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Crypto companies fear that a new way to sell digital assets like artwork, music, memes – and even tweets – will soon be overburdened by the old bureaucracy in Brussels.
European lawmakers are debating whether they should incorporate the market for so-called NFTs – non-fungible tokens – into a proposed European law regulating crypto assets and the companies managing them, dubbed MiCA. Initially, legislation avoided such online holdings. Not anymore.
Lawmakers are determined to stop scam artists and money launderers abusing the unregulated industry, which has attracted the attention of tax authorities in Australia, Canada, the Netherlands, the United Kingdom and the United States now that it is a popular way to buy and sell things. Like a digital artwork. For example, a major NFT marketplace called OpenSea is facing multiple lawsuits in the US amid allegations of stolen and stolen digital art, while New York prosecutors recently charged a former employee with misdemeanor charges.
The challenge is that the cryptocurrency market has developed at breakneck speed since almost two years ago the European Commission proposed MiCA to give investors guarantees similar to those in the financial sector. Therefore, lawmakers are determined to act amid fears that NFTs will be left unchecked in Europe, leaving crypto companies to use the sector to circumvent MiCA entirely. Taking no action is not an option and lawmakers hope to reach agreement on the matter as soon as possible next week.
However, the crypto lobby fears that lawmakers in Brussels are going too far in trying to keep up with crypto technology. He says that stuffing NFTs into MiCA is a mistake because these assets are not financial in nature. They target artists, musicians, and video players.
The danger is that they fear the EU is burying technical types under inappropriate paperwork and customer checks for the market, and they warn that a tough approach could stifle the European NFT market, which is still in its infancy.
“NFT use cases are just getting started. Big art now. Art that goes from physical to digital is fundamentally no different than art that goes from cave walls to canvas,” said Seth Hertlein, vice president and head of global policy at Ledger, a company that offers a USB key “We don’t regulate art like stocks, nor should we regulate selling digital art like selling crypto assets.” A digital wallet that allows people to hold crypto and NFT assets off exchanges.
monkeys and birds
NFTs made headlines after celebrities spent hundreds of thousands of dollars on one-of-a-kind digital artwork, such as Yacht Club Boredom Monkey and Moon Bird. These holdings went viral in the past year, but have since fallen out of favor due to the general downturn in the cryptocurrency market. The NFT sector is now valued at around $12 billion.
NFTs have broader applications than calligraphy. Musicians can sell their songs as NFTs, for example, as an alternative source of income. Investors are also buying digital stakes in physical arts or real estate. On a smaller scale, cinemas can issue movie tickets as NFTs, while video fans can use the technology to purchase props for their virtual characters.
The deal will come under further scrutiny on June 30, when Commission officials, members of the European Parliament and Council representatives from EU capitals meet in an attempt to conclude legislative negotiations on MiCA. There is always the possibility that talks will need more time, given the ongoing divisions, including over NFTs.
The Commission has taken a tougher stance, fearing investors will be hurt by NFT sales that are much less expensive than the deals making headlines.
“If the NFT markets are left unregulated, they will remain exposed to risks of market manipulation such as fake trading and insider trading,” Commission officials explained to House and Parliament lawmakers in a confidential memo, obtained by Politico, ahead of next week’s meeting.
find a middle ground
The commission is intent on ensuring that legislation covers businesses that allow trading or guardianship of NFTs, while leaving artists and companies free to create and manage their own NFTs without the regulatory burden. Several MEPs also support this approach.
But the council is not convinced. According to it, MiCA should target large online auction houses such as OpenSea or video game platforms that are below certain thresholds, such as average monthly turnover, according to a separate document prepared by the council to try to reach a compromise..
This approach seems to have caught some within the crypto industry, although they still prefer a separate set of rules outside of MiCA.
“Treating NFTs as purely financial instruments is completely missing the innovation they can bring to Europe,” said Robert Kubis, General Secretary of Blockchain Europe. “The goal of the regulators should have been to develop a detailed system of non-food devices that examines their diversity and addresses the specific risks that may arise from each different use case.”