Blog / Will Regulations Increase for NFTs to Regulate the Metaverse? NFT is an immutable unit of data stored on the blockchain that can track the transfer, ownership and properties of a unique digital asset. A fungible Token is a single encrypted token on the blockchain network. NFT can be artworks, digital collectibles, and digital items in online games. There may even be a physical entity tied to such a token in some cases.
This connection allows for new forms of ownership and transferability. As it is known, bitcoin is a floating coin, but NFTs cannot be exchanged. NFT is a unique and proprietary asset which makes it unique from other crypto assets. To put it simply, tokens differ from regular coins because they are produced in different values and uniqueness that are not interchangeable.
Fungible Tokens are mostly used in collectibles and areas that require digital ownership. For example, Crypto can be found in artwork, digital collectibles, and digital items in online games. NFTs can be artwork, stamps, basketball cards, Lebron James dunks.
What is a Metaverse?
In his 1992 science fiction novel Snow Crash, author Neal Stephenson described a virtual world he called the Metaverse. This virtual world established an internet-connected, immersive structure that serves as an alternate shared reality for its users. As the Internet grew, the metadata warehouse reference gradually entered the lexicon of technology and our lives to describe any large-scale, persistent virtual environment in the online space.
The idea of the Metaverse made itself felt in the gaming world, especially with the rise of multiplayer online games. In addition, the concept of a metaverse recently entered the news cycle when Facebook CEO Mark Zuckerberg announced his ambitious intention to transform the social media giant into a massive metaverse experience for its users, changing the name of Facebook’s parent company to Meta.
What are The NFT Regulation Challenges?
The words NFT and Metaverse have become words that we hear more and more day by day. The Metaverse has become so popular that, as we mentioned earlier, Facebook CEO Mark Zuckerberg renamed Facebook’s parent company Meta; companies like McDonald’s and Burger King are starting to capitalize on the growing popularity of NFTs by experimenting. With digital “collectibles.” Online gaming is already a pioneer in this field and has recently surpassed movies, music, and sports in popularity.
While NFT is so popular and has started to take an important place in people’s lives, the regulations to be made in this field will increase and diversify. Regulators fear that NFT and Metaverse may be Money Laundering Tools, so it is expected that risks will be identified in advance and new regulations will come in line with these risks or existing regulations will be updated by NFC, Metaverse.
Countries’ financial regulators focus on the stability of financial institutions, the integrity of capital markets, and consumer protection. NFTs affect all of this, and besides their promise and advantages, they create risks that we must address. Some governments and regulators have banned NFT trading from their countries or restricted the use of blockchain technology due to the uncertain chances of NFT trading. However, there is a point that these technologies will not disappear and will continue to increase and develop day by day. If governments use their advantages instead of banning these technologies, they can make great progress.
As expected, governments and regulators are uncertain and nervous about regulating this technology. They need to see how the market evolves for the best and appropriate regulations to come. In some cases, governments and regulators try to address this issue more actively, but with very different results. For instance, The US federal regulators apply legal principles developed years ago to classify different types of digital tokens such as securities.. While China has completely banned crypto-related services, El-Salvador has accepted Bitcoin as legal tender. These regulations prove that law is still a developing and highly uncertain field.
When crypto assets were first developed, there were many regulatory vulnerabilities. But as the market has evolved, global and local regulators such as FATF have increased their work in this area and aimed to reduce crimes such as money laundering terrorism financing through crypto-assets. Similarly, new regulations may come for NFT, Metaverse.
Building AML Compliance for NFT Marketplaces
China Central Bank Predicts NFT Metaverse Could Be Money Laundering Tools
Gou Wenjun, head of anti-money laundering of the People’s Bank of China (PBoC), stated that the apex bank would regulate the fungible token (NFT) and metaverse sectors. The NFT and metaverse sectors are two emerging areas in the cryptocurrency and blockchain space, and China is poised to cease operations.
According to the latest reports, the PBOC considers that NFTs and the Metaverse can be used for money laundering. In addition, Wenjun said that NFTs and metadata have a certain degree of interoperability in addition to cryptocurrencies. Therefore, they can easily become tools for criminals.
The report also stated that the Chinese government has already squeezed the NFT sector. The government has reportedly told tech giants that it plans to release large collections on private blockchains to curb the speculative hype.
January 30, 2022, published on Sanction Scanner Article