Despite comments to the contrary, it looks like the EU’s big crypto regulation framework will cover NFTs after all.
Just because the EU’s various arms, including the European Parliament (EP) and European Central Bank (ECB), said that the deal it struck to pass the Markets in Crypto-Assets (MiCA) bill excluded non-fungible tokens, doesn’t mean it will in practice, a European commissioner suggested at the Korea Blockchain Week conference on Aug. 9, CoinDesk reported this week.
In reality, any NFT that is part of a collection — which is to say, virtually all of them — will likely have to abide by the EU rules designed to provide token buyers information about the tokens and their risks, Peter Kerstens said.
EU legislators “take a very narrow view of what is an NFT,” Kerstens said, CoinDesk reported. “If a token is issued as a collection or as a series — even though the issuer may call it an NFT and even though each individual token in that series may be unique — it’s not considered to be an NFT, so the requirements will apply.”
The European Council’s release describing the MiCA agreement reached on June 30 said that “digital assets representing real objects like art, music and videos, will be excluded from the scope except if they fall under existing crypto-asset categories.”
It added that a “comprehensive assessment” and, if necessary, a specific legislative proposal addressing the NFT market and its risks would be due in 18 months.
What it comes down to, Kerstens said, is a difference of opinion between the national governments, who saw adding NFTs as pushing to far from the core of a bill designed to protect investors from risky stablecoins and cryptocurrency offerings. However, the European Parliament was more concerned about issues like price manipulation, CoinDesk said.
Now, you may have heard that NFTs are a way to turn digital versions of real things like Nike sneakers and McDonald’s cheeseburgers into money. However, one semi-popular NFT collection, Pudgy Penguins, saw its price spike after its creator announced that a line plush toys based on the flightless NFT fowl.
Sales on OpenSea, by far the largest NFT marketplace, are up 350% since the Aug. 11 announcement.
On the other hand, it may also be a warning about buying NFTs when news hits. They are, like most cryptocurrencies, highly volatile and tend to pop back down again.
Which is what happened, according to Nonfungible.com, which reported 14 sales totaling $55,000 on Aug. 9 jump to 107 sales worth $533,000 on Aug. 11, a level it retained for one day before slipping rapidly. By Aug 16, numbers were looking like they did before the plushies.
Selling Stolen NFTs Gets Harder
Another problem OpenSea has had is the sale of stolen NFTs, which has become a bigger problem as prices rise, causing hackers and scammers to move in.
Most notably when actor, comedian and TV producer Seth Green had to buy back his own stolen Bored Ape collectible — intended to be the main character of a new TV show, “White Horse” — for $300,000.
Well, OpenSea has had more than a little bad press over this, not the least of which comes from people who unknowingly bought a stolen NFT. After taking a mea culpa for not communicating the policy clearly and in some cases making things too difficult, the marketplace on Aug. 10 sent out a Twitter thread that explained its policy, starting with the blindingly obvious: that it is against the law to knowingly support or allow the sale of stolen property.
That moved into, “In some cases, the purchaser who unknowingly bought a stolen item (at no fault of their own) was inadvertently penalized.”
Which is somewhat inevitable in that cryptocurrency transactions cannot be reversed and the sellers are hidden behind crypto’s pseudonymity — which, when you’re a criminal, is extra hard to break as smart NFT thieves do not have funds sent to an address requiring know-your-customer (KYC) information.
Changes include requiring a police report within seven days to back up all claims that a stolen NFT is up for sale, and making it easier to re-enable the sale of an NFT that has been returned to its rightful owner.
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