Although the non-fungible tokens (NFTs) market is growing worldwide, NFTs are still not very well-known or used in France. Ifop conducted a survey for Cointribune about NFT and cryptocurrencies in the French market and the  results were published in early 2022. Ifop concluded that while the legitimacy of digital assets has yet to be established, a large majority see NFTs as purely recreational products. The survey found that  only 8% of the French population knows what an NFT is. This is very low compared to the United States or the United Kingdom where more than 50% of the population knows about NFTs, but the result is not very different from what we see in other European countries. NFTs are mostly known by French young adults (i.e. below 30 years old): 50% of the people surveyed  in this age group are familiar with NFTs and believe in their democratization and growing use in the near future. That said, only 3.5% of the French population has already purchased an NFT, mostly in the  music, art and video games industries.

That said, there is a growing interest by  French consumers in NFTs  and initiatives are being developed in the country to increase such interest. One of these initiatives is the opening in October 2022, of the NFT Factory where consumers can attend educational workshops to learn more about NFTs and how to purchase them.

French artists and companies are also contributing to the development of NFTs in the French market. For example, the rap singer Booba, has sold tracks of his latest album in NFTs and allowed live access to his latest concert in Paris for owners of NFTs from one his NFT collections. Another recent example is the NFT sale of jpegs from the collection of Rude Kidz organized during summer 2022 by the Casino Group for consumers visiting three specific Monoprix shops in Paris.

To date, there is no legal framework specifically regulating NFTs in France. This is not an usual situation - in most  countries there is a legal gap concerning this new technology which can allow a rapid growing use of NFTs but also create suspicion amongst consumers.

In this context, one must therefore rely on existing legal principles to deal with the purchase/sale and use of NFTs depending on their qualification and use. For instance, consumer protection laws will likely apply to the sale of NFTs to consumers and to the terms and conditions set by the platforms selling NFTs to consumers. In addition, specific finance and tax rules would apply to such sale as further detailed below.

The French government and actors of the web3 and NFT industries are actively lobbying for the introduction of a legal framework specific to the NFTs in France. For instance, auction houses have insisted on having NFTs covered under the loi visant à moderniser la regulation du marché de l’art adopted in February 2022. As a result, this law allows the public auction of intangible assets, including goodwill, intellectual property rights, but also NFTs. Companies engaging in the sale of NFTs must therefore monitor closely how the French regulator will set a legal framework for NFTs in the future.

NFTs can act as certificates of authenticity of an original work.  NFTs can also be related to a digital artistic work and therefore lead to issues as to the ownership of the IP rights therein.

Among the various issues raised by NFTs, from an IP perspective, the main ones seem to be related to copyright, in particular because of the intangible nature of an NFT.

In the hypothesis of the entirely digital artistic work associated with an NFT, an NFT seems to act as a certificate of authenticity only.  Thus the issue seems to be whether and how the entirely digital artistic work can be subject to copyright whereas the NFT itself is unlikely  to be.

Likewise, in the hypothesis of creation of digital work related to an NFT based on one’s original work, it remains to be seen whether the issuer of the NFT infringes the owner of the IP rights in cases where there has been a lack of authorization to create such digital artistic work. The United States District Court Southern District of New York before which Hermes brought its Metabirkins action against NFT creator Mason Rothschild will certainly open the door to some solutions but are, unfortunately, unlikely to relate to copyright since the claims in this case are mainly related to trademark, cybersquatting and unfair competition.

Reselling the digital work related to an NFT could lead to another copyright-related issue, namely   whether the “droit de suite” would apply to those sales.  Yet, a sort of “droit de suite” has been provided for in some smart contracts related to the NFTs providing for consideration to be  paid for each transaction made on the NFT following its initial sale.

It remains to be seen if, and how, NFTs will be regulated in the future in France from an IP perspective. We recommend, in the absence of legal provisions, very strict contractual provisions, if at all possible, between the author and the NFT purchaser organizing the use of IP rights pertaining to the NFT.

The French Government is generally supportive of the development of cryptoassets and adopted specific regimes in May 2019 under the “Pacte” Law (Law n°2019-486 dated 22 May 2019 on business growth and transformation). From a French finance law perspective, NFTs are at the crossroads of several legal qualifications and regimes.

In accordance with article L. 552-2 of the French Monetary and Financial Code, a token (jeton) can be defined as any intangible asset representing, in digital form, one or several rights which can be issued, recorded, stored or transferred by means of a shared electronic recording device (dispositif d'enregistrement électronique partagé) that enables the owner of the asset to be identified, directly or indirectly. Depending on their characteristics (in particular, the condition relating to the representation of one or more rights, NFTs which do not grant access to products or services but only have an authentication aim), non-fungible tokens could be captured by this legal definition.

Multiple legal regimes can apply to tokens (and by extension NFTs), depending on their characteristics.

NFTs which do not qualify as financial instruments under French law will fall under the scope of the digital assets (actifs numériques) regime (articles L. 54-10-1 et seq. of the French Monetary and Financial Code).  

This regime aims at providing a legal framework for a wide range of services on digital assets which are very much inspired by MiFID II (e.g the service of holding digital assets or accessing digital assets on behalf of third parties, where applicable in the form of private cryptographic keys, with a view to holding, storing and transferring digital assets, the service of buying or selling digital assets in legal tender or the service related to the exchange of digital assets for other digital assets). The provision of certain services (i.e the aforementioned services and the operating of a trading platform of digital assets) on French territory or by providers located in France requires prior registration to the French financial markets authority, the Autorité des marchés financiers (the “AMF”). Market players can also request an optional license as digital assets services provider (prestataire de services sur actifs numériques) (“PSAN”) with less requirements as compared to a license for an investment services provider under the MiFID II regime. This license enables PSANs to carry out financial canvassing (démarchage financier) in relation to services on digital assets (article L. 341-10, 6° of the French Monetary and Financial Code). It also enables the promotion of such services to French consumers by electronic means with a view to inviting a person, by means of a response or contact form, to request or provide additional information, or to establish a relationship with the advertiser, in order to obtain his or her agreement to carry out a transaction on such digital assets (article L. 222-16-1, a of the French Consumer Code) and to conduct sponsorship or patronage campaigns promoting such assets targeting French consumers (article L. 222-16-2, 2° of the French Consumer Code), these activities being otherwise forbidden without obtaining such a license.

Activities on NFTs may also be covered by the regime of crowdfunding services providers as laid down by the recent Regulation (EU) 2020/1503 of 7 October 2020 on European crowdfunding services providers and articles L. 547-1 et seq. and L. 548-1 et seq. of the French Monetary and Financial Code.

In addition, persons conducting these activities may also be covered by the regime of intermediation in various goods (intermédiation en biens divers), which is in particular applicable to any person who offers one or more clients or potential clients the opportunity to acquire rights in one or more assets by promoting the possibility of a direct or indirect financial return or similar economic effect (article L. 551-1, II of the French Monetary and Financial Code). Should the NFT offer a financial return or a similar economic effect, the intermediation in various goods (intermédiation en biens divers) regime may apply. This triggers several pre-requisite requirements (such as being a legal person with a determined share capital, having a procedure to determine the profile of the target investors) and obligations (such as providing to investors clear, correct and non-misleading information in any marketing material information) to be complied with.

Finally, where none of above regimes apply to a specific issue of NFTs, the specific subsidiary regime relating to the issue of tokens may apply (articles L. 552-1 et seq. of the French Monetary and Financial Code). This optional regime provides that issuers can request from the AMF, on a voluntary basis, an authorisation (visa) to issue tokens. In such a case, the issuer must in particular provide the AMF with an information document relating to the implementation of procedures to comply with applicable regulations regarding AML/CFT and the monitoring and safeguarding of the issue proceeds. Like the regime on digital assets, the authorisation (visa) of the AMF is necessary for the issuer to carry out financial canvassing of tokens issuances (article L. 341-10, 6° of the French Monetary and Financial Code), to promote the issues of tokens by electronic means or to conduct sponsorship or patronage of tokens issues targeting French consumers (articles L. 222-16-1, b and L. 222-16-2, 3° of the French Consumer Code).

These abovementioned French law definitions and regimes are very likely to evolve by way of general EU legislation on cryptoassets (e.g the upcoming EU regulation on Markets in Crypto assets (“MiCA Regulation”)) or specific regulations, more particularly on NFTs. For instance, an amendment to the draft finance bill for 2022 included a definition of NFTs but was ultimately rejected by the French Parliament. In addition, following the collapse of FTX, the higher chamber of the French Parliament, the Senate (Sénat), recently adopted an amendment to a bill in order to make the optional PSAN license mandatory for any person not already registered with  the AMF, as described above, as of 1 October 2023 and willing to provide any service on digital asset listed in article L. 54-10-2 of the French Monetary and Financial Code. Such amendment by the Senate, if confirmed by the French lower chamber of the Parliament, the National Assembly (Assemblée Nationale), would become effective as from 1 October 2023.

Each NFT contains a unique identification and metadata that makes it a one-of-a-kind asset. Due to this very-immutable nature, the “minting” process of NFTs may involve the processing of personal data, whether pseudonymized or not. Consequently, French and EU data protection regulations such as the EU General Data Protection Regulation (“GDPR”) may apply to NFTs to the extent where personal data are processed by a data processor or controller established in the EU or in France or where the NFT is offered to data subjects located in the EU or  France.

Neither the European Data Protection Board nor the French data protection authority (the “CNIL”) has yet made any reference to privacy implications in relation to NFTs.

The obvious reason would be that the link between data protection regulations and NFTs is a challenging issue. Indeed, they appear to have slightly different principles and goals.

In particular, privacy regulations assume that data controllers and data processors are identified before any data processing, which contrasts with the multiple-players and decentralisation nature of the blockchain technology. It may then be unclear which NFT stakeholder could be qualified as a data controller, as a data processor or as a third party.

Privacy regulations also impose obligations to data controllers and processors that may be difficult to comply with in the context of NFTs. In particular, although blockchain technology involves keeping permanently and unalterably track of all its users’ information, data controller and processor must grant to NFT users a right to correct and to erase their personal data and must limit the data retention period. NFT stakeholders must also ensure the confidentiality of personal data despite the public accessibility of the blockchain.

NFT stakeholders must implement appropriate security measures notably to prevent any cybercrime such as fraud or phishing attacks, which are very common considering the high value and popularity of NFTs.

Compliance with those specific requirements, whose breach may lead to high fines, must seriously be taken into account and properly addressed by the NFTs stakeholders.

NFTs have grown and will continue to grow in the art, music, luxury and fashion, alcoholic beverages, gaming and sport sectors. We see other players surfacing in the French NFT industry such as car manufacturers. Renault, for example, launched its GenR5 NFT collection in memory of its famous Renault5 and in preparation of the launch of its new Renault5. The increasing use of the metaverse will also surely contribute to the growth and democratization of NFTs amongst the French population.

Taking notably into consideration the success stories in the NFT industry of the French companies Ledger, Sorare and Arianee, the French government indicated that it will support the development of NFTs in France. As such, at the opening of the NFT Factory in October 2022, the French Deputy Minister for the Digital Transition, Jean-Noël Barrot, even indicated the following: "With global players in culture, video games and the luxury industry, France has all the assets to become a European and global platform for NFT. We need to support this movement with the help of public money, within the framework of France 2030". We can therefore expect further development and initiatives in the French market, including from a legal perspective.