NFT (Non-Fungible Token) Legal Issues and Regulation in Georgia
In recent years, NFTs (Non-Fungible Tokens) have revolutionized the digital asset market, transforming industries such as art, music, gaming, and collectibles. Georgia, emerging as a digital technology hub in the region, is actively participating in this global process. However, the creation, trading, and operation of NFT platforms involve significant legal risks. An NFT is not just a digital image; it is a digital certificate of ownership recorded on a blockchain, often underpinned by complex legal relationships. The legal status of NFTs in Georgia is still evolving, but existing legislation, particularly copyright and civil law, establishes certain frameworks. For investors, artists, and platforms, it is critical to understand what rights they are actually acquiring or granting during an NFT transaction.
Legal services for NFTs involve a comprehensive approach combining intellectual property law, contract law, and financial regulations. Specialists ensure that your digital asset is not only technologically sound but also legally protected. The service covers the following key aspects:
- Copyright Analysis: Determining who owns the copyright to the original work and exactly what rights are transferred to the buyer upon purchasing the NFT (e.g., personal use rights vs. commercial usage rights).
- Smart Contract Legal Audit: Verifying that the code of the "smart contract" aligns with the parties' actual intentions and complies with Georgian legislation.
- Drafting Licensing Agreements: Outlining detailed terms regulating the subsequent use of the NFT, royalty distribution, and third-party rights.
- Drafting Platform Terms & Conditions: Establishing user rights, liability limitations, and dispute resolution mechanisms for NFT marketplaces.
- Tax Consultation: Determining the taxation regime for income derived from NFT sales for both individuals and legal entities.
- AML/KYC Procedures: Developing compliance policies to prevent money laundering, especially for high-value transactions.
In practice, we often encounter situations where legal ambiguity creates serious problems. For instance, it is common for an artist to sell an NFT, while the buyer mistakenly believes they have acquired full copyright to the artwork and begins using it for commercial purposes (e.g., printing on merchandise), leading to disputes. Another common scenario involves "copied" NFTs, where fraudsters steal someone else's digital work and sell it as their own. Issues with automatic royalty transfers are also frequent, occurring when a Smart Contract is incorrectly programmed or a platform does not support royalty payments on the secondary market. For investors, there is a risk of purchasing an NFT that might later be classified as a security, triggering regulatory sanctions.
The legal framework for NFTs in Georgia primarily relies on the Civil Code of Georgia and the Law of Georgia on Copyright and Related Rights. The Civil Code regulates the transfer of ownership and the validity of transactions, while the Copyright Law protects the author of a work from unauthorized use. It is important to note that if an NFT exhibits characteristics of an investment instrument, the Law on Securities Market or regulations by the National Bank of Georgia regarding virtual asset service providers may apply. Additionally, in terms of e-commerce, the Law on Consumer Rights Protection is relevant, obliging sellers to provide complete information about the product.
The process of working with a lawyer begins with a detailed consultation to clarify the goals of the project or transaction. The next stage involves a legal audit (Due Diligence) of the specific asset—verifying the clearance of copyrights and the logic of the Smart Contract. Following this, the lawyer drafts the necessary documentation: purchase agreements, licensing agreements, or platform terms of use. The final stage involves legal support for the transaction and, if necessary, official registration of intellectual property with Sakpatenti or at the international level.
Legal.ge is the ideal platform to find qualified lawyers with specific expertise in blockchain and intellectual property law. The digital world changes rapidly, and a general practice lawyer may struggle to grasp the nuances of NFTs. The specialists gathered on our platform are constantly updating their knowledge of global trends and local regulations, guaranteeing that your digital assets are securely protected. Use Legal.ge to avoid costly legal mistakes in this innovative market.
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