NFT's are Basically Doomed Due to New Regulations
Psyckosama
Posts: 491
The New Infistricutre bill is going to be classifying NTFs as Securities under the Secutires Act of 1933.
"any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology" and digital assets are now considered securties.
Here's an overview.
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Ha, that is good news, I also can't see them getting unscathed through more and more stringent enviromental legislation now that it finally gets the focus it deserves.At least here in Europe.
I also understood that NFTs are subject to short-term capital gains tax in the US,...is that true?
Does the Securities Act of 1933 govern all the countries in the world, or only the United States?
Only the US, but other countries will likely follow suit as they do over trademark, patent, and copyright laws. The idea that the crypto playground could remain free of government regulation was always a fantasy.
Fascinating. I would expect legal challenges. It seems unlikely the legal challengers will be able to remain anonymous. Thanks for sharing that.
The reason you're not seeing legal challenges is because I don't think the original post is true.
This was the only thing I could find regarding NFT's and Security Laws
https://mcmillan.ca/insights/nfts-and-implications-under-canadian-securities-law/ ;
Indeed. With so many other attention-grabbing events in progress, it could be a long time before anything actually happens with respect to NFTs. Someone has to actually do something with regard to enforcement before anything happens.
https://en.wikipedia.org/wiki/Tulip_mania
Actually, I've just discovered another reason that that proposed bill will probably fail to pass, or will be repealed if it does pass... it seems some videogames will be using NFTs to unlock in-game contentt. (Video is about 5 minutes.)
In short, the video game industry is big and powerful enough that they, by themselves, can probably nuke any chance of that bill passing. So, yeah, this bill is clearly DOA.
Are you talking about the bill that was signed into law in November 15th?
Every gaming company that joins the NFT thing will never see a penny from me in the future. Even if they also create games without NFT, I will not support those companies by buying games from them anymore.
It is just that easy.
This will almost definitely not be a thing. Every video game company exec is hyperventilating about NFTs because they think it might be a Big Thing they want to get in on; most actual game devs know that there is no way this actually works, at least in the form it's being pitched. You might see some truly obnoxious microtransactions being sold as "digital collectables," but any of the stuff about this changing the industry is being pitched at the same level of knowledge as "Riot should hire me, I know exactly how to fix League of Legends." They can try, but many studios are worried about losing key staff and senior employees right now, and plenty of devs would just walk if there were any risk of games working this way.
The gaming industry also doesn't really have powerful lobbyists. It brings in a lot of money, but if studios and publishers run afoul of regulation they will get smacked quickly and they have to be pretty careful.
The issue is, how will the SEC enforce provisions about treating NFTs as securities - How does that look, how does it work. Turns out, there are a lot of articles.
Forbes has an article that suggests traditional NFTs may still not be regulated as securities.
This law firm article discusses whether and how NFTs could be considered securities.
NFTs are important enough that even The Motley Fool is talking about them.
And it seems the lack of NFT regulation spawned a securities class action lawsuit.
Finally, an article or two about the requirements in the infrastructure bill that is now law.
Since the provisions don't kick in until 2023, there is still a lot of wiggle room and I suspect the lawsuits will begin in earnest as people must start filling out their Form 8300 returns with the IRS.
Banks don't like the intrusion on their turf, and folks who get ripped off will want regulation. (If you dig deeper in this story, you'll find that this Bitcoin guy had a history of running scams before he suddenly died.)
https://www.washingtonpost.com/nation/2019/12/16/gerald-cotten-quadrigacx-cryptocurrency-death-body-exhumed/
It is possible to lock out NFTs and Bitcoins from any market. At the very least, how you move money to buy or sell these items can be regulated and or forced on you. (Credit card companies make up their own rules too.) So yes, regulation will be coming, and with it, no doubt, taxes. NFTs in particular dabble in art, and that is currently a taxable commodity in Canada where I am.
On a personal level, I'm not against NFTs, but its one thing to have something to goof around with while its quite another when huge sums of money are involved. That's gonna get regulated.
This is not true. "The video game industry" isn't behind NFTs or crypto. No big name game developers or publishers have announced crypto integration. The folks pushing NFTs are all indie companies, and most of the games being promoted have very little game content. There are a couple of actual games, but they're pretty barebones as far as games go. There's not a lot of there there.
One big reason that NFTs have taken off is that there is a lot of crypto money sloshing around the market, with not a lot of fun things to spend it on due to Covid restrictions. That won't last forever. What's more, the folks who made money with crypto have a vested interest in promoting anything to do with the blockchain. And then, of course, there's the money laundering.
Well, the point I was making is, if one or more of the bigger companies decide to imbed NFTs into their games, they'll have a definite interest in pushing regulations back the other way again... and if a gamer suddenly finds that a GAME he bought that IS an NFT suddenly has his access to it removed because of an overly aggressive set of laws... he'll not be a happy camper either. This is always a tug of war between factions.
If I buy a license to play a game, I expect that I'll be able to play that game without external dependencies. I may except a one time registration, but not external connections to be able to play... Same goes for content... You could say in a way, what some may call aggresive law, I would see as an incentive for publishers to not restrict access... just my 2 cents..
Seeing as NFTs and anything else defined as "Digital Assets" by this new law are "stored value" like a home or car that just haven't sold yet; can I leverage them for bank loans.
For example.
Can I make an NFT and value it at $1 million USD then use it as collateral to secure a bank loan?
If not, then how are they "Assets" if I can't leverage them like a house or car?
If so, Who gets to define the value of these "assets"?
How many people here are old enough to have lived through the "Savings and Loan" collapse of the 1980's?
Or how about the bank bail outs of 2008?
I see this ending badly for all the same reasons.
Yes you can, though will the bank believe it is worth the price you set. Most actual value comes from the market, not the creator.
I only invest in NFTs that have utility and are on Proof Of Stake blockchains. which means green low power energy. Nearly zero impact on the enviroment. Poo Poo ETH!
WAX ON!
Ubisoft big enough for you? Selling "unique" NFT armor in Ghost Recon, which is the same armor piece as anyone can buy but with a number on it that is unique to you. Just a tiny number barely visible but FOMO... must get the lower number! The earlier you get in the more "valuable" it is, right?
/vomit
It is really simple -- they will be forced to patch the game to use something else instead of NFT so that people can retain access to their purchases.
If they fail to comply they will be sued into oblivion.
You need to remember that not even the largest game companies have as much resources as a government -- government always wins.
Yeah, this is basically why NFTs are a nonstarter as The Future of Gaming in any way that benefits players or gives them power. Games publishers will go to the ends of the earth to avoid legal liability if there's any chance the laws have teeth (not so much for things like treating their employees fairly, but that's another subject). If something increases their legal liability and the benefit isn't astronomical, they will simply...not do that thing, rather than doing it and then trying to wrap regulations back around to benefit them. When Belgium outlawed lootboxes the gaming industry largely just threw up its hands, went, "Welp, we don't sell those there anymore!" and now just assumes that they'll be illegal everywhere else within 10 years and that we need to get off the train now.
All the pitches for NFTs in gaming seem to start with from a position of natural hostility toward the games industry. "How come they own this thing? With NFTs, you own this thing and they can't decide what you do with it!" I completely understand this impulse because I am tired of having to rent digital things instead of owning them, but there is nothing about an NFT that compels gaming companies to give you extra ownership rights. If I buy Junior Mints at the convenience store for $1.50, those are my property. The movie theater says I can't bring them in because allowing me to do that conflicts with their business model, not because I lack proof of ownership.
Additionally, gaming companies follow international laws all the time. It's a legal nightmare to try to operate globally as it is, so they'll almost always follow the path of least resistance.
This is currencies, but it's a start: Russia proposes ban on use and mining of cryptocurrencies | Reuters
There was also this in finnish paper today (translated from finnish to english with Yandex), based on an article on FT.
Had to reduce the size to get it all, but it's still legible.
Note the comment about mining virtual currencies, consuming 0.69% of the worlds energy, which is greater than, for example Finland or Norway...
0.69% of the world's energy is a pretty big chunk... plus all of that hot air and greenhouse gases escaping from the mouths of all those crypto-bros going on and on about how great their latest Doggiecoin or other stupid crypto acquisition is doing.
Interestingly Iceland is a popular place for crypto mining because they use so much cheap renewables. (Geothermal) However, they don't want too much crypto mining, and the reason is very straightforward. If the market collapses, then all that extra power generation would no longer be needed. They would still have to continue paying the capital costs for unused power plants.
That take home lesson for any region is that you really don't want to a lot of crypto since they will leave you paying bills when the market pulls back.
Not doomed enough, in my book.
There's all of this talk about "cracking down" on cryptomining, NFTs...and the rest of that guff. But no one seems to be doing anything.