Although the buyer may own an original NFT, the copyright and reproduction rights still belong to the original artist 

by ANIS HAZIM 

THE non-fungible tokens (NFTs) are one of the latest crazes in the world of blockchain that allow people to buy and own anything digital including photos, songs, movie clips, drawings and even a Twitter tweet or anything in digital form that is collectable. 

Emerged in 2017, although NFTs are based on similar technology as bitcoin and blockchain, it is not entirely the same because NFTs are “non-fungible”, which effectively means that they are “unique”. 

Meanwhile, bitcoin or physical currency are considered fungible as they can be exchanged for something that is of the same nature and value. 

“NFT is unique, has no equivalent and its value varies just like artworks when you think about it, and indeed, NFTs are often associated with the ownership of artworks, more specifically digital ones,” said podcaster Joseph Chance. 

For example, an NFT of digital artist Beeple’s work brought in US$69 million (RM323.7 million) at auction, Twitter founder Jack Dorsey’s first-ever tweet was bought as an NFT for US$2.9 million and Malaysian graffiti artist Katun has made over RM1.6 million after selling two NFTs collections in 24 hours. 

Although the buyer may own an original NFT, however, the copyright and the reproduction rights still belong to the original artist. 

If so, why would anyone spend millions on something that can be copied endlessly and can’t even be hung up on their wall? 

“NFTs continue our traditional relationship with art in the same way as with physical art, someone might buy a work to support the artist, to stand out, create a buzz or simply to feed their passion. It is often for purely financial reasons too, like an investment,” he noted. 

Meanwhile, he said a lot of contemporary artists are grateful for the invention of NFTs which has finally given them the potential to earn some money or even make a living from their art. 

Impact of NFTs and Blockchain

Despite the unabated craze, some critics have been warning about the environmental impact of NFTs and the blockchain. 

“Some cryptocurrency is known to account for high amounts of electricity consumption and production. 

As a reaction, we are gradually seeing the development of NFT platforms based on less polluting cryptos,” he added. 

NFTs in Malaysia 

According to a study by Finder.com, there are about 23.9% of Internet users in Malaysia own NFTs. 

The firm polled over 28,000 people in an online survey across 20 countries to compare NFT ownership and it was revealed that Malaysia ranks third for NFT adoption. 

“A further 10.5% of respondents said they plan to acquire more NFTs which will result in NFT adoption in Malaysia could soon hit 34.4%, which only serves to highlight the growth potential of NFTs in the country,” it said. 

Meanwhile, Bank Negara Malaysia (BNM) has declared that digital currencies are not legal tender in Malaysia due to their volatility. 

Lawfirm, Richard Wee Chambers noted that NFTs cannot logically work as legal tender and it would be akin to using collectables like artwork as money. 

“There is no objective, universally agreed upon value in NFTs. However, there are no laws in Malaysia stopping us from exchanging NFTs or using them in barter trades,” it said. 

To recap, in 2018, Malaysia’s former Finance Minister Datuk Seri Johari Abdul Ghani assured that BNM will not impose a blanket ban on cryptocurrencies, as such action will only curb innovation and creativity in the financial sector, particularly financial technology. 

Currently, cryptocurrencies and digital tokens in Malaysia fall under the purview of the Malaysian Securities Commission (SC), while there is no regulatory body for NFTs yet. 

“NFTs are so new that regulators have not formulated specific rules and regulations for this area yet, unlike for fintech and crypto-currencies,” it said. 

Nonetheless, the firm opined that NFTs should be regulated as it carries the character of a digital asset. 

“Perhaps SC may regulate NFTs if it is used as securities,” it added. Moreover, the firm views that it is possible to tax the NFTs under Section 3 of the Income Tax Act 1967 — as applied to the crypto-currency — which reads: “Subject to and in accordance with this Act, a tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in 

Malaysia from outside Malaysia. “The provisions of the Act are wide enough to catch income earned from digital platforms although there is currently no framework for taxes with regards to NFTs,” it noted.

Earlier in March, the Communications and Multimedia Ministry (K-KOMM) proposed to legalise NFTs to help the younger generation who are actively involved in the space. 

Deputy Minister Datuk Zahidi Zainul Abidin was quoted in the Parliament saying that the ministry hoped that the government will allow and legalise NFTs to increase the youth’s uptake of cryptocurrencies. 

Additionally, he said K-KOMM is looking into ways to increase young people’s involvement in digital assets.

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• This article first appeared in The Malaysian Reserve weekly print edition