What the UK Royal Mint's "Official" NFT Means for Global NFT Policy Adoption by@hughharsono

What the UK Royal Mint's "Official" NFT Means for Global NFT Policy Adoption

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Hugh Harsono

Hugh writes about cyberspace, digital currencies, economics, foreign affairs, and technology.

In early April 2022, John Glen, the economic secretary for the UK Treasury, confirmed several plans building upon previous announcements of Britain's move to reveal cryptocurrency and digital assets-based regulations in March 2022. Some of the topics being examined in these plans include stablecoin considerations, the legal status of decentralized autonomous organizations (DAOs), tax implications of defi loans and staking, and much more. The announcement of these plans bring about significant relief to cryptocurrency ecosystem enthusiasts, particularly given the British government's seemingly internally contrasting stances on the industry, particularly considering previous regulator statements such as the UK version of the SEC stating that "people should be prepared to lose all their money" in regards to crypto ATMs as recently as in March 2022.

Despite these seemingly positively-trending factors, does the specific request of Finance Minister Rishi Sunak asking the Royal Mint to create and issue an official NFT “by the summer" one that will change the way governments examine NFTs?  

Policy insights within the United Kingdom

While the Treasury's move to create an NFT is certainly a positive step forward in terms of governmental support of NFTs, ecosystem participants must see this experiment as purely exploratory in-nature, in contrast to holding this event as an oracle into the future of NFT regulation. NFTs still have a significant amount of policy considerations for governments like the UK to address, with many of these issues being related to the perception of NFTs being primarily art-based, to include concerns like phishing and pump-and-dump scams remaining in the minds of both consumers and regulators alike.

However, the Treasury's move to specifically mint an "official" NFT does highlight a positive factor for NFTs themselves, demonstrating the implied UK policy recognition of the value that NFTs, and subsequently, blockchain technology, can bring to different applications. The rollout of these regulations to offer clarity in the space also provides different government regulators a chance to align in regards to NFTs, offering further legitimacy to this part of the crypto ecosystem.  It will be interesting to see how the UK government advocates for further consumer-facing education on NFT-related projects, with NFTs potentially offering value to industries like real estate for land ownership as well as to healthcare and documentation through things like digital vaccine passports.  

EU and global policy perspectives surrounding NFTs

While Britain may implicitly recognize NFTs on the policy front, other regulators in the EU and beyond have contrastingly mixed perspectives in respect to NFT-specific legislation. Legislation such as the ever-changing Markets in Cryptoassets Regulation (MiCA Proposal), which NFTs could fall under, have so far resulted in the EU Parliament rejecting a proposal to limit the energy-intensive proof-of-work protocol, yet voting in favor of outlawing anonymous crypto transactions in late March 2022.

Additionally, in early March 2022, sources confirmed that the American SEC was investigating specific creators of certain NFTs and their associated exchanges to determine whether or not NFTs are being used as illegal token offerings. This follows on the heels of earlier statements by the US Department of Treasury, where it specifically called out NFTs as a potential means of money laundering and illicit financing in February 2022. These contrasting viewpoints demonstrate the significant amount of confusion in the space given the different stances taken by various government agencies, even within a specific country itself, on topics like NFTs. 

Future regulatory concerns over NFTs

While the push to adopt NFTs may continue to stay in the mainstream, the environmental impact of NFTs will continue to be a significant policy issue for governments to address within their respective regulatory frameworks, particularly if the NFT market continues to build primarily on the Ethereum network. One example of NFT carbon emissions can be seen in the example of French digital artist Joanie Lemercier, who cancelled his 2021 sale of six works after calculating that the ten-second sale would generate enough electricity to power his entire studio for two years. Additionally, organizations like the United Nations' Intergovernmental Panel on Climate Change (IPCC) continue to warn about the future of climate risks, calling out cryptocurrencies, and by default, the entire crypto ecosystem to include NFTs, as a potential growing global source of carbon emissions if electricity production is not decarbonized, according to an IPCC report released in April 2022.

Other regulatory concerns will continue to exist in the space as the British government steadily releases more information. Some policy concerns that NFT enthusiasts must keep an eye out for include consumer protections, anti-money laundering/Know Your Customer (AML/KYC) regulations, and disclosure agreements, among many others. 

Conclusion

Therefore, while a UK mint-backed NFT may not significantly move the needle in regards to policy adoption tailored towards wider acceptance of NFTs, this move will result in a corresponding flurry of interest by other regulating bodies in the EU and around the world. This decision by the Royal Mint will undoubtedly force other countries to declare their positions on NFT acceptance within their wider ecosystems, forcing a decision point to either begin iterations on regulations aimed at NFTs, or banning them from markets entirely. While overregulation will certainly stifle innovation, Britain's move to proactively deal with NFTs and their corresponding amount of secondary and tertiary issues does demonstrate a practical foot forward in ensuring that governmental policy can keep pace with the ever-changing crypto ecosystem. 

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