Nevertheless, this could potentially mean that NFT marketplaces like and OpenSea – which allow for NFTs to be bought and sold for crypto and fiat – will fall into the category of VASPs or entities that need to be regulated. However, the organization was also quite vague in how it plans to actually differentiate between non-VA NFTs and VA NFTs. In its draft updated guidance released at the end of March, the FATF appeared to make a distinction between fungible and non-fungible tokens, implying that the latter may be considered Virtual Assets (VAs), depending on how they are traded on secondary markets and used as a store of value. Where do NFTs fit in from a regulatory perspective? Regulatory gap: Most global regulatory authorities have yet to develop clear guidelines and approaches for regulating NFTs.Decentralization and Anonymity: NFTs have the same characteristics that make traditional art an enticing target for ML (subjectivity in value, anonymity, portability, etc.) but in an exponentially more convenient package.While the exchange rate of Bitcoin to EUR follows the market principles of supply and demand, the prices of NFTs are highly speculative and can change quickly. Price speculation: What makes NFTs particularly attractive for money laundering purposes are the volatile prices.A lucrative and thriving industry: Reaching a value of $13.7 million in the first half of 2020, the NFT industry is now worth $2.5 billion.Given the speed and opacity of the crypto world, there are undeniable tendencies that NFTs present a growing risk vector for money laundering, for several reasons: Are NFTs the new digital art of money laundering? The majority of NFTs are bought online using cryptocurrencies leading to conversations on how best to regulate this new art sector. In other words, NFTs are the good you are buying, while crypto is the means to pay for it. In practice, NFTs are usually purchased with cryptocurrencies, like Ether (ETH) or Solana (SOL). Like with traditional fiat currencies like EUR, USD, and GBP, every monetary unit is equal and interchangeable. Unlike NFTs, cryptocurrencies are fungible, meaning that every unit is the same. Also similar to cryptocurrencies, NFTs use blockchain technology. Just like cryptocurrencies, NFTs are stored in digital wallets (however the wallet does specifically have to be NFT-compatible). How are NFTs different from cryptocurrencies? Bitcoins as being the most known example in cryptocurrency are fungible, meaning one Bitcoin is equal to one Bitcoin, and it’s equal to all other Bitcoins. What is the difference between fungible and non-fungible tokens?Ĭontrary to the unique character of non-fungible NFT tokens, fungible NFT tokens are interchangeable and divisible. NFTs have gained popularity, especially in 2021, with celebrities, influencers, and artists alike singing their praises as a major revolution in the way digital art is consumed. Due to their unique non-interchangeable traits, NFTs are often compared to traditional collectibles, like playing cards or artworks – just with the difference of being fully digital (digital artwork). The tokens can represent any form or data, from a picture or video to a digital asset in a video game. NFTs are being considered as non-interchangeable tokens stored on a blockchain, using blockchain technology (like crypto) or other forms of distributed ledger.
Nft non fungible token software#
They are bought and sold online, and they are generally encoded with the same underlying software as many cryptocurrencies. What are Non-Fungible Tokens (NFTs)?Īn NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. Learn what NFTs (Non-Fungible Tokens) are standing for, what their potential is for businesses around the globe, and how regulations could apply to them to ensure solid KYC processes and prevent Identity Fraud and Money Laundering.
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