Linking a Digital Asset to an NFT—Technical and Legal Analysis

Response to Reviewer 1 Comments

1. Summary

Thank you very much for taking the time to review this manuscript. Please find the detailed responses below and the corresponding corrections in the re-submitted file. We have preferred to focus on a point-by-point response as it makes the changes made easier to understand. Once again, thank you very much for your input; we are confident that it has significantly enhanced the article.

2. Point-by-point response to Comments and Suggestions for Authors

Comments 1:

-Blinding and non-blinding distinction: something that I am not very familiar with- perhaps the author(s) should describe what they mean by this distinction

Response 1: Thank you for pointing this out. The central core of the legal analysis in this article is whether there is a legal binding between the token and the underlying asset. Specifically, the article examines whether a direct binding can exist (as recognized by a Liechtenstein regulation) such that trading the token would also mean trading the linked asset. Alternatively, the article explores whether special rules or the recognition of the parties' autonomy of will be required for this linkage to have legal force.

Comments 2: -What improvements are the authors referring to when stating: "Implementing these improvements will make the smart contract not only technologically advanced and secure but also legally robust and adaptable to the various needs of linking assets to an NFT"

Response 2:  According to your comment. Although these improvements in the Smart Contract are outlined in Chapter 4, we agree that they should also be presented in the conclusions. Therefore, we have included them in the conclusions section on page 22.

Comments 3: - which law are the authors referring to here: "Ultimately, as suggested by the Liechtenstein Token and VT Service Provider Act 507 (2019), the law should consider that "the 'token' is a kind of 'container' in which a right is incorporated, so that transactions conducted with the token are considered to be conducted with the asset or rights associated with it.

Response 3:

Thank you for your appreciation. In this case, we refer to a law that has addressed the issue of linking the token to the underlying asset: Law of 3 October 2019 on Tokens and TT Service Providers of Liechtenstein (Token and TT Service Provider Act; TVTG). The analysis of this section can be found in chapter 5.2.1.1 Regulation of the Linkage in Domestic Laws, which is referenced in the conclusions. To provide greater clarity, we have included a paragraph in the conclusions page: 23 that better clarifies which law we are referring to.

Comments 4: - I think these two sentences are contradicting: "From a legal perspective, the NFT has a direct link with the associated asset." AND "Whether the object is tangible or intangible, there must be legal recognition linking the token to the asset, so the transfer of the former also implies a change in the ownership rights of the latter".

Response 4:

Thank you for the contribution. Indeed, we also consider it contradictory, and to provide greater clarity, we have included a new wording of the paragraph on page 16.

Comments 5:

- The following paragraph can be expanded to include a detailed recommendation for countries other than Liechtenstein: "These suitable measures referred to by the law involve the contractual recognition of such linkage, whereby the token holder guarantees that transferring the token implies transferring the asset and its linked rights by virtue of the party autonomy. However, it is recommended that this contractual manifestation be included in the metadata file, specifically in a file called the "rights file," so that the proof of this manifestation is embedded in the smart contract (Liechtenstein Token and Trusted Technology Service Provider Act (TVTG), 2019)"

Response 5:

Your recommendation is very important, which we accept and have made modifications. To this end, we have expanded the highlighted paragraph, where we make recommendations to all countries intending to regulate digital assets such as NFTs. This has been included on page 18.

Comments 6:

- On a final note, I recommend that the authors focus on some other articles that focus extensively on whether there is a tethering effect between the NFT and the underlying asset- and evaluate their.

Response 6:

Thank you very much for the suggestion. We have included new authors focusing on the tethering effect between the NFT and the underlying asset. The included authors are:a

Alvarado Herrera, L. (2022). “Los criptoactivos con función de pago: criptomonedas estables y sistemas de pago a la luz de la propuesta del reglamento relativo a los mercados de criptoactivos (MICA)” en M.J. Blanco Sánchez y A. Madrid Parra (Dirs.), Derecho digital y nuevas tecnologías (pp. 857-888). Ed. Thomsom-Reuters Aranzadi.

Argelich, C., (2022). “Smart Property and Smart Contracts Under Spanish Law in the European Context”, 30 European Review of Private Law, 215, 226.

Bočánek, M., (2021). “First draft of crypto-asset regulation (mica) with the European Union and potential implementation”, Financial Law Review, No. 22 (2)/2021 p. 40.

CHIU, I. H-Y. (2021). “Regulating the Cripto Economy. Business transformation and financialisation”, Hart Publishing. Oxford.

Divissenko, N., (2023). “Regulation of Crypto-assets in the EU: Future-proofing the Regulation of Innovation in Digital Finance”, European Papers, Vol. 8, No 2, pp. 665-687.

Dutta, S., (2020). “The Definitive Guide to Blockchain for Accounting and Business: Understanding the Revolutionary Technology”, Emerald Publishing, 81–82.

Kaisto, J., Juutilainen, T., & Kauranen, J. (2024). Non-fungible tokens, tokenization, and ownership. Computer Law & Security Review, 54, Article 105996. https://doi.org/10.1016/j.clsr.2024.105996.

Mujević, B., & Mujević, M. (2023). “NFTs and copyright law”, SCIENCE International journal, 2(2), 15-20. doi: 10.35120/sciencej020215m

Patz, A. y Wettlaufer, I.M. (2022). “E-money Tokens, Ttablecoins and Token Payment Services” en Maume/Maute/Fromberger (Dirs.), The law of crypto assets. A handbook (pp. 242-268). Beck-Nomos-Hart Ed.

Pérez Marín, M. (2023). “El reglamento MiCA: responsabilidad y sanción frente al incumplimiento de la regulación del mercado de criptoactivos”. IUS ET SCIENTIA. Vol. 9 Nº 2.

Rabinowitz, J., (2022) ‘The Origin of the Negotiable Promissory Note’ (1956) 104 University of Pennsylvania Law Review . Juliet M Moringiello and Christopher K Odinet, ‘The Property Law of Tokens’. 74. Florida Law Review, 607, 615–27.

Savelyev, A., (2018). “Some Risks of Tokenization and Blockchainizaition of Private Law”, Computer Law & Security Review, 34, 863.

Szostek, D. (2019). Blockchain and the Law, Nomos Verlagsgesellschaft, 86–87.

Response to Reviewer 2 Comments

1. Summary

Thank you ever so much for dedicating your time to reviewing this manuscript. Below, you will find a comprehensive response to each point, along with the relevant corrections in the resubmitted file. We have opted for a detailed, point-by-point reply to facilitate a clearer understanding of the modifications made. Once again, we sincerely appreciate your feedback; we are certain that it has greatly improved the quality of the article.

2. Point-by-point response to Comments and Suggestions for Authors

Comments 1:

The legal part could be more detailed than stated in the title. In light of the current investigation, the reference to legal aspects in the title should be removed.

Response 1:

Thank you for the recommendation. We have added several sections to make the legal part more detailed and understandable. In this sense, we have included a section on the Mica Regulation and we have delved into the analysis of the legal part.

Comments 2:

In particular, there are no links to the MICA recently approved in Europe

Response 2:  

We appreciate your contribution. Since MiCA directly excludes NFTs and does not regulate the aspects of linking the token to the underlying asset, it had been excluded from the article. However, following your recommendation, we have included a section that addresses this issue. You can see it on page 19.

Comments 3: And to the cases of the American courts about NFTs.

Response 3:

Thank you for the recommendation; the following judgments have been included:

-          Hermès International and Hermès of Paris, INC., VS, Mason Rothschild

-          Jeeun Friel, Individually and on behalf of all others similarly situated, Plaintiff, Vs Dapper Labs, Inc. and Roham Gharegozlou

-          Nike, Inc. v. StockX LLC de 1/09/2023

-          Yuga Labs, Inc. v. Ripps, 21 abril 2023

-          Visual Entidad de Gestión de Artistas Plásticos vs Grupo Mango

-          Friel v. Dapper Labs, Inc. et al, 21 Civ. 5837 (VM) (U.S. District Court Southern District of New York [EE. UU.], 22 de febrero de 2023).

-          Juventus F.C. vs plataforma de blockchain “Blockeras”.

Comments 4: - The legal bibliography also needs to be increased.

Response 4:

In accordance with your recommendation, new bibliography was added to the legal section. The articles are:

Alvarado Herrera, L. (2022). “Los criptoactivos con función de pago: criptomonedas estables y sistemas de pago a la luz de la propuesta del reglamento relativo a los mercados de criptoactivos (MICA)” en M.J. Blanco Sánchez y A. Madrid Parra (Dirs.), Derecho digital y nuevas tecnologías (pp. 857-888). Ed. Thomsom-Reuters Aranzadi.

Argelich, C., (2022). “Smart Property and Smart Contracts Under Spanish Law in the European Context”, 30 European Review of Private Law, 215, 226.

Bočánek, M., (2021). “First draft of crypto-asset regulation (mica) with the European Union and potential implementation”, Financial Law Review, No. 22 (2)/2021 p. 40.

CHIU, I. H-Y. (2021). “Regulating the Cripto Economy. Business transformation and financialisation”, Hart Publishing. Oxford.

Divissenko, N., (2023). “Regulation of Crypto-assets in the EU: Future-proofing the Regulation of Innovation in Digital Finance”, European Papers, Vol. 8, No 2, pp. 665-687.

Dutta, S., (2020). “The Definitive Guide to Blockchain for Accounting and Business: Understanding the Revolutionary Technology”, Emerald Publishing, 81–82.

Kaisto, J., Juutilainen, T., & Kauranen, J. (2024). Non-fungible tokens, tokenization, and ownership. Computer Law & Security Review, 54, Article 105996. https://doi.org/10.1016/j.clsr.2024.105996.

Mujević, B., & Mujević, M. (2023). “NFTs and copyright law”, SCIENCE International journal, 2(2), 15-20. doi: 10.35120/sciencej020215m

Patz, A. y Wettlaufer, I.M. (2022). “E-money Tokens, Ttablecoins and Token Payment Services” en Maume/Maute/Fromberger (Dirs.), The law of crypto assets. A handbook (pp. 242-268). Beck-Nomos-Hart Ed.

Pérez Marín, M. (2023). “El reglamento MiCA: responsabilidad y sanción frente al incumplimiento de la regulación del mercado de criptoactivos”. IUS ET SCIENTIA. Vol. 9 Nº 2.

Rabinowitz, J., (2022) ‘The Origin of the Negotiable Promissory Note’ (1956) 104 University of Pennsylvania Law Review . Juliet M Moringiello and Christopher K Odinet, ‘The Property Law of Tokens’. 74. Florida Law Review, 607, 615–27.

Savelyev, A., (2018). “Some Risks of Tokenization and Blockchainizaition of Private Law”, Computer Law & Security Review, 34, 863.

Szostek, D. (2019). Blockchain and the Law, Nomos Verlagsgesellschaft, 86–87.