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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. “This year we have a regulatory festival, and different countries apply rules one by one,” said Piotr Jaśkiewicz, a lawyer for the law firm Baker McKenzie.
– 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 store any number, we can only send NFT between users’ wallets, and we can’t copy them freely, says Peter Jaśkiewicz of the Newseria Business Agency.
NFT (non-fungible tokens) is a type of cryptographic token that acts as a certificate confirming the authenticity of a particular file, which exists in only one copy. Although the file for sale is reproducible, there is only one NFT-certified original. For example, Mike Winkelmann’s “Everydays: The First 5000 Days”, a popular digital artwork sold by Christie’s in 2021. Anyone can find it in the Google search engine, view the image, and even download it and install it as a wallpaper. However, 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.
As with cryptocurrencies, NFT tokens are traded 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, first of all you should pay attention to what it really is, because tokens are already used in many cases. If we compare it to a sheet of paper, we can have a work of art, tickets to a concert, a campaign or a contract that gives us some rights, says a lawyer from Baker McKenzie.
Although NFT has taken the art market by storm, more and more software is emerging 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 where buyers can check, for example, an NFT certificate assigned to an expensive, exclusive wallet or other 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, in the sale of tickets for 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.
– The additional risk is often due to the fact that 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. Piotr Jaśkiewicz says that risk can be minimized if we use exchanges or platforms that provide standards for identifying people who set up accounts.
The security of operations should also be enhanced by appropriate regulations requiring, for example, the licensing of intermediaries, the inspection of transactions in terms of money laundering, terrorist financing or evasion of economic sanctions. Such rules – as noted by the expert – do not currently exist. Most countries still do not have rules governing such cryptocurrencies, so there are general rules in this market, but this 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. It is expected to be ready by the end of this year, and the MICA regulation, which will probably take effect next year, said Baker McKenzie, a lawyer with the law firm..
The MiCA regulation on crypto assets, which amends the so-called 2019/1937 Directive, is the first attempt to comprehensively regulate the functioning of this EU market. However, it is still unknown whether it will include non-exchangeable tokens 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 intermediaries will become regulated entities, which means that they will have to get a license, which is good news, but it will be valid throughout the European Union, says Piotr Jaśkiewicz.
According to Nonfungible.com, the value of NFT turnover will reach about $ 17.7 billion in 2021. (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 value of 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, so making money from such transactions may not be as easy as before.
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