An official informed guests at Korea Blockchain Week on Tuesday that non-fungible tokens (NFTs) that are a part of a collection will need to adhere to new European Union cryptocurrency laws meant to alert investors to dangers.
The comments contradict earlier assertions that the novel ownership tokens will not be included by the bloc’s recently adopted Markets in Crypto Assets (MiCA) law. At the end of June, the EU reached a political agreement on MiCA, and the treatment of NFTs—which provide a tradable, digital means of proving ownership of assets such as artwork—was a major issue of contention in the negotiations right up until the very end.
Although the agreement resolved the key political aspects of the law, no draft has yet been made public. The final version of the law, in theory, exempts NFTs unless they represent another type of crypto asset, according to official statements. According to Peter Kerstens of the European Commission, a carve-out could not actually offer much comfort.
Kerstens, an adviser for technical innovation at the commission’s financial-services department, claimed that EU legislators “have a very restrictive view of what is an NFT,” suggesting that few assets will benefit from the exemption.
Even though the issuer may refer to a token as an NFT and even though each token in a series may be unique, according to Kerstens, such a token is not deemed to be an NFT and the requirements will still be applicable.
The issuers of NFT collections would then be required to publish a white paper outlining the specifics of the NFT protocol and would be prohibited from making improbable claims about future value that would trick consumers into purchasing, he added.
The EU national governments believed that adding NFTs to MiCA would be an unjustified expansion of a law that was initially intended to safeguard investors in initial coin offerings and stablecoins. However, members of the European Parliament, who also had to approve the legislative agreement, were more hawkish, claiming the NFT market is susceptible to price manipulation similar to that found in the securities industry, such as wash trading.
The initial draft of MiCA was first suggested in 2020 by the European Commission, which is essentially the EU’s executive branch. It has since mediated negotiations in the EU Council and Parliament as they changed the law.
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