Non-fungible tokens (NFTs) can be more than art… but are they regulated?

What are “non-fungible” tokens… Really?

Non-fungible tokens (NFT) aren’t a new concept, but the past 6-8 months have seen an explosion of interest and NFT typing volume has skyrocketed. From the initial The craze for crypto kittens in 2017 to the most recent Beeple’s “Everyday: The First 5000 Days” US $ 69 Million Sale, there is a clear link between NFTs and works of art. Being uniquely identifiable, as the name suggests, it’s no wonder that NFTs have gained attention in the art world, which is based on rarity and originality.

Besides the subjective, because art can be reproduced, its value (like digital objects) is a question of authentication and provenance. If you can authenticate a print as a carbon copy of an original work of art, it has some value. If you can authenticate the original of this artwork, it will be even more valuable. But if you can authenticate an original work of art as signed by the artist… that’s what NFTs can do. They can attach rarity (or originality) to an asset, and with rarity comes value.

How do NFTs work?

Simply put, NFTs are digital assets that represent a wide range of unique tangible and intangible elements. Although they are created on a similar basis to other cryptocurrencies, unlike fungible tokens such as bitcoin (i.e. each token is ubiquitous, divisible, and interchangeable with others of the same type. ), NFTs are unique and indivisible.

If it exists, it can be tokenized

NFTs do not stop at s. Digital currencies have had a tumultuous education. From humble and fungible beginnings to more established institutional implementations, it’s a new era for tokens; digital authentication of any single asset (even in time). This begs the question: what is possible when I can irrefutably prove that I own a thing, or part of a thing?

Fractional real or virtual real estate ownership (Metaverse and Decentral); benefits of music (Kings of Leon) and conferences (VeeFriends); digital identities; collectible cards (Gods unleashed); the time parcels of self-employed workers priced according to free market mechanisms; digital financial documents to manage the logistics of the financial supply chain. The current list of how NFTs can be used is just beginning.

Are NFTs regulated in Australia?

Have you ever dreamed of owning the Mona Lisa smile? Not just an interest in collective ownership of the Mona Lisa, but the part that is the real smile? NFTs make this kind of fractionation and ownership possible. Direct legal ownership; where you hold full legal title. Since the value of art-based NFTs is tied to this ownership and possession, comments have generally been focused on creators, buyers and sellers paying attention to the intellectual property rights attached to the underlying content. While this is true and relevant in the context of any activity involving works of art (including where “ real ” ownership may be a conflict between artist and consumer), there are a host of other legal considerations when it comes to NFT in Australia.

Merely holding an NFT may not trigger Australian regulatory obligations. However, the issuance or sale of NFT can. Since an NFT can be used to authenticate anything (even a financial product), implementation is critical as you can easily trigger regulatory considerations associated with collective ownership and the implications for those who inadvertently enter. in the financial services regulatory framework of an unprepared jurisdiction can be significant.

Like any other token, whether an NFT triggers an Australian regulatory outcome will depend on what the NFT represents, certifies or authenticates, as well as any rights that may be attached to it.

Where does this lead?

The market is teeming with speculation about the future of non-fungible tokens, but the strategies we see (and can imagine) present opportunities to create better access to more assets for more people and to challenge middlemen more.

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