Art goes public! When will NFT copies of paintings and music become a common source of passive income?

…what are the disadvantages?

As Olga Novinskaya, a lawyer in the intellectual property/information technology practice at Kachkin and Partners, explains to Sobaka.ru, the concept of “investments in digital objects” can hide very different operations. “Therefore, it is important for the investor to understand what is the subject of the transaction,” she emphasizes. In other words, when investing in NFT paintings by a contemporary artist or the soundtrack to your favorite movie, it is important to understand what exactly a person is acquiring and whether it can be sold later.

There is one more aspect. According to representatives of Atomize, their Digital Art platform is regulated by the Central Bank of the Russian Federation, and the digital objects that are sold on it are completely within the legal framework.

However, Olga Novinskaya warns that otherwise, regulatory regulation of NFT technologies “does not keep pace with the development of relations in this area.” Therefore, in fact, many transactions with tokens based on songs, paintings or other works of art, which are completely legal abroad, may turn out to be illegal in our country.

“At the moment, rights in NFTs are not designated by law as digital rights, nor are there any regulations for NFT marketplaces,” she adds. — In addition, the use of cryptocurrencies is not legalized in Russia, while [большинство] operations [в мире] transactions with NFTs are carried out using cryptocurrencies. So in Russia, investments in NFTs can hardly be called protected, since regulation in general tends to prohibit the use of cryptocurrencies in payments, and NFTs are hardly recognized as an object of civil rights.”

Finally, warns an expert from the law firm Kachkin and Partners, there are other reasons to be cautious about investing in NFTs or rights to any works of art in Russia. “If we are talking about popular, time-tested works or works by famous authors, these are more reliable investments, since there is reason to believe that they will remain in demand for some time,” Novinskaya believes. — Investments in new works or works by authors who have not yet become famous are less reliable. In the Internet era, the amount of creative content has increased manifold, while the period of so-called active consumption of content has decreased. It is impossible to predict which art objects will be in demand and capable of generating income for investors.”

However, Nikita Replyansky believes that at least some of these problems can be solved if an appropriate ecosystem is created. “[Надо внедрить] a transparent and understandable legal structure for investors and, possibly, the organization of consultations and evaluation of works. No matter how young artists would like it, the art market is not like open NFT platforms; it has its own structure, authorities, whose opinions are taken into account by investors and collectors. These same authorities can serve as the most important bridge between new technologies and old market paradigms. Also, a prerequisite must be safe, understandable and accessible technical means of investment, perhaps even intermediary companies that technically support transactions, maintaining the cybersecurity of all participants in such transactions.”

In turn, the founder of the Masters school and digital art gallery Masters Digital, Polina Bondareva, in a conversation with the editors, said that she “would not talk” about NFT art in the context of financial instruments and investment opportunities.