UK Parliament Will Inquire the Future of NFTs

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UK Parliament Will Inquire the Future of NFTs

The Digital, Culture, Media and Sport Committee (DCMS) of the United Kingdom (UK) Parliament will hold an inquiry on the operation, risks, and benefits of NFTs and the blockchain, both for investors and the UK economy.

NFT Regulation in the UK is Almost Non-Existent

The purpose of the inquiry that the DCMS Committee will hold is to assess if Non-Fungible Token (NFT) investors, particularly retail investors who are more affected by speculation, are put at risk by the current NFT market structure.

In its public statement, the DCMS says that some people claim that NFTs becoming prominent is the result of a more democratic method of creating and selling assets, whose ownership and uniqueness are demonstrated and secured in the blockchain. The popularity of NFTs is proven by the global NFT sales in 2021, which reached a whopping amount of $17 billion.

The growth of the NFT market raised concerns that NFT speculation could be a financial bubble and that retail investors could be used to dump overvalued assets. To add to this fear, the market decrease led to a drop in the value of many assets, since weekly NFT sales decreased by more than 90% between August 2021 and March 2022. As an example, an NFT of Jack Dorsey’s first tweet, which was initially sold for $2.9 million, was auctioned off with a mere bid of $280.

Scope of the Inquiry

The DCMS considers that NFT regulation in the UK is currently almost non-existent, and the goal of this inquiry is to fill the need of examining if the country needs further regulation. The call for evidence is already live, where anyone can submit answers to the following questions until January 6, 2023:

  1. Is the UK’s light-touch NFT regulation sufficient? 
  2. What are the potential harms to vulnerable people of NFT speculation? 
  3. Do blockchains offer security to British investors? 
  4. What are the potential benefits to individuals and society of NFT speculation?

Julian Knight, the Chairman of the DCMS, commented how the NFT market “is veering wildly, and there are fears that the bubble may burst, we need to understand the risks, benefits, and regulatory requirements of this groundbreaking technology”.

At the core of DMCS’ fears are vulnerable investors, as Julian Knight added, because they “are at risk of being swindled into buying NFTs whose value may tank on the moment of purchase”. What the future may hold for the UK in terms of NFT legislation will depend on the answers of British citizens to this inquiry:

“This inquiry will also help Parliament understand the opportunities presented by an exciting new technology which could democratize how assets are bought and sold”.

UK Stance on NFTs

Recently appointed UK Prime Minister, Rishi Sunak, is a vocal advocate of NFT and cryptocurrency adoption. Earlier this year, in April, Sunak, who was Minister of the Treasury at the time, asked the Royal Mint, an institution over 1,000 years old responsible for making the British pound coins, to create an NFT. 

The first NFT vending machine in Europe will also be introduced in London at the NFT.London event, where anyone passing by can use it to buy NFTs.

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