The incredible enthusiasm in the Non-Convertible Tokens (NFT) market has led to a huge growth in this industry in 2021. The turnover in this market reached $ 17.7 billion in the first quarter of this year, and the value of oil turnover was about $ 7.9 billion. – According to Nonfungible.com. The technology that has taken the art market by storm is now finding more and more business applications, including among luxury goods brands. Some countries are also preparing to introduce rules to increase the security of trade in crypto assets. “We have a regulatory festival this year, and different countries apply rules one by one,” said Piotr Jaśkiewicz, Baker McKenzie’s lawyer.
NFT token – what is it?
– NFT tokens are entries in a blockchain network with individual identifiers in the metadata. Unlike ordinary files on the Internet, we can copy, email and save as much as we want, NFT can only be sent between users’ wallets, and we can’t copy them freely – Newsseria Business Piotr Jaśkiewicz agency says.
NFT (non-fungible tokens) is a type of cryptographic token that acts as a certificate confirming the authenticity of a particular file, which is available in only one copy.. Although the file for sale is reproducible, there is only one NFT-certified original. Mike Winkelmann’s famous “Everydays: The First 5000 Days” digital art sold by Christie’s in 2021. Anyone can find it on Google, look at the image and even download it and install it as a wallpaper. But the original is only one, and the record belongs to Indian investor Vignesh Sundaresana for $ 69 million. received an NFT token confirming the authenticity of the case and the right of ownership.
Trade with NFT tokens through the blockchain network
As in cryptocurrencies Trading with NFT tokens occurs through a blockchain network. All transactions with them and information such as transaction amount, buyer, seller and time stamp are open and can be verified. However, an NFT badge in a digital wallet cannot be copied or copied without the owner’s consent, making it an ideal tool for storing information about the ownership and authenticity of digital art. It is in this area that the NFT token market has developed the fastest so far, and the works of NFT-certified artists are already offered by the most prestigious auction houses such as Sotheby’s or Christie’s. Last year, they were joined by the Polish auction house DESA Unicum. As a result, this market is gradually maturing and normalizing, as evidenced by the fact that we see increasingly shockingly low prices for virtual works of art.
– When buying an NFT token, you should first pay attention to what it really isbecause tokens are already used in many cases. If we compare it to a piece of paper, it could be a work of art, concert tickets, events, or a picture with a contract that gives us some rights. – Baker McKenzie mentions a lawyer for a law firm.
Business applications of NFT tokens
Though NFT is storming the art market, there are more and more applications for this technology. Tokens are used, among others, for authentication of rare collections or luxury goods. Last year, Gucci, Prada and Cartier created a special Aura platform that buyers can check out NFT certificate for example, an expensive, exclusive handbag or other item of clothing. At NFT, you can set up an automatic commission for the original issuer so that when transferring a token – the percentage of the transaction is always returned to him. Therefore, this technology can be used, for example when selling tickets to concerts and other events with a limited audience.
According to Baker McKenzie, the market will continue to focus on the growing role of business solutions, not only on the aesthetic functions of electronic assets, but also on their usability.
Despite the constant professionalization of the oil market, operations are still accompanied by a number of risk factors.
– An additional risk often arises because we do not know the identity of the seller. Thus, we can get a target from a criminal or a person subject to international sanctions. This is a direct risk for our buyers, because by doing so, we are breaking the rules. Meanwhile, it is currently difficult to verify who the owner of a particular wallet is. However, this risk can be minimized if we use exchanges or platforms that apply standards to identify people who set up accounts. – says Piotr Jaśkiewicz.
Operational security and crypto-active trading rules (including NFT)
Operational safety They should also increase relevant regulations that would require inspections of transactions, such as licensing brokers, money laundering, terrorist financing, or circumventing economic sanctions. Such rules – as noted by the expert – do not currently exist. Most countries still do not have rules to cover them cryptocurrencyTherefore, general rules apply in this market, but it does not take into account all the technological possibilities offered by blockchain and NFT.
– But this will change. This year we have a regulatory festival, and different countries apply rules one by one in this area. The United States has officially begun to reconsider its rules, and US agencies must make appropriate proposals. The United Kingdom is also applying new rules, and the European Union is in the final stages. We need to be ready by the end of this year, and probably the MICA regulation, which will come into force next year – Baker McKenzie’s lawyer says.
The so-called MiCA Crypto Regulation Amendments to the 2019/1937 Directive are the first attempt to comprehensively regulate the functioning of this EU market. However, it is not yet known whether non-exchangeable tokens will be included and to what extent. The bill was published by the European Commission in September 2020 as part of the Digital Finance Package. The rule provides greater protection for consumers and investors (the right to refuse to purchase cryptocurrencies within 14 days of the conclusion of the contract) and provides for a number of obligations for institutions involved in the issuance of cryptocurrencies.
– Additional requirements for brokers trading in crypto assets that MiCA will introduce, among others. They will mainly focus on the fight against money laundering. In addition, many brokers will become regulated, meaning that they will have to obtain a license, which is good news, but will be valid throughout the European Union. Says Piotr Jaśkiewicz.
The oil market is booming and growing by leaps and bounds
According to Nonfungible.com in 2021 NFT trading value reached about $ 17.7 billion. (with a sharp increase from $ 82 million a year ago), with an estimated portfolio of about 2.6 million assets. In turn, in the first quarter of this year. The turnover was about $ 7.9 billion, and the number of active portfolios fell by more than 25% on a quarterly basis to 1.45 million. Experts note that the profitability of NFT is declining, which means that earning from such operations may not be as easy as before.