it.
The NFT art and its legal limits
Added to all this is the proliferation of creators of original works who earn royalties from the sale of their creations. Technology of smart contract helping, NFT art authors are at an advantage. The only problem is the existence of certain legal obstacles, which refers us to the need to establish a legal framework and adequate regulations. Haven’t we recently experienced a problematic situation related to intellectual property (IP) rights during a mint and a Mason Rothschild NFT art sale?
As a reminder, the artist has released a collection of 100 NFTs ” MetaBirkin NFT with illustrations of the legendary Hermès Birkin bag. Retailing for $42,000 apiece, this digital property was the subject of a trademark infringement lawsuit from Hermès. Of course, the artist has been brought to justice and we are waiting for the rest of the trial.
In this way, focusing on NFT art and its legal issues, Dupont Partners has addressed the legal environment ofcrypto business in the United Arab Emirates.
NFT art and cryptocurrencies, current status of jurisdiction in the United Arab Emirates
The cities of Abu Dhabi and Dubai have made relative progress in regulating the universe of NFT art and cryptocurrencies.
Abu Dhabi and the ADGM
Abu Dhabi, via Abu Dhabi Global Market (ADGM), has established a financial free zone to facilitate the regulation of cryptocurrencies. Your consultation document called “ Proposals to improve capital markets and virtual assets in the ADGM vouch for this wish. Through this document, the institution recognizes that NFTs constitute intellectual property and not “specific investments or financial instruments“.
It also says that they are considered “virtual assets» cryptocurrencies, digital assets, fiat currencies and derivatives/funds. Hence the need to cede its management to virtual asset depositories and multilateral trading systems.
Dubai and the DMCC
At the same time, in Dubai, there is theDubai Multi-Product Center(DMCC) suggesting a comprehensive legal framework for NFT art and cryptocurrencies. At the moment, it suggests 4 types of licenses for entrepreneurs working in the metaverse, NFT, cryptocurrency and derivatives sectors. With such proof in hand, the latter will have the facility to operate in thefree zonefrom DMCC. The fact that the latter implements a structured regulatory framework that promotes transparency and ease of doing business makes life easier for local actors.
And finally, it is worth mentioning the birth of the Virtual Assets Regulatory Authority (VARA) in Dubai last March. Its mission is to grant licenses and establish regulations related to Law No. 4 of 2022. This law related to digital assets has the particular objective of regulating virtual assets in the Emirate of Dubai. The only entity not affected: the International Financial Center, which has its own regulatory framework on investment tokens.
Dubai, digital asset law and NFT art
The birth of VARA and that of the digital asset law are not inseparable. This law defines thedigital tokens” as a “digital representation of a set of rights that can be offered and traded digitally through a virtual asset platform“.
A question arises: will NFTs easily fall within the scope of this law on digital assets?
At this time, VARA prohibits any form of participation in specific assets related to digital assets without their permission. They are worried :
- operate and manage a virtual asset platform;
- the provision of exchange services between fiat and digital assets;
- the provision of transfer services in relation to digital assets;
- the provision of digital asset custody, management and/or control services;
- digital asset portfolio services; Y
- services related to commerce in the offer of digital tokens.
The said law obliges all Dubai companies that have a legal form to comply with the directives of the authorities appointed by the Dubai government. This is in order to protect the interests of investors.
To conclude, we will say that the United Arab Emirates (UAE) is aware of the development of the cryptocurrency sector and NFT art. Providing clear and precise information, as well as clear and complete regulations, is one of its current priorities. Seemingly restrictive, these initiatives fully correspond to the desire to include players from the blockchain, crypto and NFT sectors operating in the region.
Source: ITC France United Arab Emirates
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The blockchain and cryptocurrency revolution is underway! And the day the impacts are felt in the most vulnerable economy in this world, against all hope, I will say that I had something to do with it.