10 industry leaders’ tips for regulators as they start to scrutinize NFTs

NFTs are a new asset powered by a new technology, so regulators will need to craft all-new solutions. Many outside the crypto industry first heard of nonfungible tokens only within the last year or so, with most mainstream coverage focused on the digital artwork market. Those not in the know may well have thought NFTs […]

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NFTs are a new asset powered by a new technology, so regulators will need to craft all-new solutions.

Many outside the crypto industry first heard of nonfungible tokens only within the last year or so, with most mainstream coverage focused on the digital artwork market. Those not in the know may well have thought NFTs would amount to nothing more than digital collectibles. However, industry pioneers grasped the full potential of NFTs, and new applications are surfacing that could impact multiple industries. 

As the value of NFTs as assets is realized, regulation is sure to follow — but it won’t be as simple as applying the rules established for more traditional assets. Below, 10 members of Cointelegraph Innovation Circle discuss some important facts regulators should understand as they start to scrutinize NFT markets.

Get familiar with the underlying technology and its potential

NFTs are not only a new concept, but the blockchain technology behind them is complex. Regulators should be careful when attempting to group them into an existing framework. They should approach the NFT market with a willingness to learn and understand the underlying technology behind NFTs and the ways in which tokenization technology can be utilized to disrupt many industries. – Megan Nyvold, BingX

Recognize NFTs aren’t ‘one size fits all’

Regulators should understand that NFTs are not “one size fits all.” Their applications are incredibly wide-ranging, and rules that make sense to apply to one type of NFT may not make sense to apply to another. – Molly Glennon, Ditto

Know that not all NFTs are securities

Say you go to a movie theater: You pay the entry fee, and they give you a piece of paper that grants you the right to watch the movie undisturbed — all good. Now, let’s save some trees (ESG, anyone?). Instead of issuing a paper ticket, the theater asks you to download an app (wallet) so they can send you an ERC-721 token that gives you the same rights as the piece of paper. How is that a security? – Carlos Gomez, Belobaba Crypto Fund

Recognize the potential for creativity NFTs bring

It’s important for regulators to recognize the significant potential for creativity that NFTs bring. By enabling new forms of artistic expression, community building and economic activity, NFTs are helping to drive a wave of exciting new possibilities. To best support this innovation, regulators should think about ways to foster growth and development while still protecting end consumers. – Bogomil Stoev, Seasonal Tokens

Don’t stifle industry innovation

NFTs are much more than just a speculative asset class. The unique properties of NFTs have a wide range of practical applications that can help catalyze growth across many different industries. So while regulators should work to protect investors from bad actors, they must also be careful not to stifle innovation. – Wolfgang Rückerl, ENT Technologies AG

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Take both emerging and traditional markets into account

Regulators must approach NFTs with caution to protect both buyers and sellers. They should establish and implement standards that ensure authenticity and safety and create a regulatory framework that takes into account both emerging and traditional markets. This will ensure that all parties are fully protected and that the market remains secure, fair and prosperous. – Theo Sastre-Garau, NFTevening

Focus regulations on the actors, not the technology

Regulators should understand the unique nature of NFTs as distinct, one-of-a-kind digital assets. This understanding will help them to approach regulation in a way that recognizes the distinct features of NFTs and avoid stifling innovation in the space. Ideally, regulation should be imposed on the actors of an ecosystem, not on blockchain technology itself. – Sheraz Ahmed, STORM Partners

Counter the known bad actions in the market

Regulators know that the NFT market is widely used to launder funds — just like the old-fashioned art market. They should set appropriate rules to counter this, focusing on such things as more transparency, Know Your Customer, Anti-Money Laundering requirements and so on. – Motti Peer, ReBlonde LTD

Take a nuanced approach

Regulators should take a nuanced approach and have an understanding of the unique features of NFTs and their intended use to regulate the market appropriately. For instance, an NFT representing virtual real estate in the metaverse can entail distinct legal implications versus an NFT representing digital artwork, since it pertains to ownership of virtual space and governance of virtual entities. – Vinita Rathi, Systango

Study the many applications and facets of NFTs

Regulators must fully understand the many applications and facets of NFTs in order to best regulate the market. NFTs have many use cases beyond speculative investment vehicles or digital art; therefore, comprehensive knowledge of their capabilities and the functions they serve will be essential in making informed regulatory decisions. – Anthony Georgiades, Pastel Network


This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.

Learn more about Cointelegraph Innovation Circle and see if you qualify to join.

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