The Legal Protection of NFT in Indonesia

As of early 2022, the hype of digital assets seems to be exploded. Recent case in Indonesia that a young man has sold his selfies in billions Rupiah on NFT platform called OpenSea, which was traded in ETH cryptocurrency. NFT are now becoming very popular way to sell or purchase digital artwork. Despite unique and innovative, how does Indonesian law protect NFT as a digital asset?

Definition of NFT

Non-Fungible Tokens or NFT is a unit of data stored on a digital ledger (blockchain) that certifies a digital asset to be unique and therefore non-fungible. NFT as a digital asset can represents art objects such as painting, photograph, videos music and even in-game items. Since NFT exist on blockchain, the data is distributed to a ledger that records transactions. Each NFT is unique, cannot be exchanged and dissimilar to one another, hence impossible to be counterfeited. The purchaser of the NFT will typically have a token and transferring such token between parties is possible.

 

IP Framework

To this date, NFT does not specifically regulated under Indonesian law. Nevertheless, the artwork that is associated with the NFT is protected as copyright. Indonesian Law No. 28 of 2014 on Copyright (“Copyright Law”) determines that Copyright is the exclusive right of the creator that arise automatically based on the principle of declarative after an invention is embodied in a tangible form without prejudice to the restrictions in accordance with the provisions of the legislation. Copyright Law provides no further explanation as to what extent a tangible form is determined. Yet a digital form can be reproduced, copied, modified or published either directly or use device assistance that constitutes a tangible form.

 

NFT is not copyrighted artwork. Even though NFT contains copyrighted work owned by the creator, the right does not necessarily owned or automatically transferred to the NFT purchaser. Unless, there is an assignment of right from the creator to other party(ies). As the copyright is solely owned by the creator of artwork and/or copyright holder, NFT purchaser is not authorized to reproduce, copy, modify or publish publicly the artwork associated with the NFT for commercial purpose without the permission of the creator or copyright holder. Such conduct is considered as infringement and will render to criminal penalty with imprisonment and fine sanctions. Instead, the purchaser will own a token as proof of NFT ownership, which is transferable.

 

As the digital asset continues to evolve, so must the legal and regulatory development. Albeit Copyright Law is currently silent on NFT protection, we hope that NFT will be further regulated under Copyright Law in terms of intellectual property protection in the near future.

Written by: Threeas Novayanti