The NFT (non-fungible token) art field is taking off in Israel. Last month, the Tel Aviv Museum of Art featured an exhibition titled “NFT> One of a Kinds.” Alongside discovering the 40 exhibited works of art, visitors were invited to scan a QR code that invited them to also experience the exhibition virtually on their phones with explanations on the different art pieces. A few days after the launching, three of the exhibiting designers secretly replaced the QR code with a different one, replacing the virtual works with a text complaining about the low cyber security measures the museum had allegedly employed.
The digital protest of the three designers touched on the very essence of NFT — digital files registered by an e-commerce network (blockchain). The idea is that the technology used to register these files of artworks enables reliable identification of the source, thereby rendering the artworks unique, with a distinct owner.
An array of Israeli groups and communities are thriving on Facebook, WhatsApp, Twitter and especially Discord. A variety of private websites provide information and services in this field. There is an Israeli art gallery specializing in NFT. Last year, the Knesset issued an NFT of the original draft of the presidential oath. It was then offered to then-incoming President Isaac Herzog ahead of his inauguration. Also in 2021, a first NFT conference was organized by the Shenkar engineering, design and art school. A first NFT art auction in Israel took place last May.
Likewise, Israeli commercial entities have become involved in the field, like the cafe chain Landover, which this year launched the first commercial NFT in Israel, “eight NFT images of its iconic dish — the Rozalach,” which were sold within minutes and are now found on sale for sums of tens or even hundreds of thousands of dollars. While this community and business activity is just starting out, it is already quite dynamic.
Still, since this field is rather new in Israel, the legal framework is not so clear. For instance, a few months ago a report revealed attempts to sell pictures that are simulations of the stones of the Western Wall, based on NFT technology. The case is now in court after a temporary injunction order issued at the request of the State until the issue is settled.
According to Jaguar A. Gal, advocate, and CEO of JAGuar Reg&Comp specialized in this field, there are currently very few legal decisions in Israel on the topic. She emphasizes the need for rules, laws and regulations in this field in Israel.
Gal explains that money launderers, tax evaders and copyright infringers can use the partial lack of legal clarity in Israel and evade punishment. More so, many creative Israelis in this field base their activity abroad, in some cases in countries that function, in her definition, as “regulation shelters.” In this regard, she notes, the European Union advances a proposed law to regulate the cryptographic asset field, called Markets in Crypto-Assets.
Gal recommends Israeli regulators take an active role in the NFT field on three fronts: at home, toward local entrepreneurs; outwardly, toward foreign entrepreneurs who market to Israel consumers; and creating regulatory cooperation between Israel and other countries in order to regulate activities in which Israeli NFT actors are involved around the world. The legal system, she says, must provide clarity, and if needed, the necessary legal aid for various facets, situations and wrongs that could occur in Israel to local users in their use of NFT technology.