An enabling and future-proof regulatory and legal framework is required for Non-Fungible Tokens (NFT) to help the Indian economy derive full benefits of the technological innovation. A recent report by the Esya Centre, in association with the Internet and Mobile Association of India [IAMAI] titled “NFTs: A Technological and Legal Primer”, suggests that while several jurisdictions have introduced laws and regulations to govern cryptoassets, no country has yet proposed an overarching regulation for NFTs, given the emergent legal and regulatory concerns associated with their use. The report also identifies several regulatory and legal challenges presently being faced by NFT in India, which impedes their growth and adoption.
Non-Fungible Tokens are a form of code/software that help prove ownership of digital and physical goods in the virtual realm, something which was not feasible earlier. As a result, NFTs can be used for several different purposes, such as digital art, collectibles, fashion and finance.
The report sheds light on the growing involvement of Indians in all aspects of the NFT value chain. For instance, Polygon, a blockchain founded by three Indian developers, is increasingly preferred by leading marketplaces and artists to create and host their NFTs. Similarly, NFT marketplaces that cater specifically to the interests of the Indian public have also come up. For example, Rario creates NFTs based on highlights and notable events from cricket matches. Indian celebrities, such as Amitabh Bachchan, have also used NFTs to engage with their fans.
Commenting on the report, IAMAI president, Dr Subho Ray said: “The Primer is intended to raise awareness among policymakers about different types of NFTs and their future possibilities. Each possibly needs to be regulated and taxed differently and not with a single broad brush of ‘virtual assets’.”
The report highlights the legal and regulatory concerns that must be addressed to fuel the NFT ecosystem’s growth. Report co-author Mohit Chawdhry, Junior Fellow at Esya Centre, said that some of these concerns “stem from the potential use of NFTs for money laundering, tax evasion and infringement of intellectual property rights” and must be resolved. In addition, “greater clarity on the FDI caps on NFT marketplaces and their obligations under the Foreign Exchange Management Act will also help bolster the ecosystem,” he added.
The report lays out suggestions for policymakers, entrepreneurs, developers and creators to consider to help promote a healthy growth of the industry. The report also addresses the issues of copyright and IPR associated with NFT that both creators and dealers of NFT need to be aware of before engaging with NFT assets.
About IAMAI
The Internet and Mobile Association of India [IAMAI] is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was established in 2004 by the leading online publishers, and in the last 16 years has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, digital entertainment, ecommerce and mobile & digital payments among others.Sixteen years after its establishment, the association is still the only professional industry body representing the online industry in India. The association is registered under the Societies Act and is a recognized charity in Maharashtra. With a membership of nearly 300 Indian and overseas companies, and with offices in Delhi and Mumbai the association is well placed to work towards charting a growth path for the digital industry in India.
About Esya Centre
The Esya Centre is a New Delhi based think tank that aims at generating empirical research and informing thought leadership to catalyse new policy constructs for the future. It simultaneously builds institutional capacities for fostering ideas which enjoin the triad of people, innovation and value, consequently helping reimagine the public policy discourse in India. More information can be found on www.esyacentre.org
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