Issuing art as NFTs, or issuing NFTs through the Sponsor NFT scheme HEXA provides, follows lawful schemes that HEXA has confirmed with lawyers and others. However, if you issue NFTs with new elements added, the content must comply with laws and regulations such as the Act against Unjustifiable Premiums and Misleading Representations, gambling laws, the Payment Services Act and the Financial Instruments and Exchange Act. Under HEXA's Terms of Use (Japanese), issuers represent and warrant that they issue NFTs lawfully. HEXA's review does not confirm legality. For more about the review, see here.
NFTs you issue must comply with the law. If you have any concerns, we recommend consulting a lawyer, but we summarize common points below.
The same laws and regulations below also apply to Japanese companies and residents of Japan who use OpenSea rather than HEXA (some also apply to NFTs sold by overseas companies to people in Japan), so these restrictions are not specific to HEXA.
1. Does the content avoid violating the Act against Unjustifiable Premiums and Misleading Representations?
Offering prizes with economic value to NFT buyers may violate the Act against Unjustifiable Premiums and Misleading Representations. We generally recommend not providing services or products with economic value to NFT buyers, but if you really want to, please have a lawyer confirm that your design does not violate the Act before issuing. NFTs may be withdrawn and traded outside the platform with no price limits, so your design must take this into account. Moreover, even if you are not actually giving buyers a prize with economic value at that time, the Act may still apply if buyers misunderstand it that way, or if buyers perceive it that way even though it is not actually stated (you will need to check the details with a lawyer).
2. Are there any elements that could amount to gambling?
You cannot issue NFTs that may amount to gambling, such as those with gacha (random draw) elements or where buyers could gain or lose depending on the outcome of buying the NFT. Your design must not amount to gambling.
3. Is the design one that could qualify as a financial instrument?
If you distribute part of your profits or share monetary rewards with NFT holders, the NFT is very likely to qualify as a security. In that case, anyone who is not a financial instruments business operator (such as a securities company) is restricted in soliciting and selling, and issuing or selling NFTs designed this way is highly likely to violate the Financial Instruments and Exchange Act. Please check this point carefully as well before issuing.
4. Is the design one that could violate the Payment Services Act?
If holding an NFT gives the right to exchange it for services or products, for example by consuming the NFT, it may qualify as a prepaid payment instrument or similar and fall under the Payment Services Act. Because NFTs can be withdrawn, it is difficult to design such NFTs in compliance with the law, so unless you have carefully considered and prepared the necessary measures and systems, you must make sure your NFT does not become a prepaid payment instrument.
5. Is the design one that could amount to a crypto-asset exchange business?
NFTs designed so that Japanese yen can in effect be exchanged for crypto-assets (or vice versa) through them, or NFTs used for payment, are limited to businesses licensed as crypto-asset exchange service providers. If you are not a crypto-asset exchange service provider, you are not allowed to issue NFTs with a payment function, so you must design your NFTs so that they do not have functions related to crypto-assets.
Reference: https://www.fsa.go.jp/news/r4/sonota/20230324-2/20230324-2.html#bessi
6. Are you infringing trademarks, not just copyright?
Whatever content you turn into an NFT, whether photos, illustrations or any other work, please be careful about trademarks as well as copyright. Even if there is no copyright problem, a name, silhouette or shape may infringe a trademark. Changing just one character, switching katakana to hiragana, or imitating the shape of a famous building registered as a silhouette or 3D trademark is highly likely to infringe the trademark if the trademarked item can be inferred. The review cannot check everything, so please apply only with works for which you hold 100% of the rights.
7. Is the design one that could violate other relevant laws?
The above are examples of typical points to consider. If you plan a new project that is not a standard form of issuance, the content must comply with the law. When carrying out a new, original project, please have it checked by a lawyer before issuing.