Anyone who is involved in the NFT sector will tell you that the industry has grown exponentially in the last few years, going from a niche concept that only hardcore blockchainheads knew about to be on the global stage. This has included the billions of dollars spent in the industry and its increased public profile.
Well, it seems that the British Parliament has taken notice of this and wants to investigate more. As was announced on November 4, 2022, the UK Digital, Culture, Media and Sports committee (DCMS) will be opening an inquiry into the inner workings, risks, and benefits of NFTs and blockchain technology.
NFTs Under Scrutiny
As per the statement from the committee, this inquiry was sparked as a result of the $17 billion sales boom that the sector has seen. The statement also acknowledges that NFTs have democratized the process of creating and selling assets. But despite this, there are still concerns among regulators about investors possibly being exploited.
“This growth has also sparked fears that NFT speculation may be a bubble, and that overvalued assets may be dumped on “greater fool” investors. Fears have been compounded by drops in NFT prices and sales,” the statement said.
It especially noted the incident of Twitter founder Jack Dorsey’s first-ever tweet being minted as an NFT and sold for millions but failing to secure even $1,000 in the resale market as well as the drop in trading volume on some NFT marketplaces and collections.
But the ultimate goal of this inquiry is to determine regulations for NFTs, considering how under-regulated they are. It has been suggested that if better regulation is put in place, more benefits can be secured for the UK, as well as better protection for investors across the board.
“Now that the market is veering wildly, and there are fears that the bubble may burst, we need to understand the risks, benefits, and regulatory requirements of this groundbreaking technology[..] Our inquiry will investigate whether greater regulation is needed to protect these consumers and wider markets from volatile investments[..] This inquiry will also help Parliament understand the opportunities presented by an exciting new technology which could democratise how assets are bought and sold,” said the Chair of the DCMS Committee, Julian Knight MP.
More updates are expected as the inquiry from the committee progresses.
What this Means for NFTs
The announcement of this inquiry means a few things; first, the industry has become big enough to be on the radar which is a testament to how much it has grown. It also highlights the fact that the less savoury parts of the industry have also gotten attention such as transaction volume decline and the much-hyped projects that do not live up to expectations.
What will likely come out of this is better regulation that will especially protect investors. The industry has been largely unregulated for a long time but as it enters a new period of maturity, better frameworks will be put in place.