The Philippines



Non-fungible tokens (NFTs) have been a hot topic of discussion worldwide for the past couple of years, and India has recently joined this bandwagon. Earlier this year, some of India’s biggest cryptocurrency exchanges launched their own NFT marketplaces that run on blockchains created by these exchanges. These NFT marketplaces have been created to bridge the gap between artists and buyers by providing end-to-end platforms, primarily for facilitating trade, using cryptocurrency as a medium of exchange.

Sujata Chaudhri, Sujata Chaudhri IP Attorneys
Sujata Chaudhri
Founder and Managing Partner of Sujata Chaudhri IP Attorneys in Noida
Tel: +91 88 6013 0723

There is a lot of scepticism around the future of NFTs in India, and the validity of NFT transactions. One of the reasons is the question of the legality of cryptocurrency in the country, which remains unanswered. In 2018, the central bank, the Reserve Bank of India (RBI), had issued a circular asking banks not to deal with or provide any services to entities dealing with virtual currencies.

However, in 2020, the Supreme Court of India struck down the 2018 circular. In early 2021, the finance minister stated that the government was not closing its options and would give room to stakeholders for experimenting with blockchains, bitcoins and cryptocurrencies. In May, the RBI issued another circular that directed all banks to carry out due diligence for transactions in virtual currencies, in line with the existing regulations pertaining to anti-money laundering, foreign exchange and combating of financing of terrorism. However, stakeholders are still waiting for more guidance on the scope and extent of legality of cryptocurrencies and crypto assets from the government, as well as other regulatory authorities.

At this time, India does not have any law or regulation to govern NFTs. Accordingly, as far as NFTs are concerned, we must rely on the established principles of law as laid down in statute books in the country.

Urfee Roomi, Sujata Chaudhri IP Attorneys
Urfee Roomi
Principal Associate at Sujata Chaudhri IP Attorneys in Noida
Tel: +91 98 1809 8835

It is settled that NFTs can represent various things, however their worldwide popularity, including in India, is attributed to their representation of a digital art form. Therefore, in its most popular form, an NFT is a digital copy or token of an underlying original work. Having said this, owning an NFT does not confer ownership of the underlying work that the NFT represents.

It follows that the difference between buying an original artwork and buying an NFT is that the copyright in the original underlying work does not get automatically transfer to a purchaser of an NFT. While it is possible for a copyright holder to transfer ownership rights to the purchaser of the NFT at the time of sale, the provisions of the Copyright Act, 1957, require the contract for sale to provide for such assignment of rights explicitly, in writing.

Once the rights are assigned in compliance with the provisions of the Copyright Act, an NFT holder would be treated as the owner of the copyrighted work. Accordingly, the rights of the parties to an NFT sale, and the extent of such rights, are determined by the governing sales contract.

Rishikaa, Sujata Chaudhri IP Attorneys
Associate at Sujata Chaudhri IP Attorneys in Noida
Tel: +91 99 5881 5862

Most NFT-related transactions take place through smart contracts, which may stipulate the terms of a licence, provide automatic royalties in case of resale transactions, set limits to the use of copyrights, and track subsequent purchases of an NFT. A smart contract is governed by the Contract Act, 1872, and the Information Technology Act, 2000.

Under the Contract Act, an offer, acceptance and consideration are the cornerstones of a valid contract. While a smart contract has the offer and acceptance components of a valid contract, the consideration component may be an issue. Usually, in a smart contract governing an NFT transaction, consideration would be in cryptocurrency. However, as explained above, the legality of cryptocurrencies in India continues to be cloudy, leading one to question the validity of a smart contract and the underlying transaction.

Given the RBI circular, which requires compliance with laws relating to foreign exchange and money laundering in all virtual currency transactions, it would not be far-fetched to state that NFT transactions would also be subject to these laws. In the absence of a legal framework, Indian legal scholars are divided on the classification of NFTs required for such compliance. This classification is key in understanding the legal implications with respect to these NFTs, and their effects on the assets they represent.

If an NFT represents an asset that is considered a security under Indian securities laws, then it may be subject to these securities laws. According to some legal experts, NFTs are essentially derivatives under the Securities Contract (Regulation) Act, 1956 (SCRA). As per the SCRA, derivates include “a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; a contract which derives its value from the prices, or index of prices, of underlying securities.”

Furthermore, a contract in derivatives would be valid and legal only if derivatives are traded on an authorised stock exchange in accordance with the laws of that exchange. Consequently, if NFTs are classified as derivatives, then any contract in such derivatives would be illegal because the marketplaces on which they are traded are not authorised by law.

However, the way the current marketplaces have been set up may not require such authorisation. This is because these marketplaces have been fashioned less like exchanges and more like platforms, where a buyer purchases an NFT from the seller without any intervention from or payment to these platforms other than a nominal sales commission or gas fee (an amount paid by users towards computing energy that is required to validate NFT transactions on blockchains).

Similarly, the popular view is that the treatment of NFTs under India’s taxation regime would depend on the nature or classification of the underlying asset. An NFT would be subject to a goods and services tax (GST), and the definition of goods under the Central Goods and Services Tax Act, 2017 includes moveable property other than money and securities, and services include anything other than goods. It is highly likely that the GST would be imposed, based on what the NFT represents.

However, there may be additional complications in cases of cross-border NFT transactions. The Finance Act, 2020 contains provisions regarding an equalisation levy (EL), which charges a 2% fee on corporations based out of India but having operations within the country. If a marketplace is considered as an e-commerce operator under the Finance Act, then the2% EL may apply on the gross value of the NFT, or the gas fee charged by these marketplaces, or both.

In addition, cross-border NFT transactions will also invoke provisions of the Foreign Exchange Management Act, 1999 (FEMA). Again, the treatment of an NFT under the FEMA would depend on the nature of the underlying asset. However, the situation is not as simple as it sounds, since it is almost impossible to determine the location of an NFT. This may lead NFT holders and marketplaces to avoid FEMA regulations altogether.

The emergence of NFTs has also led to concerns regarding money laundering. NFTs are based on blockchains that provide a perfect opportunity for maintaining anonymity and privacy for parties to the transactions. Although it may be possible to trace these parties by contacting the marketplace or crypto wallet and identifying the IP address, the overall process would be slow and tedious, providing enough opportunities for such parties to evade the law, or hide from regulatory authorities.

As is evident, there are a lot of concerns surrounding NFTs, particularly for a nation that is still struggling with the cryptocurrency conundrum. However, what started as a fad is now gaining ground in the country. One of the major reasons attributed to the rapid acceptance of NFTs is the sheer number of traditional and digital artists in India, and the benefits they can reap from NFTs.

While speculation persists around NFTs and virtual assets, the Indian government has proposed a new law for regulating cryptocurrencies. Stakeholders and experts anticipate that this legislation will also play a role in clearing the air surrounding NFTs in India.

New regulations are definitely the need of the hour, because current laws can only provide quick fixes to issues, whereas new regulations are capable of providing long-term solutions pertaining to this new facet of technology. Although the future of NFTs in India remains unknown, it is fairly certain that they are here to stay.

Sujata Chaudhri IP Attorneys

Sujata Chaudhri IP Attorneys

1/F B-36, Sector 132
Expressway, Noida – 201301
Tel: +91 88 6013 0723


The recent surge in non-fungible tokens (NFTs) has hit Indonesia with a sense of style. A multi-platform media and entertainment startup recently put a digital artwork titled Baduy, picturing a man of the local Baduy tribe, for sale as NFTs. Many individual players have embraced this relatively new and unregulated method of blockchain verification, yet still more are wary of its practical implementation, and the implications it may have from a legal standpoint.

Naufal Fileindi, Guido Hidayanto & Partners
Naufal Fileindi
Partner at Guido Hidayanto & Partners in Jakarta

The legal infrastructure in the country seems to want to encompass the unique non-fungible characteristics of NFTs, and the trend will only continue to rapidly progress. Indonesian authorities have taken a measured approach in examining the existence of blockchain technology, leaning more towards embracing the new technology rather than banning it altogether. This can be seen by the approach currently taken for cryptocurrencies and blockchain in general. It will be interesting to see whether NFTs will be managed cautiously, or governed in a sterner manner.

The implementation of blockchain technology is recognised under the current laws and regulations. Most notably, the Indonesian standard industrial business classification code (klasifikasi baku lapangan usaha Indonesia, or KBLI), issued in 2020, has recognised “the development of blockchain technology” as a valid business activity. In addition, blockchain technology is recognised in the provision of supporting services in fund lending for peer-to-peer companies.

Cryptocurrencies are in a unique position in Indonesia’s legal framework. The central bank, Bank Indonesia, through its 2020 regulation of the payment system, prohibits the use of virtual currency, including cryptocurrency, in any kind of payment transaction. However, in parallel with recent developments, the government has started to accept cryptocurrencies, although limited to being a commodity in the futures market. This ultimately makes cryptocurrency, or virtual currency, obsolete as payment transaction methods, but not necessarily as other financial products.

Muhammad Fernanda Dharmawan, Guido Hidayanto & Partners
Muhammad Fernanda Dharmawan
Associate at Guido Hidayanto & Partners in Jakarta

The Minister of Trade Regulation No 99 of 2018, on the general policy of crypto-asset futures trading, categorised cryptocurrencies as futures commodities. The trading of futures commodities in Indonesia is administered by the Commodity Futures Trading Authority (Badan Pengawas Perdagangan Berjangka Komoditi, or Bappebti). Cryptocurrency is a sub-class of crypto assets, but not all crypto assets are cryptocurrencies. In this regard, crypto assets can only be traded via specific merchants, and cannot be used as a payment instrument in Indonesia.

Based on the current regulatory landscape of crypto assets, the NFT has not yet been regulated under Indonesian law. An NFT distinguishes itself from cryptocurrencies as it adopts a non-fungible characteristic. Consequently, the price of an NFT is not determined by the market but by the NFT owner. Therefore, NFTs must be treated differently from cryptocurrencies and, as such, there are several legal issues that must be resolved for the implementation of NFTs in Indonesia.

IP aspects of NFTs

One of the main issues for discussion is regarding the proof of ownership in terms of IP, specifically for copyright matters. Based on the Indonesian Copyright Act, ownership of the NFT may not necessarily mean ownership of the work represented by the NFT, whereas the original artwork, before the NFT is minted, may be protected by the act. If the creator of the original artwork is not the same entity creating or minting the NFT, some copyright issues may arise.

There is a distinction between the NFT and the work represented by the NFT. Owning an NFT is limited to owning the token where such artwork is inserted. Indonesian copyright law may not provide copyright protection to the holder of the NFT, and copyright protection is only provided to the creator of the artwork. It would be interesting to follow further developments regarding IP protection for NFTs, especially whether the copyright law extends to NFTs, and whether NFTs can be used as collateral – as copyright can be used as collateral under the Indonesian copyright law.

Blockchain and NFTs are based on a decentralised system, and consequently jurisdiction will inevitably become an issue. Copyright protection is only provided to the extent that the work is within an Indonesian jurisdiction, or whether Indonesia and the relevant jurisdiction have ratified the relevant and applicable international treaty or convention on copyright protection.

If an NFT creator unlawfully inserts copyrighted work into NFTs, the copyright holder may have the right to sue the NFT creator for infringing copyright. Further, copyright infringement might also be subject to a criminal penalty of imprisonment for up to two years and/or fines up to IDR300 million (USD21,000)

NFT marketplace

NFT marketplaces may also impose a legal issue under Indonesian law. NFT trades will commonly use crypto coins as their currency, as happens within a blockchain ecosystem. This poses an issue under Indonesian law, as the only currency that can be used for exchange is the rupiah.

In a bid to comply with Indonesian law, parties can determine their method of payment. Accordingly, NFT trades can resort to conventional payment methods without needing to utilise crypto coins. An Indonesian NFT marketplace recently has resorted to such conventional payment services for its NFT transactions, which seems to be a means of complying with prevailing laws and regulations.

Additionally, NFT marketplaces face similar jurisdictional issues with IP matters. As NFT marketplaces are decentralised, the applicable law for NFT transactions is unclear. However, under government regulation No 80 of 2019 on trading through electronic systems, foreign businesses will be subject to Indonesian law if they actively engage with Indonesian consumers and meet the criteria on: (1) transaction volume; (2) transaction value; (3) shipping volume; and/or (4) the amount of traffic.

Compliance with Indonesian law includes but is not limited to: (1) obtaining business and technical licences; (2) conducting company registration and mandatory taxation; (3) providing access to the electronic system for the Indonesian government; and (4) implementing consumer protection in accordance with Indonesian law.

NFT marketplaces often employ a smart contract auditing service, CertiK, to assess the level of security and safety of the blockchain. Indonesian law is silent on authentication and verification matters within a blockchain. However, the law obliges electronic system providers to ensure that they can prevent any disturbance, failure and loss.

NFTs could be implemented within the Indonesian legal system through recognition by the government, as was the case with peer-to-peer lending companies at their initial inception. As blockchain technology is relatively new and currently unregulated, the government might impose a regulatory sandbox to assess the reliability of blockchain regarding NFT transactions.

Digital business in Indonesia

NFTs are a part of the digital business in Indonesia, as are other digital and technology companies. The main concern for digital companies conducting business in the country, including big tech companies, is the requirement to comply with several statutory obligations, which in practice may not seem practicable and raises more concerns.

For instance, the Minister of Communication and Informatics Regulation No 5 of 2020 on electronic system providers in the private sector stipulates that all Indonesian and foreign individuals and/or entities that provide, manage and/or operate electronic systems must register as an electronic system provider.

Such a requirement applies to all electronic platforms (websites and applications) conducting activities in Indonesia, irrespective of the location of the server, or the location of the entity itself. Therefore, organisers of NFT transactions and/or marketplaces may be obliged to register their electronic system with the relevant authorities.

Apart from the electronic systems registration requirements, tax is also imposed for digital goods. Major tech companies that meet a certain threshold have had tax obligations imposed for the past couple of years, and this has been fully implemented among major tech companies.

More tech companies have such requirements imposed in the following months. Whether NFT trading will comply with the above-mentioned requirements remains to be seen – while non-compliance to the relevant Indonesian regulations may lead to temporary suspension and/or access blocking.

Guido Hidayanto & Partners

Guido Hidayanto & Partners

World Trade Centre 3, Level 27
Jl. Jend. Sudirman Kav.29-31, Kuningan
Jakarta – 12920 Indonesia
Tel: +62 21 5011 0199


Non-fungible tokens (NFTs) in the art, gaming and sporting sectors are rapidly gaining popularity worldwide, and consequently are receiving significant attention and developing in practice in Japan. Beginning around April 2021, NFT markets started to appear in the country, and many companies have announced entering NFT-related businesses in collectables, sports and blockchain games, among others. As a result, NFT businesses in Japan are expected to continue to grow.

Masakazu Iwakura, TMI Associates
Masakazu Iwakura
Senior Partner at TMI Associates in Tokyo
Tel: +81 3 6438 5511

This article explores the recent status of NFTs in the country by focusing on the treatment of NFTs under Japanese law.

Legal status of NFTs

There is currently no law in Japan that directly regulates NFTs. However, if money or other assets that are considered to be a “distribution of profits” are delivered to a holder of an NFT, it is highly likely that the NFT falls within the definition of “securities” under article 2.1 of the Financial Instruments and Exchange Act. Even if an NFT does not correspond to securities, if it has an economic function, such as being a means of payment, there is the possibility that it falls within the definition of a “crypto asset” or a “prepaid payment instrument” under article 2.5 or article 3.1 of the Payment Services Act.

However, when looking at how NFTs are transacted, there is no delivery of money or other assets that can be considered to be a distribution of profits to the holder from the NFT itself, and it can be surmised that an NFT does not have an economic function, such as being a means of payment. Therefore, as to the current state of play, it is understood that NFTs are not subject to the financial or business regulations under the Financial Instruments and Exchange Act, the Payment Services Act, or other Japanese laws.

Atsushi Igarashi, TMI Associates
Atsushi Igarashi
Partner at TMI Associates in Tokyo
Tel: +81 3 6438 5511

If NFTs are used as premiums (i.e. contest prizes or promotions), the Act against Unjustifiable Premiums and Misleading Representations will apply, and NFTs will be subject to price caps and controls on the total amount. Gambling is, in principle, illegal under the laws of Japan and criminal penalties can be imposed, and the use of NFTs in any act of gambling is prohibited.

Legal significance of transactions

There are instances where the expression “acquiring ownership of an NFT” is used in transactions of NFT items. Under the Civil Code of Japan, while the “thing” that becomes the object of ownership is a tangible object (article 85), the NFT itself is intangible digital data and, therefore, does not become the object of ownership. Specifically, even if an NFT is purchased, its ownership is not acquired.

The Tokyo District Court decision of 5 August 2015 indicated that Bitcoins, which are tokens on a blockchain, are not objects of ownership since they are not tangible. Acquiring an NFT is understood as proof of the technical nature of a one and only NFT on a blockchain in a non-rewritable manner, as the acquirer of digital data specified by the token.

Haruo Narimoto, TMI Associates
Haruo Narimoto
Partner at TMI Associates in Tokyo
Tel: +81 3 6438 5511

Furthermore, acquiring an NFT item does not mean acquiring the copyright of the item. A copyright is the right to exclusively use a copyrighted work and is granted to the author of the copyrighted work under the Copyright Act. However, even if an NFT item is acquired, unless there is an agreement with the copyright holder to acquire the actual copyright, the acquirer will not acquire the copyright to such work. Unless a licence is obtained from the copyright holder, the right to use the copyrighted work is not obtained by the acquirer.

In the case of art, according to article 45 of the Copyright Act, the owner of the original work of the copyrighted work of art can publicly exhibit such work without obtaining the copyright holder’s authorisation. However, in the case of an NFT, since it is not subject to ownership, article 45 does not apply.

Therefore, how the acquirer can use the NFT will be determined by the terms of the agreement between the acquirer and the copyright holder. Although the licence terms are not always clear in all NFT transactions, the resale of an acquired NFT work to a third party can be thought to be included as an implicit licence. Otherwise, the scope of licence in the agreement will have to be construed from the descriptions in the metadata of the NFT, or from the terms of use of the platform on which the NFT is being transacted.

Considerations in transactions

The key points to consider in transactions of NFT items in Japan are:

(1) For creators or sellers:

(i) The creator or seller must make sure that third-party rights are not infringed when listing an NFT item. Selling another person’s copyrighted work by making it into an NFT without authorisation can be an infringement of the reproduction right (article 21), adaptation right (article 27), automatic public transmission right (article 23.1) and other rights under the Copyright Act. If a third party’s image is used without authorisation, that use is an infringement of such person’s image and publicity right. Under the laws of Japan, an image right (shozoken) is recognised as a right that protects an individual’s appearance, and a publicity right is a right that protects the economic value of the image of a famous person.

(ii) To prevent subsequent unnecessary disputes, an NFT seller should clarify the extent to which such work will be licensed to the purchaser. The seller also should confirm the terms of use of the marketplace, and consider how to state the terms of use within the metatag of the work.

(iii) Once a work is sold as an NFT, since the work cannot be retrieved unless the creator repurchases it, whether there will be an effect on the seller’s existing business and the scope of it should be considered.

(2) For purchasers:

(i) When purchasing an NFT, the purchaser needs to confirm in advance the scope in which the NFT item can be exploited. In particular, the purchaser needs to confirm the types of use that are being licensed in the agreement in terms of copyright use, as well as the terms of use of the platform and the information within the metatag of the NFT.

(ii) There have been instances where items having the same content were sold multiple times. Moreover, a seller is not legally prohibited from selling similar works as NFTs. Even if an item is the one and only item as an NFT, the purchaser should be aware that there is the possibility of the same or similar work existing in other markets.

(iii) Since the copyright is not acquired, the purchaser needs to be aware that the purchaser cannot bring a claim seeking an injunction or damages based on copyright, even if a third party is exploiting a similar work without authorisation.

(iv) Since NFTs cannot be usually transacted between platforms with differing blockchain protocols, the purchaser should confirm the platforms on which the acquired NFT can be resold.

(3) For platformers of marketplaces:

(i) To avoid legal disputes, a platformer needs to clarify the relationship of rights between the transacting parties through a term of use, and clearly provide limitations of liability and other disclaimers that are to apply to transactions and users.

(ii) Since records of a rights-infringing work cannot be deleted from a blockchain, a platformer should consider how to prevent unlawful or unauthorised transactions preemptively.

(iii) Although an NFT will exist on a blockchain virtually forever, a platformer should consider the continuation of, and succession methods for, its service so that NFT purchasers do not incur damages due to the termination of the platform services.

(iv) A platformer needs to take appropriate actions for the security of its platform system. A security breach incident on an NFT platform was reported in Japan in August 2021.

While NFTs hold hidden possibilities as a new means of content distribution, their structure and legal positioning are not necessarily fully known at this time. To duly expand NFT businesses in the future, an understanding of NFTs by parties to transactions, and the creation of clear and proper rules, are desirable, and such efforts are currently being made by various stakeholders.

Market participants also will need to be mindful of Japanese legal and regulatory developments that likely will result as NFTs gain prominence, and should seek advice from knowledgeable counsel.

TMI Associates

TMI Associates

23/F Roppongi Hills Mori Tower, 6-10-1 Roppongi
Minato-ku, Tokyo 106 6123, Japan
Tel: +81 3 6438 5511

The Philippines

A recent primer by the Philippine Central Bank, or Bangko Sentral ng Pilipinas (BSP), succinctly describes non-fungible tokens (NFTs) as instruments that generally represent a class of virtual asset that, as opposed to traditional cryptocurrencies, establish ownership of a unique physical or digital asset. This unique underlying asset – such as digital art, music or in-game tokens – makes it non-fungible, in contrast with fiat or cryptocurrencies that are identical, interchangeable and, thus, fungible.

Mark Gorriceta, Gorriceta Africa Cauton & Saavedra
Mark Gorriceta
Managing Partner at Gorriceta Africa Cauton & Saavedra in Metro Manila
Tel: +632 8696 0687

In the global blockchain community, NFTs have grown through the explosion of digital art projects, minted mainly through the Ethereum protocol and traded on popular NFT marketplaces like OpenSea, even infiltrating elite art auction houses like Sotheby’s and Christie’s. In the Philippines, the adoption of NFTs is more mainstream due to the rise of play-to-earn games like Axie Infinity, where players use unique digital characters called Axies as NFTs to earn native tokens that can be traded into a cryptocurrency with a corresponding and often appreciating fiat value.

While the NFT market continues to spread domestically, the legal and regulatory treatment surrounding this specific technology remains in a wait-and-see stasis. Nevertheless, NFTs may still fall under Philippine regulations depending on the nature of the business model or process where the NFT project is embedded, which may be subject to regulatory oversight or scrutiny.

As far as the BSP is concerned, NFTs with the characteristic of being used as a pure in-game token – meaning they have no utility or purpose outside of a gaming ecosystem – are specifically excluded from the definition of virtual assets regulated by the BSP. This makes sense, considering that the BSP is broadly concerned with the regulation of financial instruments and their circulation within the Philippine economy; NFTs having no utility as a means of payment (i.e. a fiat equivalent) are outside the BSP’s jurisdiction.

Liane Stella Candelario, Gorriceta Africa Cauton & Saavedra
Liane Stella Candelario
Mid-Level Associate at Gorriceta Africa Cauton & Saavedra in Metro Manila

Conversely, virtual assets with payment token or fiat characteristics fall under BSP’s regulation, pursuant to BSP circular No. 1108, and amended BSP circular Nos. 942, 944, and 1039 in relation to virtual asset service providers (VASPs, formerly known as virtual currency exchanges, or VCEs) that provide consumers with a facility to exchange fiat to cryptocurrency (or vice-versa), i.e. to acquire NFTs as well as redeem them into fiat currency.

If the VASP also performs activities in relation to virtual assets being used as a means of payment for goods or services (i.e. converted virtual assets are used to purchase NFTs), such a VASP may further be classified as an operator of payment system under BSP circular No. 1049.

Other than NFTs’ involvement in a facility or digital platform that is directly related to VC-fiat conversion or payment systems, the BSP’s current constraint to their proliferation would be reduced to warning the public against the volatility associated with NFTs, which may pose a financial risk to those interested in investing or acquiring such new and speculative digital assets.

Richmond Montevirgen, Gorriceta Africa Cauton & Saavedra
Richmond Montevirgen
Mid-Level Associate at Gorriceta Africa Cauton & Saavedra in Metro Manila

A potentially more active and concerned regulator would be the Philippine Securities and Exchange Commission (SEC), which has a mandate to ensure that securities offered, distributed and sold to Filipinos and residents within the Philippines are duly registered (unless legally excluded from the registration requirement), and where the securities issuer maintains compliance with disclosure requirements.

On this note, it is an open secret that while there are genuine utility and use cases for NFTs, the current climate and publicity for such digital assets are wildly speculative, with some NFT projects known to be trading for astonishing gains rarely seen even under traditional securities markets.

In the Philippines, traditional media outlets featured the profitability and exceptional gains made by locals who are early adopters and players of Axie Infinity, making it more enticing amid a protracted pandemic where job cuts, business closures and unemployment have run high.

The Philippine Securities Regulation Code (SRC) has a broad and encompassing definition for securities by taking into account investment contracts as part of such a definition. In this case, the SEC relies on the infamous Howey Test, patterned under US case law, to determine whether an instrument is an investment contract and, by extension, security.

This entails meeting four requirements, namely: (1) an investment of money; (2) in a common enterprise; (3) with the expectation of profits; and (4) primarily from the efforts of others. These requirements naturally call for a factual and case-to-case determination that can be challenging, given the complexities surrounding blockchain technology, the added intricacies of every NFT project, and the inherent anonymity usually provided in these ecosystems.

However, when called upon to act on its investor protection mandate, the SEC will step in and enforce the SRC. An example would be a recent advisory issued by the SEC Enforcement and Investor Protection Department, which issued a warning against Pogi Breeds. The group that goes by Pogi Breeds International, or CoPartners Pogibreeds, solicited money from the public for buying or breeding Axies and playing in Axie Infinity, promising gains to investors that could be liquidated after a certain period.

Where a common enterprise is involved in promising passive gains in exchange for an investment, the SEC’s jurisdiction becomes suddenly apparent by simply applying the Howey Test and identifying a security or investment contract veiled under an NFT project. However, in more complex ecosystems like decentralised NFT-based virtual estates (i.e. DecentraLand), or pure collectable digital art projects (i.e. CryptoPunks), the call for regulatory oversight becomes blurry, unless tailor-fitted rules are developed for such innovations (i.e. with the prospective digital asset offering and digital asset exchange rules of the SEC).

In terms of taxation and oversight of the Philippine Bureau of Internal Revenue (BIR), the fundamental rule is that all income derived from whatever source is subject to tax and, unless provided otherwise by law, will always be controlled. Hence, while the BSP and SEC may grapple on regulating NFTs, as long as gains are derived by taxable individuals and entities (i.e. gains derived by players of Axie Infinity), the tax code, through the BIR, shall impose tax liabilities on such gains.

BIR Revenue Memorandum Circular No. 60-2020 further emphasises this by giving notice to all persons doing business and earning income through digital transactions in electronic platforms and media, and other digital means, to ensure that they are duly registered with the BIR, and to pay the corresponding tax liabilities for such digital transactions.

In this case, the taxability of a transaction dealing with NFTs would highly depend on the activity performed. For players, it may be considered as income subject to the graduated income tax table. Hence, if the annual income of the player does not exceed PHP250,000 (USD4,950), no income would be due. Conversely, investors handling players may be considered to engage in regular conduct or pursuit of commercial activity. They may be subject to value-added tax, other percentage tax (as applicable), income tax, and other taxes and fees (e.g. registration fees).

Finally, under the IP regime, ownership of an NFT generally does not carry with it the transfer of copyright ownership to the underlying asset (i.e. digital work). To a blockchain evangelist, involving a regulator (the Intellectual Property Office of the Philippines) may even be unnecessary given the nature of NFTs hosted on a decentralised digital ledger that ensures its uniqueness and non-fungibility being the source of its value-generating proposition, as opposed to registration with a government-held (centralised) ledger.

The regulatory regime with respect to NFTs in the Philippines remains reliant on traditional financial, securities and taxation laws, which do not give regulators the necessary flexibility to fully govern the innovation and adoption of NFTs.

On a more promising note, regulators have shifted to a more open, sandbox approach in the hopes of attracting competitive technologies and economic opportunities that come with these technologies. Ultimately, they are mindful of the need to balance adoption of these innovations with the need to protect the public.

Gorriceta Africa Cauton & Saavedra

Gorriceta Africa Cauton & Saavedra

15/F Strata 2000, F. Ortigas Jr. Road
Ortigas Center, Pasig City
Metro Manila – 1605, Philippines
Tel: +632 8696-0687


New applications of cryptocurrency and blockchain technology called non-fungible tokens (NFTs) are a hotly discussed topic in Taiwan. Currently, there are no regulations specifically addressing the rise and development of NFTs in Taiwan, and the regulator does not seem to have revealed any official view on this trend.

Abe Sung, Lee and Li
Abe Sung
Partner at Lee and Li in Taipei
Tel: +886 2 2763 8000 (Ext. 2232)

From a local perspective, the classification of any NFT and related activities or transactions should be determined on a case-by-case basis, and one can only resort to existing laws and regulations to analyse the same.

Securities and financial law

NFTs are commonly structured to represent digital artworks, musical works, collectables, sports cards and photo albums, and their classification would depend on the structure and the linked assets or interests, among other factors. It is less likely that an NFT would be deemed to be securities, or any other financial instrument that falls under existing financial instruments regulation, as long as the NFT is linked to or represents a unique underlying asset, and there would not be multiple NFTs that are linked to or represent the same asset. However, we still cannot completely rule out the applicability of financial law and securities regulations due to its possible investment character.

NFT holder rights, interests

Ownership of NFT assets depends on the structure and the underlying asset. For example, after a transfer of an NFT representing a digital artwork to the purchaser, the purchaser as the NFT owner has access to the underlying asset, but this does not mean that the purchaser automatically obtains ownership of the content of the underlying digital artwork.

Eddie Hsiung, Lee and Li
Eddie Hsiung
Associate Partner at Lee and Li in Taipei
Tel: +886 2 2763 8000 (Ext. 2162)

Depending on the terms and conditions, the NFT purchaser might only be entitled to view the digital artwork and does not acquire its ownership in any form (e.g. any electronic files of the artwork). For any NFT designed and intended to represent any physical asset – take sneakers as an example – the issue may be whether the NFT transfer would mean the transfer of the sneakers to the transferee. If yes, Taiwan’s Civil Code would view the transfer as similar to a claim against the warehouse operator with which the sneakers are deposited.

The purchaser of an NFT may want to carefully assess and understand all the legal rights, titles and interests in and to the NFT before making the decision, from the perspectives of the NFT itself and the assets and/or interests linked to it. The NFT creators or issuers may want to specify the rights the NFT holder would acquire in the offering terms (or equivalent to it), with a focus on the accuracy of the product descriptions and warranties, as well as the avoidance of over-promise. For example, the terms should not suggest to offer a form of digital ownership behind the NFT, while in reality the holder merely has the right to view the asset and does not own the content. Otherwise, civil or consumer disputes or even criminal liability might arise.

In practice, it is also expected that there will be NFT marketplaces, platforms or exchanges where NFTs can be listed and traded. Similar to ordinary electronic commerce platforms, the standard terms and conditions for these marketplaces should specify the rights and obligations of the registered users or members.

Before launching or permitting the listing of any NFT, the marketplace operators need to carry out necessary due diligence investigation, commercial and legal, on the NFT to avoid any potential liability due to any law violation or third-party claim by the NFT creator or issuer. The agreement between the marketplace operator and the NFT creator or issuer might need to clearly state the division of liabilities that may arise.

An offering of NFTs and the access to the underlying assets might also be exposed to technology risks, such as security breach, unauthorised intrusion or breach by hackers, service disruption or technical malfunction of relevant networks, which may even cause the unavailability of the offering. NFT creators and marketplace operators may want to address the risks by incorporating reasonable disclaimers to the extent that applicable laws permit.

IP rights

IP rights, especially copyright, can be a critical issue for NFTs if the underlying assets involve artworks, photographic works, musical works and recordings. NFT creators or issuers would need to obtain the necessary licences or authorisation from the IP owners before issuing any NFT.

The NFT marketplace operators may need to conduct relevant checks to mitigate the associated risks. It is important to ensure under the NFT and marketplace terms that NFT holders hold and exercise relevant rights and use of the NFT, and that they would not infringe upon any third-party rights, specifically IP rights.

Metaverse and NFTs

Metaverse, a term that combines the prefix “meta”, meaning beyond, and “universe”, generally refers to highly interactive virtual worlds or digital spaces that can be accessed with technologies such as augmented reality (AR) or virtual reality (VR) and specific devices, such as VR headsets, AR glasses, etc. NFTs are perceived as a crucial element of it.

For example, in traditional gaming, players pay to buy in-game assets, while most in-game assets are merely licensed to players and can even be revoked by publishers. Some industry players believe that this can be addressed by tokenising the in-game assets and creating gaming NFTs so that the concept of portable game assets – in-game assets that can be brought off the game or transferred across multiple platforms – can be made possible.

From a legal perspective, if this is the real intention of the game publisher, then the publisher might need first to amend the terms applying to the game so that an NFT purchaser may really “own” the underlying game asset, depending on the structure of the NFTs. Also, as the original game assets are subject to the applicable terms and licences granted by the publishers, an agreement between publishers may be needed to allow the game assets to be portable or transferable between different platforms, or between games.

Anti-money laundering

With respect to digital currency platform operators and transactions, the latest amended anti-money laundering (AML) law has brought virtual currency platforms and trade businesses into Taiwan’s regulatory regime, under which enterprises falling within the designated scope will be subject to the relevant rules applicable to financial institutions.

In April, the Executive Yuan (the cabinet) issued the AML Ruling, which interpreted the scope of enterprises in virtual currency platforms and trading businesses. The Financial Supervisory Commission (financial regulator) followed it by promulgating the regulations governing anti-money laundering and countering the financing of terrorism for enterprises of virtual currency platforms and trading businesses (AML Regulations).

According to the regulations, designated operators of crypto-asset platforms and trade businesses are required to establish internal control and audit mechanisms, reporting procedures of suspicious transactions and know your customer (KYC) procedures, among others. Both the ruling and regulations took effect in July 2021.

It is unclear whether NFT market players fall within the designated scope described under the AML Ruling. The key issue will be whether the term “virtual currency” under the ruling will also be interpreted to cover NFTs. If yes, then relevant market players, especially marketplace operators and any business operators providing NFT custody-related services, will be obliged to follow the AML Regulations and to perform the above-mentioned AML-related obligations.

The authors believe this will substantially increase the compliance cost of relevant NFT market players. Considering that, in practice, trading NFTs might involve a massive amount of money, which may to some extent justify any potential AML obligations. Industry players are well advised to follow the regulatory trends closely.

Lee and Li

Lee and Li

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Taipei – 11072, Taiwan
Contact details:
Tel: +886 2 2763 8000