There’s no doubt that the minting and sale of non-fungible tokens (NFTs) represents huge business in the crypto market, with this reflected by the sector’s sustained growth.

To this end, the bank recently raised its NFT market-cap forecast to more than $35 billion for 2022, while this sum is expected to peak at more than $80 billion by 2025.

But what exactly is NFT, and what are the legal challenges associated with this market? Let’s get into it!

What is NFT?

NFT is a digital asset that can be ‘minted’ to represent a real-world object, such as a piece of Banksy artwork. 

In fact, an original Banksy print (Morons) was burnt and destroyed in a live streamed video in 2020, before being sold via NFT for $380,000 (£274,000). This was nearly four-times the value of the original piece, highlighting the core appeal of and demand for NFTs and similar assets.

But what underpins such price points? Well aside from novelty value and the huge spike in online demand, NFTs are completely unique assets that cannot be interchanged at all with one another.

This puts them at odds with cryptocurrency tokens, which can be exchanged with one another according to fluctuating and real-time rates of exchange.

Due to the unique, one-of-a-kind nature of NFTs, this type of asset has unique identifying code and boasts genuine digital scarcity.

This also adds a hefty premium to the asset’s value, often causing the underlying instrument to be more valuable as a digital token than it was in its original form.

From an investment perspective, virtually anything that holds original value can be minted to create NFT. The most popular verticals include art, music and poetry, with art collections and individual paintings have sold huge volumes digitally since 2014.

What are the Legal Challenges of NFTs?

Of course, buying and selling NFTs raises potential legal challenges, and this was borne out by another incident involving a Banksy piece in the summer of 2021.

In this case, a hacker was forced to return $336,000 to a UK collector after the latter was tricked into buying a fake Banksy NFT that had been widely advertised.

The subsequent auction ended earlier after the collector in question offered 90% more than his rival bidders, and this instance highlights the potential challenges facing NFT investors in 2022.

Such issues have been particularly prevalent in the art world according to Withers Worldwide, who reported that some creators of NFTs have dishonestly and deliberately posed as famous artists (such as Banksy) to sell fake or completely misappropriated tokens.

What’s more, many of these cases are overlooked or not reported, mainly because buyers are either disappointed or too embarrassed to seek redress or an immediate refund.

Another significant challenge is the fact that some NFT creators mint artworks without the authority of the copyright owner. This is relatively easy to do, especially in instances where the original work is already easily and readily accessible online.

As we can see, it’s possible to overcome such challenges, so long as the issues are raised with individual marketplaces (which have their own T&Cs) and dealt with directly.

Read also: Is Freezing Assets Legal?

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