Non-fungible tokens and the development of the legal concept of ownership of digital property

Abstract

This dissertation examines the concept of ownership and its possible application to digital assets, particularly Non-Fungible Tokens (“NFTs”). Technological advancements which allow the creation, storage, and sale of unique digital assets in a purely digital manner have raised many questions about the concept of ‘digital ownership’. However, the legal frameworks regulating the ownership, sale, and legal classification of digital assets have not evolved in line with technology. This leads to a lack of legal certainty in the digital landscape, and weakened protection for the users of this technology, particularly in the European Union (“EU”). Although the concept of digital property has been discussed theoretically, practical recommendations for the implementation of this concept are still scarce. This paper discusses these issues after providing a contextual understanding of NFTs and the technology behind them, providing practical solutions based on analysis of possible approaches and an analysis of the current legal landscape. This dissertation conducts an interdisciplinary qualitative analysis of the relationships between law and digital property through document-based research. Due to the legal nature of the discussion, several legal research methods were utilised to analyse the issues at hand. This paper first provides an overview of use-cases of NFTs, as well as their characteristics. A comparative legal analysis was then conducted to examine the legal classification of NFTs, and the ownership of digital property in jurisdictions across the globe. Following this, the potential implications of the lack of proper regulation were discussed through a conceptual legal analysis. A theoretical exercise is then conducted to examine the potential of NFTs to attract property rights, based on theories proposed through literature. Finally, recommendations are proposed for a harmonised EU-level framework for the legal classification of NFTs, and for the concept of digital property. The research shows that the legal classification of NFTs, and the concept of digital property varies greatly across jurisdictions. While common law jurisdictions have been more flexible, civil law jurisdictions are more rigid in their approach - except for Liechtenstein. It is argued that the lack of a proper framework regulating digital property leads to legal uncertainty, and that innovative legal concepts need to be developed to address these issues. It was then established through the theoretical exercise that NFTs have the potential to attract property rights, depending on their usage. Finally, the paper proposes recommendations for the development of a technologically neutral framework based on a mixture of approaches analysed throughout the paper. It is argued that the proposed framework is one which would not require major legislative efforts to implement and can also be equally applied to both common and civil law jurisdictions within the EU.