Standard NFT and MiCAR

Do standard NFTs fall under the MiCAR crypto framework? Probably not. Neither the EU legislator nor local supervisory authorities, such as BaFin in Germany, want that.

Key Facts

MiCAR is intended to create an EU legal framework for crypto assets to promote innovative technologies in the financial sector.
Digital assets on a blockchain are usually not a regulatory concern, but there are gray areas.
The term crypto asset is unclear and only defined in a few legal matters.
Experts should examine business models that can be classified in the FinTech sector.
Startups with distributed ledger technology have enormous potential until 2030.
The cost of legal advice in the blockchain sector is high due to a lack of expertise.
Marketing and application influence the legal assessment of NFT-based business models.

The objective of MiCAR is to establish an EU regulatory framework for crypto assets in order to expand and promote the use of innovative technologies in the financial sector, particularly in relation to distributed ledger technology. This is also necessary and exciting from both a legal and business perspective.

If a game provider wants to store digital content/assets on a blockchain, this is generally not supposed to be a regulatory concern already according to the institution of the legislators. The gray area is thin in places, however, and details matter in many places. For example, if NFT is associated with “paying out” FIAT, or if the underlying smart contracts and especially the marketing are designed to make an NFT more about the investment purpose, this may be different.

“Cryptovalue” is, after all, a termincus technicus, albeit a term that is sometimes very poorly defined and has so far been clarified in only a few binding legal issues.

So if you feel that your own business is more in the realm of FinTech, an expert should examine the details and requirements more closely. However, if one’s business is more likely to go towards digital content or rights being stored on a blockchain, rather than a hard drive, to possibly simplify transfer or increase the “sense of ownership” of users, then there is a good chance that this business can operate without separate permissions. However, sub-areas of a company that affect FIAT must be distinguished from this, such as payment management, the re-exchange of digital assets, or services related to the transfer of content stored on a blockchain.

Unfortunately, one sees again and again that the extent of the examinations is underestimated, because it depends not only on details and the special characteristic of a business model, but also on the marketing, the concrete use and numerous other aspects, which affect many other areas of law, such as the competition law, the copyright, the trademark law or also the general civil law.

The potential of startups and business model related to distributed ledger is huge and will also rise sharply by 2030. However, the need for legal advice and thus the cost of legally compliant handling of blockchains is also enormous. This is also true because there are not yet too many tech-savvy lawyers who can advise on business models in the field.

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.