JOIN FORKAST+ FOR EXCLUSIVE STORIES, REPORTS AND EVENTS

Regulations on the Radar

Part of our special research report

State of the NFT Market | Q1 2022

In partnership with CryptoSlam

While blockchains and NFTs can theoretically eliminate plagiarism and fraud, there is as yet no clear distinction between NFTs that have been inspired by the designs of others and those that are simply copycats.

Nike, for instance, has filed a lawsuit against StockX for selling NFT images of its shoes, while Hermès has sued an artist over the latter’s Birkin bag NFTs.

As companies start entering the digital realm, the rules, regulations and trademarks from the physical world will move into the virtual realm. 

NFTs may also get dragged into the regulatory maze aimed at preventing money laundering and counter-terrorist financing, although NFTs are generally not considered to be virtual assets by the global Financial Action Task Force (FATF). The task force, however, said countries will need to consider applying FATF standards to NFTs on a case-by-case basis.

For now, there is little consensus among governments on how to best regulate the fast-growing NFT sector. 

In China, the state-backed blockchain network is looking to create a standard for legal NFTs even as other government agencies and state-owned media outlets warned of the dangers of trading NFTs. In the EU, regulators want to ensure NFT issuers adhere to rules similar to those that apply to businesses in the physical world.

In the U.S., there is no direct state regulatory guidance on NFTs, though a few states have passed laws that could bring NFTs under their purview. New York, for example, has maintained tight control over cryptocurrency usage.