Web3 and Its Transformative Potential
The 2022 Idaho Cryptocurrency Summit brought together industry leaders to discuss the regulatory and legal landscape of digital assets. Christopher Rowlison, CEO and board director of MCX Technologies, initiated the conversation with an exploration of Web3.
Web3 represents a decentralized evolution of the current internet, often referred to as Web2. Unlike Web2—which is dominated by centralized platforms like Facebook and Instagram—Web3 enables peer-to-peer interactions without relying on central servers. This shift aims to combat digital authoritarianism, reduce the power of tech oligopolies, and minimize large-scale data harvesting and sales.
Beyond cryptocurrency enthusiasts, investors are also betting on Web3’s growth. In 2021, venture capital investments in blockchain startups reached $17.9 billion. This enthusiasm stems from Web3’s potential to revolutionize both daily life and business operations. Although futuristic concepts like acquiring digital twins in the metaverse remain speculative, they underscore the innovative spirit driving this space.
The Regulatory Framework for Cryptocurrencies
Jonathan Wheatley, an attorney at Hawley Troxell, provided an overview of federal regulations governing cryptocurrencies in the United States. Cryptocurrencies and digital assets are subject to a complex web of oversight, with regulatory applicability depending on the entity and its activities.
Key federal regulators include:
- The Securities and Exchange Commission (SEC)
- The Commodity Futures Trading Commission (CFTC)
- The Financial Crimes Enforcement Network (FinCEN)
- The Office of Foreign Assets Control (OFAC)
- Prudential banking regulators
- The Internal Revenue Service (IRS)
- The Department of Justice (DOJ)
In March 2022, President Joe Biden issued an executive order urging federal agencies to coordinate their crypto policies, signaling increased governmental attention to the industry.
Idaho’s Approach to Cryptocurrency Regulation
A panel discussion moderated by Bradlee Frazer, a partner at Hawley Troxell, featured representatives from the Idaho State Department of Finance, including Patty Perkins, Salvador Cruz, and Robert Moore. The panel emphasized Idaho’s crypto-friendly stance and the state’s interest in developing uniform policies for digital asset regulation.
Idaho’s proactive and collaborative approach aims to balance innovation with consumer protection. The state’s openness to cryptocurrencies is exemplified by community-driven initiatives—even lighthearted ones like PotatoCoin.
What Do You Actually Own When You Buy an NFT?
Bradlee Frazer concluded the summit by addressing a critical question: What rights do you acquire when purchasing a non-fungible token (NFT)? The answer lies at the intersection of copyright law and digital ownership.
Copyright is a form of intellectual property protection granted automatically when an original work is fixed in a tangible medium. It grants the author exclusive rights, such as reproduction, distribution, and public display, under 17 U.S.C. § 106.
An NFT, by contrast, is a unique line of code—often representing a digital asset like an image—that is minted on a blockchain. Importantly, the NFT is distinct from the underlying copyrighted work. For example, the creator of a digital artwork retains the copyright unless explicitly transferred.
When you buy an NFT, you typically acquire:
- Proof of ownership and provenance on the blockchain
- A link to the underlying digital asset (e.g., a URL)
- Potential ancillary benefits, like access to exclusive communities or events
However, unless the transaction includes a written copyright assignment or an exclusive license—which may be embedded in a smart contract—the purchaser does not gain copyright rights to the underlying work. 👉 Explore more strategies for navigating digital ownership
Smart contracts—self-executing agreements on the blockchain—complicate this landscape. Current legal frameworks suggest that automated systems cannot enter binding contracts, as they lack legal agency. Thus, the enforceability of smart contracts as copyright licenses remains uncertain.
As the NFT market evolves, buyers should exercise caution and understand the limits of what they are purchasing. Until clearer precedents emerge, participants must navigate this exciting but ambiguous terrain carefully.
Frequently Asked Questions
What is Web3?
Web3 is a decentralized version of the internet that enables peer-to-peer transactions without intermediaries. It aims to give users greater control over their data and reduce the dominance of large tech companies.
How are cryptocurrencies regulated in the U.S.?
Cryptocurrencies are regulated by multiple federal agencies, including the SEC, CFTC, and IRS. Regulations vary based on the asset’s classification and its use case.
Does buying an NFT grant copyright ownership?
No. Purchasing an NFT usually confers ownership of the token itself, not the underlying creative work. Copyright transfer requires a separate, written agreement.
What is a smart contract?
A smart contract is a self-executing program on a blockchain that automates agreements between parties. Its legal enforceability, especially for copyright licensing, is still uncertain.
Is Idaho friendly toward cryptocurrency businesses?
Yes. Idaho regulators aim to create a supportive environment for cryptocurrency innovation while ensuring consumer protection and regulatory clarity.
What should I consider before buying an NFT?
Evaluate what rights you are actually acquiring, verify the authenticity of the asset, and be aware of the limitations of smart contracts and copyright law.