NFTs and marketplaces: which regime?
The MiCA Regulation leaves crypto-assets that are unique and not fungible outside its scope. That exclusion has limits: a large series, fractions or a right to a share of revenues can bring a collection within MiCA, or within financial law. For a marketplace, the question also arises for each service it provides: custody, exchange, payment, consumer law and the DSA.
ORWL Avocats advises creators and brands launching a collection, as well as marketplace operators, from the qualification of the NFT to the drafting of the terms of use.
Are NFTs excluded from the MiCA Regulation?
As a matter of principle, yes. The MiCA Regulation does not apply to crypto-assets that are unique and not fungible with other crypto-assets. Its recitals refer to digital art and collectibles, whose value depends on the specific features of each token and on the use it offers its holder.
Most art, photography and music collections fall within that description, as do numbered tickets and certificates of authenticity for a physical item.
Regulators look at what the token actually is rather than at what it is called. The Regulation and the ESMA guidelines point to four limits:
- Large series. Issuing a token in a large series or collection is an indicator of fungibility. A unique identifier attached to each token is not enough: the asset or the right represented must itself be unique.
- Fractionalised NFTs. Fractions of an NFT are not unique. They fall within the MiCA Regulation, and possibly within financial law where the NFT represents a real-world asset; the firm also advises on tokenisation of real-world assets (in French).
- NFTs that are interchangeable in practice. A token that looks unique but trades like all the others, at the same price, loses the benefit of the exclusion.
- Financial or governance rights. An NFT granting a share of a project’s revenues or a vote on its decisions may qualify as a financial instrument. Being outside the MiCA Regulation does not mean being outside financial law.
Our reading is a pragmatic one: an art or collectibles collection remains, in principle, outside the MiCA Regulation. These limits call for a case-by-case analysis, documented before launch.
Where the collection comes with a fungible token, a governance token or an in-game currency, that token follows its own regime. ORWL Avocats also handles its qualification under the MiCA Regulation (in French).
The firm further advises game studios on two regimes of their own: JONUM, the French regime for games with monetisable digital objects (in French), for items earned through play, and the French prohibition on lotteries (in French), for NFTs allocated at random through booster packs or mystery boxes.
Is your NFT outside MiCA?
When does an NFT marketplace need authorisation?
NFTs falling outside the MiCA Regulation does not settle the position of the marketplace. The firm reviews its activity service by service: each service provided around the NFT may fall within a regulated status.
The marketplace becomes a crypto-asset service provider (CASP) and must obtain authorisation from the AMF, the French financial markets regulator, as soon as it:
- holds crypto-assets in custody on behalf of its users;
- exchanges crypto-assets for euros or for other crypto-assets, for instance to allow a card payment for an NFT priced in ether;
- admits fungible tokens to trading alongside NFTs, or receives and transmits orders on those tokens.
Escrow, a point to watch
Many marketplaces hold the sale price until the NFT is transferred. Where that escrow runs through a wallet the operator controls, the risk of the arrangement qualifying as custody is a real one.
The MiCA Regulation sets no minimum duration or amount below which holding crypto-assets for others would escape the status. A brief period of holding may be enough. The payment journey is therefore designed with counsel from the outset: an authorised partner, authorisation of your own, or a journey in which the operator never holds the assets, depending on the model.
Payments in euros
Collecting the price in euros and passing it on to the seller is, in principle, a payment service. The marketplace must then check its position under payment services rules: authorisation from the ACPR (Autorité de contrôle prudentiel et de résolution, the French Prudential Supervision and Resolution Authority), an exemption, or the use of an authorised payment service provider. The firm carries out that analysis and, where needed, structures the combination of crypto and payment statuses.
Investment services
If a collection qualifies as a financial instrument, trading in it falls within investment services rather than the MiCA Regulation. The qualification of the NFT therefore drives the qualification of the platform.
NFT marketplaces: which status for which model?
| Model | Likely status | Expected deliverables |
|---|---|---|
| Payment in euros | Outside the MiCA Regulation where the NFTs are excluded from it; collecting the price falls within payment services rules. | Terms of use and terms of sale, review of the contract with the payment service provider, content moderation policy |
| Payment in crypto-assets, with no holding by the operator | Outside the MiCA Regulation in principle, provided the technical journey demonstrates it. | Qualification memorandum, flow chart of the transaction, terms of use |
| Escrow through a wallet controlled by the operator | High risk of qualifying as custody on behalf of clients: CASP authorisation, an authorised partner, or a redesign of the journey. | Qualification memorandum, flow chart of the transaction, legal opinion at a partner’s request |
| Conversion between crypto-assets and euros | Exchange service: CASP authorisation or use of an authorised CASP partner. | Review of the partnership agreement, terms of use, customer journey |
| Listing of fungible tokens (in French) | Exchange or trading platform: CASP authorisation; each token must be qualified under the MiCA Regulation. | Token qualification memorandum, crypto-asset white paper where required, authorisation application |
| Fractionalised NFTs (in French) | Fractions are crypto-assets, and possibly financial instruments: the regimes of the issuer and of the platform both apply. | Qualification analysis, offer documentation, terms of use |
Terms of use, consumer law, DSA: what must a marketplace comply with?
Outside any financial regulation, an NFT marketplace remains an online platform selling to consumers or connecting sellers with buyers. The firm drafts and reviews its contractual documentation and brings it into line with consumer law and with the Digital Services Act (DSA).
Consumer law
- Pre-contractual information: the features of the NFT and the rights it confers, the price, platform and network fees, the identity of the seller and whether that seller is a trader or a private individual.
- Right of withdrawal: an NFT is digital content not supplied on a tangible medium. The consumer only loses the fourteen-day right where they give express consent to immediate performance, acknowledge the loss of the right and receive confirmation of that agreement. The purchase journey must capture all three.
- Unfair contract terms: limitations of liability in the event of network failure, unilateral removal of an NFT, amendments to the terms of use without notice.
- Platform fairness: ranking parameters for offers, handling of reviews, disclosure of relationships with featured sellers.
Digital Services Act (DSA)
As an online platform, the marketplace must provide in particular for:
- a notice and action mechanism for illegal content, with reasoned removal decisions;
- traceability of traders, identified before being allowed to sell;
- a fair interface, free of design features that push users towards a decision they would not otherwise have made, and clearly identifiable advertising;
- a lighter regime for micro and small enterprises, which are exempt from part of these obligations.
Terms of use designed for NFTs
The marketplace’s terms of use bring these requirements together with the technology: what happens to the NFT if it is withdrawn, disputes between seller and buyer, resale royalties, account suspension. The firm drafts them alongside the content moderation policy and the dispute-handling rules.
Intellectual property and tax
Buying an NFT does not transfer copyright in the associated work unless the rights are expressly assigned. ORWL Avocats also advises creators and marketplaces on the licence attached to the NFT and on action against counterfeiting (IP/IT/Data).
The firm likewise handles VAT on NFT sales and the taxation of capital gains on disposals (Tax).
Is an NFT marketplace subject to AML/CFT obligations?
The answer follows from the regulatory analysis. A marketplace authorised as a CASP, or holding a payment status, is an obliged entity for anti-money laundering and counter-terrorist financing purposes: customer identification, transaction monitoring, reports to Tracfin, the French financial intelligence unit. Its liability and that of its managers follow from this; the firm assists in building its AML/CFT framework.
A marketplace that is not an obliged entity is not therefore free of any measures:
- the NFT market remains exposed to fraud, to wash trading designed to inflate prices and to money laundering, against which the platform must protect itself;
- asset freezing rules apply to it as they do to everyone;
- its regulated partners, whether a payment service provider or a CASP, impose verification and monitoring measures by contract.
In practice, a marketplace that takes no measures at all is very rare. The firm calibrates those measures according to the qualification adopted and to partners’ requirements, without imposing the framework of an authorised institution on a business that does not need one.
How does ORWL Avocats support an NFT project?
For a collection as much as for a marketplace, the engagement begins with the qualification of the instrument, then moves to the analysis of the activity.
Why work with ORWL Avocats?
Since it was founded in 2018, ORWL Avocats has advised NFT and Web3 projects. The firm has worked with marketplaces, with video game and trading card publishers of the first rank, and with cultural institutions. Its expertise in digital assets is recognised in France and in Europe, in particular by Chambers FinTech and Leaders League.
A lawyer qualifies: they say whether the NFT falls within the MiCA Regulation, within financial law or within neither, and take professional responsibility for that analysis. Exchanges with the client are covered by legal professional privilege. The same firm then drafts the terms of use, negotiates with partners and engages with regulators: one team, from the first memorandum to go-live.
A partner leads every engagement.
ORWL Avocats’ Regulatory practice
Qualifying NFTs, structuring marketplaces, bringing platforms into compliance: ORWL Avocats is recognised in these areas. The firm advises crypto and Web3 start-ups on games, DeFi and the promotion of their services, and regulated players across all their regulatory matters.
