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Interview with Yuliya Prokopyshyn, Blockchain Lawyer. “The NFT Legal Playbook".

Yuliya Prokopyshyn is a blockchain lawyer helping tech businesses navigate the complex legal landscape of Web3.

Q: Do you have any NFTs of your own? What is your favourite collection and why?

Yuliya: I started working with NFTs around the time of the NFT boom in 2021, so I do have a few favourite collections at this point. Some of my favourites are from Dress X, a digital fashion clothing brand that releases NFT virtual clothing. I've been passionate about digital fashion for quite some time due to various reasons - from sustainability to the anticipation of interacting with them in virtual worlds. I firmly believe that sooner rather than later, we will each have our own virtual identities. Personally, I wouldn't want to wear the same T-shirt to all my meetings every single day. Therefore, yes, I do own several pieces of digital clothing, ranging from leather trousers to bomber jackets. I find the concept of digital fashion incredibly intriguing!

Q: What is your absolute favourite NFT fashion piece?

Yuliya: I own this leather jacket from Dress X that was created in collaboration with a Ukrainian fashion brand. Being Ukrainian myself, I felt a strong connection to this piece, making it my favourite among all.

Q: Yuliya, being based in the UK, could you provide us with insights into the current regulations there? How do they compare to regulations in Europe?

Yuliya: Certainly. The regulatory landscape surrounding NFTs and digital assets is a bit like the Wild West at the moment, particularly in the UK. I've been involved in this space for a few years now and have witnessed considerable progress, although things are evolving rapidly. Currently, digital assets, including NFTs, are subject to varying regulations across jurisdictions. Even NFTs themselves are regulated differently in the UK depending on the assets and utilities they are associated with. Presently, the UK has a favourable stance, treating standard NFTs as utility tokens. However, the regulatory framework can diverge based on the attachments to your NFT, such as voting rights or physical items. This complexity poses challenges for both regulators and collectors, as there isn't a one-size-fits-all answer.

Regulations pertaining to NFTs and digital assets vary considerably between the UK, Europe, the US, and other nations. I can specifically speak about UK regulations due to my background as a UK lawyer. However, I am aware that NFTs are subject to strict regulation in the US, while the European Union shares a similar approach to the UK. Anyone contemplating the launch of NFTs needs to carefully study the specific regulations of the jurisdiction they're operating within.

Q: What are the key considerations when launching an NFT collection in today's landscape?

Yuliya: Certainly. When venturing into launching an NFT collection, there are several pivotal aspects to keep in mind. First and foremost, you should take into account the prevailing legal framework in your jurisdiction, such as the regulations here in the UK. Additionally, a crucial step involves defining the utility of your tokens and the assets that will be associated with your NFTs. Lawyers can play a significant role in guiding sellers through this intricate process, assisting them in reevaluating their projects, and providing clarity on how their tokens will be regulated within specific jurisdictions.

For both collectors and sellers, there are several other key points that demand attention. Intellectual Property (IP) rights, data protection, and advertising are the top three considerations, in my opinion. Concerning IP, it's imperative for both buyers and sellers to comprehensively understand the intellectual property assets embedded within the NFTs. This entails clarifying which rights are transferred to the buyer and which remain with the seller, all of which should be meticulously documented.

Addressing data protection is another crucial aspect, often underestimated within the broader context of Web3 projects. While some might believe that these projects don't collect personal data and are thus exempt from data protection laws, this perspective can be flawed. Many NFT projects are hosted on platforms that gather digital wallet addresses from users, necessitating compliance with data protection regulations and the implementation of suitable protocols.

Furthermore, advertising is an important facet to consider. The imminent introduction of a new advertising law in the UK will elucidate how digital assets and crypto projects can be marketed. This underscores the significance of aligning your marketing strategies and language with these evolving advertising standards. In certain cases, gaining approval from regulatory authorities might be necessary.

In essence, launching an NFT collection involves a comprehensive understanding of legal and regulatory considerations, meticulous management of IP rights, a commitment to data protection, and adherence to forthcoming advertising standards.

Q: Can creators proceed with launching their collections now while awaiting the introduction of new laws?

Yulia: Laws typically aren't applied retroactively. Many new laws are on the horizon that will impact upcoming projects, but they are unlikely to have an effect on projects that are currently launching. However, it's not advisable to assume that the absence of present laws in the field means that you can disregard potential future regulations. It's important to consult with your tax and business advisors to ensure you're making informed decisions in light of both current and potential future legal developments.

Q: When it comes to intellectual property (IP), who owns the artwork when an artist creates art for someone's NFT collection?

Yulia: I have seen it happen so many times in the NFT space, when a business launches a collection, but it is now business’ owners who created art for the collection, but by an artist or another company. I would advise these businesses to have proper agreements with artists in place, as if you don’t there is a whole situation where we can question who actually owns IP rights to artwork. Usually, it is an NFT creator (who minted the NFT, usually an artist) who owns all IP rights to the artwork, and their buyers (who buy NFTs, a collector) simply get a licence to use it for their personal proposals. However, it’s not always the case, and it's going to be governed by terms and conditions, or whichever agreement you have with your artist or buyers in place, which stipulates what rights the buyers, artists and owners get. If you don’t get the agreement in place it might be up to the court to decide who owns this IP right. It is tricky and there is no black and white answer.

Q: Are there concerns surrounding the use of AI-generated images in NFT artworks? What are the legal implications of incorporating such images?

Yuliya: Indeed, AI-generated content introduces unique legal considerations, with intellectual property (IP) rights and data ownership taking center stage. A pivotal concern is determining the ownership of IP rights for AI-generated artworks. A significant question arises: if you're the creator of the image, do you own the rights, or does the AI itself possess ownership while granting you a license for use? It's advisable to carefully review the agreement between you and the AI platform you're utilising. In cases where no explicit terms exist, complications can arise.

Copyright issues also come to the forefront. AI has the potential to employ elements of others' art, music, video, or text to create new pieces, which raises uncertainties. This can lead to ambiguity regarding liability – are you accountable for using AI to generate art, or is the AI tool itself liable for incorporating someone else's content? Given the early stage of this technology, numerous questions remain unanswered. The ongoing evolution of AI and its interaction with legal frameworks is intriguing, and it remains to be seen how lawmakers and regulators will address these intricate issues.

Q: If an artist's work was used to create an AI-generated piece, can the original artist approach the AI creator and request the removal of the generated artwork?

Yulia: Certainly, if someone has copied your work online, regardless of whether it was done through an AI tool or by a third party, there is a strong possibility of the original artist having a valid legal claim against the act of copying their work.

Q: What legal challenges are associated with smart contracts, and who bears liability when issues arise, such as undelivered value or marketplace breaches?

Yuliya: The legal landscape surrounding smart contracts is intricate, primarily due to their inherent design for security and robustness. Although smart contracts offer the assurance that data is recorded and transactions are automated, the technology's early stage can lead to technical glitches and issues, which is often observed within the NFT space. For instance, if a smart contract fails to execute a transaction correctly, buyers might lose the value they invested, whether it's for an image or access to a physical item.

Creators of NFTs must prioritise the technical aspects of their projects. They should collaborate with competent teams that possess an acute awareness of potential issues and can develop smart contracts and technologies with these considerations in mind. Establishing effective preventive measures is essential.

Currently, we lack sufficient case law to definitively determine liability when a smart contract malfunctions. Whether it's the utilising business or the engineer who created the smart contract, the responsible party remains uncertain. Although the answer is elusive, my advice is for NFT creators to establish a capable team. In the event of smart contract failures, such as broken links or misdirected NFTs, having mechanisms to manage these situations is vital.

Transparency is another valuable approach. NFT creators should openly inform buyers about potential risks associated with this emerging technology. As it stands, navigating these challenges involves a degree of trial and error for businesses. Learning from these experiences will be essential in shaping how issues are addressed and resolved in the future.

Q: If issues arise with an NFT collection and the founder is based in one country, like the UK, but is selling in a foreign market, which laws apply in such a scenario?

Yuliya: The primary factor to consider is the jurisdiction in which you're launching your NFT collection. This jurisdiction becomes particularly significant when addressing matters such as NFT regulation, digital protection, and intellectual property rights. However, as your business starts to target customers in different jurisdictions, the laws of those respective jurisdictions will come into play.

For instance, if you're based in the UK but your customers are in the US, you must account for their data protection laws and regulations. As you expand globally and strive for decentralization, the complexity increases. Attempting to comply with the laws of every jurisdiction where you and your customers are located can be challenging. Practically speaking, achieving full compliance with all these laws might not be feasible. Therefore, the focus shifts to managing risks and addressing the legal aspects as comprehensively as possible across these different jurisdictions.

In essence, the laws that apply depend on the jurisdiction where you're operating from and the jurisdictions where your customers are located, making it a complex endeavor to navigate the intricacies of global legal landscapes.

Q: Given the considerable responsibility involved, would you suggest operating as a legally registered entity or as an individual in the NFT space?

Yuliya: The risks that NFT creators undertake often go underestimated when launching collections as individuals. If issues arise, personal liability becomes a concern, leaving individuals accountable for all collection-related matters. My recommendation for anyone venturing into NFT collection launches is to conduct these activities through a legally registered entity. By doing so, you benefit from corporate liability protection. This shields you from personal accountability, providing a more secure approach in navigating the intricacies of the NFT space.

Q: How should NFT marketplaces handle copyright infringement when users upload NFTs to their platform?

Yuliya: An excellent question! Generally, the responsibility would rest with the users who upload the NFTs onto the platform. However, a responsible NFT marketplace should take measures to address this concern. They might choose to monitor content or conduct checks to verify whether the NFTs are subject to copyright.

From a legal standpoint, my advice to many clients involves implementing well-defined processes and terms. This includes specifying in terms and conditions that the platform reserves the right to remove NFTs if copyright infringement is identified. Establishing legal terms and processes is crucial for a platform. Informing NFT sellers that the marketplace prioritises copyright safety and possesses the authority to remove infringing NFTs is the initial step. This approach helps in building a secure environment for creators and buyers while demonstrating the platform's commitment to copyright protection.

Q: Based on our discussion today, what are the most vital legal factors to take into account when launching an NFT collection?

Yuliya: When embarking on NFT collection creation as a business endeavour, it's imperative to address several key legal considerations. Firstly, establishing a robust legal framework for your business is paramount. This entails the proper formation and registration of your company. Secondly, the convergence of intellectual property rights and data protection measures is crucial. This safeguards not only your valuable assets but also the data accumulated during the sale process.

Furthermore, crafting transparent and well-defined agreements with both artists and buyers is instrumental in mitigating potential conflicts down the line. By outlining rights, responsibilities, and expectations, you can avoid ambiguity and disputes in the future.

Navigating the intricate legal landscape of NFTs is best approached with the guidance of legal experts who possess a deep understanding of this evolving field. Engaging their expertise will empower you to navigate the complexities and ensure that your NFT collection launch is legally sound and secure.

Q: How do you envision the future of NFTs? Can we expect widespread adoption, and in which industries?

Yuliya: NFTs have already garnered substantial attention and adoption in diverse sectors, ranging from art and gaming to music and even real estate. I hold the view that the future of NFTs is highly promising, and we're poised to witness their broader mass adoption across a wider spectrum of industries. As technology advances and legal frameworks adapt, NFTs possess the capacity to reshape how we engage with digital assets and concepts of ownership, representing a significant transformation in various sectors.

Question: What are your top 5 tips to consider when launching your own NFT collection?


  1. Ensure clear ownership rights to the artwork or content you're tokenizing.

  2. Comply with data protection regulations if you collect personal data during the NFT sale process.

  3. Be transparent about the origin and potential copyright or trademark issues associated with your artwork.

  4. Engage legal experts to develop robust smart contracts and address any potential liabilities.

  5. Consider forming a legal business entity and register it properly to protect your assets and interests.

Thank you, Yuliya, for generously sharing your invaluable insights on NFT legal considerations. Your expertise has provided a wealth of information that will undoubtedly prove immensely beneficial.


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