POSTPONED
This is Part 5 of the series ‘Meet MiCA – the new global standard for crypto-asset regulation’.
Since MiCA was first proposed, the draft text excluded from its scope ‘crypto-assets that are unique and not fungible with other crypto-assets’, commonly referred to as non-fungible tokens or NFTs.
The NFT market, much hyped around mid-2021, still shows significant levels of activity (37 billion USD in the first four months of 2022 were spent on NFTs, according to analytics firm Chainalysis). While some may deny the ‘usefulness’ of the majority of current NFT projects (apes, punks, etc) there may be other applications of this concept with more social utility, including fractional ownership of tangible or intangible property. The reality of the NFT market at the moment is, however, characterised by significant volatility of prices, low levels of liquidity, a significant number of scams and some serious potential for money laundering.
As discussed in the two previous seminars, there are two levels at which the question could be tackled: should the issuance of NFTs be brought within the scope of regulation (issuer regime), or rather services relating to the asset such as trading (the CASP regime), or even both? The problems currently identified can be located at both levels: scams happen at the level of NFT issuers, whereas problems with trading (fees, transparency, governance, money laundering) are located at the level of CASPs.
As discussed in the two previous seminars, there are two levels at which the question could be tackled: should the issuance of NFTs be brought within the scope of regulation (issuer regime), or rather services relating to the asset such as trading (the CASP regime), or even both? The problems currently identified can be located at both levels: scams happen at the level of NFT issuers, whereas problems with trading (fees, transparency, governance, money laundering) are located at the level of CASPs.
On the one hand, it seems that consumers would be better protected, and markets would be more efficient long term if there was at least some regulation of NFTs. On the other hand, crypto-assets are regulated under MiCA like ‘financial assets’ and ‘Bored Apes’ or ‘Crypto Punks’ are not really in line with that concept. Hence, there is a certain reluctance to bring the current NFT market into the scope of MiCA and on the day-to-day agenda of financial supervisors.
These questions are amongst the remaining material issues still being discussed in the last phase of the negotiation of MiCA. Our seminar will provide an opportunity to learn about the different arguments for and against the inclusion of NFTs into the scope of MiCA, and map the likely outcome of the legislative process with regard to NFTs.
SPEAKER (TBC)
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