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Highlights
- The lawmakers of Britain's DCMS committee have opened up an inquiry to understand the potential benefits and risks of NFTs.
- Lawmakers feel that with the markets swinging so wildly, there are fears that NFTs may be in a bubble.
The non-fungible tokens (NFT) created quite a boom in 2021. Since then, the NFTs have quietly but steadily moved up the ladder.
Many crypto market enthusiasts were predicting that NFTs would further establish themselves as a force reckoner in 2022, however, a prolonged crypto winter saw sales dip.
In fact, according to the research firm Chainalysis, the NFT coffers totalled just over US$1 billion in June, registering its worst performance since the same month last year. The sales in the same month in 2021 were US$648 million.
The decline also reflects the common mood of the crypto industry as it has fallen from a high of US$3 trillion last November to just US$1.3 trillion as on November 7.
Even though the figures suggest a slowdown, according to DappRadar, there is still significant interest in NFTs. In fact, according to the report, the month of October saw an 18% increase in the number of unique traders.
It may be due to this wild swing of numbers that regulators worldwide consider keeping a check on its market. UK keen is one of the regions contemplating NFT regulation, and they have opened an inquiry into the same.
What are UK lawmakers looking at?
Britain's Digital, Culture, Media and Sport Committee (DCMS) have opened up an investigation to understand the pros and cons associated with NFTs. In a November 4 announcement, the DCMS Committee said that one has to consider whether it is overvalued and whether its wild speculations would put NFT investors at risk.
The UK members of the Parliament are of the view such NFT speculations may put innocent investors at risk in the hope of making quick money. The official document cited the example of Jack Dorsey's first tweet: that it was sold as an NFT for US$2.9 million. However, when it was re-listed at auction, it only went as high as US$280. Similarly, the news of NFT sales dropping by more than 90% was also cited in the document. Julian Knight, MP, chair of the DCMS Committee, said in a statement that there are fears that the bubble may burst with so much volatility in the market.
UK is getting their regulatory acts together
Britain has been making strides in the regulatory aspect of digital assets. It recently made a few changes to define crypto as a regulated activity. Secondly, it restricted authorized firms' ability to run ads or other similar promotions.
Prime Minister Rishi Sunak has been a proponent of cryptos in his previous position as a Chancellor. Earlier this year, he proposed the creation of a Royal Mint NFT and the UK establishing a central bank digital currency. All in all, the UK regulators are getting their act together to ensure they have the laws and mechanisms in place to safeguard the investors and punish the illicit players.
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