October 29, 2022
Issue No. 26
Welcome to this week's AtherXplorer, covering the latest in gaming, blockchain, and everything in between.
This week’s top picks include:
- Blockchain & Defi: Google Introduces Cloud-Based Blockchain Node Service
- NFTs: Reddit Avoids Crypto Lingo, Confirms Assumptions to Take NFTs Mainstream
- Web3 & Metaverse: E&Y to Prepare Clients for the Metaverse; Norway Steps Into the Metaverse
- Gaming: ‘Pixels Online’ Amasses DAU and Followers with Airdrop; Gaming Blockchain Oasys Debuts Mainnet
- Legal Landscape: UK Lawmakers Vote to Recognize Crypto as Regulated Financial Instruments
Blockchain & DeFi Developments
Digital Asset Data Provider Amberdata Acquires Crypto Analytics Company Genesis Volatility
Amberdata, a provider of digital asset data to financial institutions, has acquired Genesis Volatility (GVol), a crypto options and derivatives analytics firm.
The purchase will allow Amberdata to expand its decentralized finance (DeFi) products, offering support for protocols such as Friktion, Ribbon, and Lyra, according to an announcement shared with CoinDesk. The company's institutional clients include Citigroup (C), Fidelity, and Nasdaq (NDAQ).
The financial terms of the deal have not been disclosed. GVol already provides exchanges such as Deribit and LedgerX with analytics data from centralized finance (CeFi) and DeFi options markets.
"Many of the big proprietary trading firms are very interested in options,"
Shawn Douglass, CEO of Amberdata.
"I think that it's going to be the next evolution of DeFi." "Nasdaq and Citi are big options players and they see this as a massive growth area for DeFi, as well as for the institutionalization of crypto,"
Google Introduces Cloud-Based Blockchain Node Service for Ethereum
Tech giant Google said Thursday it will be launching a cloud-based node engine for Ethereum projects.
The company said its Google Cloud Blockchain Node Engine will be a “fully managed node-hosting service that can minimize the need for node operations,” meaning that Google will be responsible for monitoring node activity and restarting them during outages.
A node is a type of computer that runs a blockchain’s software to validate and store the history of transactions on a blockchain’s network. At the time of launch, Google will be supporting only Ethereum nodes.
Google’s announcement signifies the growing attention that technology giants are giving to the blockchain, crypto, and Web3 projects. “Blockchain is changing the way the world stores and moves its information,” Google said in its announcement.
Polygon-Based DeFi Platform QuickSwap Closes Lending Service After Exploit
QuickSwap, a decentralized finance (DeFi) platform that's based on the Polygon blockchain, closed its lending services for users following a flash-loan exploit for over $220,000 worth of tokens on Monday.
Blockchain data shows the attackers manipulated token prices by borrowing funds using a flash loan – a form of unsecured lending – and then used the inflated values as collateral to drain all liquidity from the affected QuickSwap pool. Stolen tokens including MATIC, Lido’s LDO, and staked MATIC were exchanged for other tokens on privacy mixer Tornado Cash on Monday afternoon, data shows.
"QuickSwap Lend is closing,"
the company said in a tweet.
“$220k was exploited in a flash loans attack due to a vulnerability with the Curve Oracle, which @marketxyz was using."
Reddit Avoids Crypto Lingo, Confirms Assumptions on How to Take NFTs Mainstream
Reddit may have demonstrated the best way to introduce the masses to the world of blockchain: Avoid complicating things with talk about cryptocurrency and non-fungible tokens.
The social media and discussion platform recently released a collection of “Collectible Avatars” users can either claim or purchase. Reddit also appeared to purposely avoid using blockchain terms like “crypto” and “NFT” in the main portion of its sales presentation of the digital collectibles.
The net result is that since Reddit launched its NFT marketplace in July, users have created about 3 million crypto wallets, a company executive recently said. That’s several hundred thousand more than the 2.3 million active wallets held on OpenSea, the world’s largest NFT marketplace, which has been in operation for nearly five years. Subtracting the number of active OpenSea wallets —again, the most popular NFT marketplace— by the number of Reddit wallets suggests that Reddit’s strategy may have helped encourage as many as half a million or more people to buy an NFT for the first time.
Reddit’s seemingly simple approach to describing digital avatars and how they can be claimed and traded has demonstrated a different, if not simplified, way for an established technology company to introduce users to web3 products like cryptocurrency and NFTs. Reddit NFTs have generated more than $6.7 million in total sales volume, according to the crypto analytics platform Dune.
The platform allows users to buy their Reddit avatars with regular fiat currency rather than cryptocurrency.
Reddit “seems to have paved the way for mainstream adoption,” according to The Block research analyst Thomas Bialek, who added that the social media network may have largely steered clear from using “NFT” in most descriptions of the avatars as a way of avoiding controversy.
“'NFT' is a dirty word right now, for better or worse,” said Sasha Fleyshman, an NFT fund manager at Arca, a digital assets investment firm.
Falling cryptocurrency prices have caused a lot of heavily promoted NFT collections to lose significant value in recent months. Many people who bought NFTs when prices were high have subsequently seen the value of their digital assets sink dramatically.
“Reddit’s Collectible Avatars have proved to be an easy-to-understand and fun introduction to NFTs and cryptocurrency,” said Barney Chambers, cofounder of Umbria Network, a company helping people migrate fungible assets between cryptocurrency networks. Chambers agrees that Reddit’s strategy of staying away from “crypto jargon” appears to be paying dividends.
Mythical Games Brings NFT Car Ownership to Nitro Nation
Mythical Games, the studio behind Blankos Block Party and NFL Rivals, has released information about its upcoming project Nitro Nation World Tour. The studio has partnered with CM Games, creators of the popular Nitro Nation franchise, to release a new foray into the automotive world.
Nitro Nation World Tour enables players to have a sense of ownership by buying NFT cars and workshops. Powered by the Mythos blockchain, players can shop for NFT cars from the most sought-after names in racing. If a player owns a workshop, they can provide services to other players. One of the key functions of workshops is the ability to rent out or loan cars.
Once set up, players can jump into the campaign, PvP races, duels, and other events. Also of note: Nitro Nation World Racing features social clubs for players to create and join. These clubs are similar to guilds and create a groundwork for groups to work together towards similar goals. One nice feature of social clubs is being able to tune and upgrade more cars than you would with an individual account.
Workshops will go on sale in Q4 2022 with cars to follow in early 2023. Anyone who owns a workshop automatically gains access to the closed beta and an in-game founder’s pack. Those interested can check out the game’s website. Finally, a chance to own a McLaren!
Apple Kneecapped all NFT-Related Game Functionality – and it Wants 30% of Sales
Apple has updated its app review guidelines to address the increasing use of crypto and NFT tech on the App Store.
Under the new guidance, Apple will allow NFT sales and related services, but only through in-app purchases, meaning it gets that juicy 30% cut. Additionally, they will not approve any game that links added functionality or content to NFT ownership.
The updated guidance is therefore likely to cause a lot of headaches for developers working in the space.
“Apps may not use their own mechanisms to unlock content or functionality, such as license keys, augmented reality markers, QR codes, cryptocurrencies and cryptocurrency wallets, etc,”
the new guidance reads.
Another new clause states:
“Apps may use in-app purchases to sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring. Apps may allow users to view their own NFTs, provided that NFT ownership does not unlock features or functionality within the app. Apps may allow users to browse NFT collections owned by others, provided that the apps may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.”
Industry response to the news was swift and damning.
Epic Games boss Tim Sweeney tweeted:
He later added:
“It’s quite shocking that, in the presence of antitrust lawsuits and greatly increased legislative and regulatory scrutiny, Apple’s doubling down on brazen monopoly rent-seeking.”
Ric Moore, CEO of Oxalis Games, one of Supercell’s first investments in web3, said on LinkedIn:
“Apple has effectively banned NFTs from games. [The new guidelines imply that] any NFT that ‘unlocks’ gameplay is not allowed. Like if you had a Spiderman card (NFT) that lets you ‘unlock’ and play as Spiderman in some Marvel fighting game; that’s not allowed, but you are allowed to look at how pretty the card is in your library.”
CEO of game economy platform Metanomic Theo Priestley said:
“Apple has updated their NFT policy for the App Store, prohibiting NFTs as a means to bypass Apple’s in-app purchase mechanism. They support NFTs and web3 where they can tax it, and won’t support it where they can’t – so token gating via iOS is out the window, and making any money from NFTs or selling digital assets via Apple nets barely anything over time.”
Web3 & Metaverse
Ernst & Young will Prepare Clients for the Metaverse and Web3 with Virtual Experiences
The metaverse is clearly going corporate. Ernst & Young said it will provide EY wavespace experiences in the metaverse to help clients prepare for Web3 and the metaverse.
EY wavespace is a global network that gives clients the ability to bring teams together wherever they are based. Ernst & Young will expand the network’s capability to help clients co-innovate and rapidly help address business challenges.
Ernst & Young’s U.S. operation has also established a metaverse lab where technologists build customized metaverse environments for various use cases.
Together, EY wavespace and the EY metaverse lab are guiding clients through immersive digital experiences to help them anticipate new business models and shift to a decentralized economy arising out of Web3-based applications and platforms. EY typically does this during big tech transitions, and this move means that it sees the potential of Web3 and the metaverse to transform business.
With its capabilities in a blockchain — which it said is one of the foundational features of the internet’s future — and these metaverse capabilities, EY teams are advising clients on how to execute robust strategies that are inclusive of new business models, technology interoperability, new transaction platforms, enhanced customer and community experiences, and risk mitigation — including tax, legal and regulatory considerations.
“The EY organization operates at the intersection of business and technology,”
said Jay Nibbe, EY global vice chair for markets, in a statement.
“EY teams are committed to helping businesses understand what the metaverse means for them and how to strategically adapt new business models for the transition to a decentralized economy.”
Xbox’s Phil Spencer says the Metaverse is a ‘Poorly Built Video Game’
Phil Spencer, Microsoft’s CEO of gaming, is the latest tech exec to take a shot at Meta’s vision of the metaverse. When asked his definition of the metaverse, Spencer described it as “a poorly built video game” at the WSJ Tech Live conference, as seen at about the 1:12 mark of this video.
Meta rebranded from Facebook last year as a testament to its focus on the metaverse, which it believes will become a place where you not only socialize with friends but also do serious work with colleagues. It seems as if Spencer doesn’t necessarily agree with the work aspect of the metaverse, at least in one form. “Video game creators have an amazing ability to build compelling worlds that we want to go spend time in,” he said at the conference. “For me, building a metaverse that looks like a meeting room... I just find that’s not where I want to spend most of my time.”
Spencer wasn’t the only person to push back on the idea of the metaverse during WSJ Tech Live. Snap CEO Evan Spiegel defined the metaverse as “living inside a computer” and followed that up by saying, “The last thing I want to do when I get home from work at the end of a long day is live inside a computer.” Apple’s SVP of worldwide marketing Greg Joswiak said that the metaverse is “a word I’ll never use.” Disney CEO Bob Chapek said the company tends “not to use” the word metaverse “because, for us, that’s a big, broad term. For us, it’s next-generation storytelling.”
Meta hasn’t made a very convincing case that its VR worlds are worth hanging out in. Even Meta’s own employees are barely using Horizon Worlds — and getting people to buy in can’t have gotten easier after the widespread ridicule over Mark Zuckerberg’s widely memed avatar selfie.
Despite Spencer’s comments, though, he does feel that the concept of the metaverse is going to change. “I tease a little bit in [saying it’s] a bad video game. I just think we’re early,” he said. But he feels that, over time, the metaverse is “going to end up looking a lot more like video games than some of the models that I see for the metaverse today.”
Norway Steps Into the Metaverse With Decentraland Tax Office
The Norwegian government is taking steps to embrace Web3 with the establishment of a metaverse tax office.
At the Nokios conference on Wednesday, the Brønnøysund, Norway’s central register, and Skatteetaten, the nation’s tax authority, announced that they’re partnering with consulting firm Ernst and Young (EY) to establish an office in Decentraland. The goal of the initiative, according to Nokios, is to deliver services to younger, tech-native individuals while establishing their Web3 footprint.
Magnus Jones, Nordic blockchain lead at EY, wrote in a LinkedIn post on Tuesday that he hopes the partnership with Norwegian authorities will help spearhead education in the crypto space by teaching users about taxes related to decentralized finance (DeFi) and non-fungible tokens (NFT). The Brønnøysund is also exploring additional Web3 services, such as decentralized autonomous organizations (DAO), wallets, smart contracts, and more.
“Kudos once again to Norwegian authorities who dare to make moves to bring clarity in a complex landscape,”
“Building further on issuing worlds first guidance on how to tax DeFi and also NFTs, and being a front runner in the crypto space in general.”
Games & Blockchain Gaming
Fundamentally Games' Oscar Clark on Designing Long-term Games Revenue
In this article, Oscar Clark, CEO at Fundamentally Games and author of “Games As A Service” will explore some of the design thinking behind longer-term sustainable revenue models. Along the way, he hopes to show that the model can be plausible for smaller teams, without falling into the content treadmill, and how to focus on player value.
Why Do We Buy?
In 1960 R. Bauer wrote about ‘The role of risk in consumer behavior’ which I think remains a great starting point to help understand why anyone buys anything; and just as importantly ‘why’ when they don’t! To heavily summarise the paper sets out to show that for any purchase we all need to mollify our own concerns that would otherwise prevent us from buying.
Basically, there are four core motivations that we need to engage before we will be willing to take the plunge and buy any item:
- Anticipation: Unless I trust that the purchase will fulfill some desire or value for me, I will not buy.
- Opportunity Cost: If I don’t understand the cost of missing out by failing to act, I will not buy.
- Social Capital: If I don’t see how this purchase contributes to my ‘social identity I will not buy.
- Abnegation: If I have outside pressures or responsibilities which override my needs, I will not buy.
Putting Player Value First
My first step is to look at the game through the player’s eyes and in general, I think you can break this down into the following types of utility (meaning that thing which satisfies the player's “wants”):
- Subsistence: What do players need and without which the game cannot progress, e.g. fuel, health, energy (even owning the game for a pay-upfront game)?
- Shortcuts: Power-ups, boosts, weapons, armor, vehicles, etc allow the player to complete tasks or otherwise sustain their game for longer.
- Strategy: Discrete alternative modes/ways of playing which add extra value either as a mode of play or introduced through player loadouts.
- Social: Opportunities for the player to show off their creativity, taste, or social identity within the game. Even a shared Lore can supply a social value – provided players care enough about the game.
Utility can take many forms but essentially comes down to whether access to the benefits is temporary (e.g. consumable items) or if they are lasting (e.g. durable or aspirational goods). Capacity and consumable generation can also play a part in this mix – something I have covered in previous articles on game monetization. Just as important, however, is how the players access these elements, i.e. what is the form of exchange?
Forms of exchange:
- Grind: The time and effort put in by the player in the game which delivers some form of ‘Currency’ or ‘Reward’. From a design point of view, this can include the benefits of watching rewarded ads.
- Currency: Some kind of resources e.g. Gems/Gold/XP that is earned through ‘Grind’ or purchased in bundles and provides a way to measure incremental earnings in the game that are converted into other more meaningful rewards. Terms like Soft and Hard Currency are used to reflect the spectrum between earning through play or paying to obtain these exchange items.
- Anchors: Specific currencies or rewards which can only be earned through actual play. They must never be possible to buy or otherwise be gifted or they lose their value. Anchors are a great way to ensure that we can easily balance an otherwise complex game economy.
- Ratchets: Conditional tasks, items, achievements, or statuses that form the prerequisite for unlocking other items.
- Premium: Of course, we can pay for items directly or indirectly through Battlepass or Subscription offers; indeed watching rewarded videos (on mobile).
So what does this actually mean in practice?
Let's take a fantasy RPG-style game as an example:
I need more Health Potions (Subsistence) to be able to keep playing… I Grind in the game by taking the time to collect ingredients, including a rare flower (Anchor) that cannot be purchased. I then convert the results to health potions. Whilst I could buy Potions in bundles (Premium) I may be better off instead upgrading the Health Potion Recipe but that requires that I complete a specific mission (Ratchet) first. Alternatively, I could use the leather (Resource) I collect to craft a potion belt (Capacity) which means I can carry more potions.
Understanding the flow of your whole game economy, not just the things you want to sell, is essential if you want to understand why players will want to spend not just once, but time and time again. I’d recommend doing a sync/source analysis to better understand how all these elements fit together, but again that’s for another article.
Web3 Game ‘Pixels Online’ Amasses 30K DAU and over 130K Twitter Followers in 2 Months
Pixels Online is a web3 farming game with core gameplay mechanics similar to Zynga’s Farmville.
The Pixels team, which raised $2.4M in a round led by Animoca Brands back in January 2022, has had great success with garnering a large player base for the past couple of months.
This inflow of players was made possible via their ‘Play-to-Airdrop’ strategy, whereby players compete to become eligible for the airdrop. Players earn points from owning Pixels lands NFTs, referrals, and playing the game (farming & completing quests). To be eligible, players must reach the top 20,000 ranks in the leaderboards by October 31, 2021.
The Pixels team has mentioned that the tokens distributed via the airdrop will be vested by both time and activity. As such, players must continue to play the game after the game’s release (chapter 1) in order to unlock their allocated tokens.
Prior to the announcement, they had approximately 1.5K to 2K average DAU and a little over 10K Twitter followers. After the ‘Play-to’Airdrop’ announcement, their number of DAU and Twitter followers has been increasing.
For instance, as of October 14, 2022, they had approximately 30K DAU.
Furthermore, their Twitter follower count has gone up by over 130K as of October 28, 2022.
We can all agree that a portion of the participants are definitely bots and (airdrop) farmers (no pun intended), as with any token airdrop. However, there’s no denying that their ‘Play-to-Airdrop’ strategy has led to successful results in terms of numbers. The best part of it all is that the team has only spent about $3K in marketing, as quoted by Pixels Founder, Luke Barwikowski.
Gaming Blockchain Oasys Debuts Mainnet
Gaming blockchain Oasys, a known partner of game studios such as Square Enix and Ubisoft, has taken the final steps towards debuting its mainnet, with 21 initial validators. There will be three initial phases, the first of which commences today.
Validators are set to begin taking operations of all nodes — ensuring that Oasys Layer 1, the Hub-Layer, can maintain stable performance, according to a company release.
The second phase, which will begin to integrate its Layer 2 Verse-Layer on top of the existing framework, is expected around the second week of November.
Phase three will follow on Nov. 22, when the blockchain plans to integrate the Oasys-Hub, a front-end user portal.
Can Web3 and Dynamic NFTs Unlock Sustainable Game Monetization?
The endless monetization conversation has become heated in the Web3 world, where many games focus their core mechanics on speculation, artificial scarcity, and collecting. At GamesBeat Summit Next, Alun Evans, CEO, and co-founder of Freeverse spoke about the three problems that Web3 actually solves — but only if tokens can evolve and change based on what the user does with them.
“We believe that the digital economy should also be much larger than just collectibles,”
“There’s an entire iceberg there waiting to be unveiled, and I think we do that with living assets, with dynamic NFTs.”
From speculation, scarcity, and collectibles, the focus should be turned to utility and earned value, where the value of the token is based on what the user does with it, and how the user engages in the ecosystem, he argued. Collection and speculation aren’t sustainable, and boom and bust only hurt the reputation of the blockchain game industry and the wallets of developers.
“There will never be this permanent influx of more new users that will drive the economy, and so the impact of that is, why bother with Web3? What problem is it really solving here?”
“We can reward players for their time by allowing NFTs to level up. That drives retention. We can allow users to create user-generated content, which can be sold on secondary markets. That not only increases retention but also increases monetization.”
For instance, Goal Revolution, on Freeverse’s platform, lets users train characters to upgrade their stats, essentially generating value on that token. Any profit earned when they sell it is based on their investment, rather than scarcity. Players are also incentivized to maintain the value of their assets for themselves both in and out of the game — a character that loses its skill if it isn’t consistently trained, and the asset loses monetary value. And these mechanics proved successful enough to attract the interest of a worldwide football IP, which will launch next year.
User-generated content, which increases engagement by giving gamers permission to customize their experience, shouldn’t be immutable either, Evans argues. If a player has customized something — maybe even paying money to the developer for the raw ingredients — being able to sell it on a secondary market retains that player in the game ecosystem, and lets the game developer charge a commission on that sale too.
“It’s also being slightly fairer to the gamer,” he added. “If I create something, why shouldn’t I be able to monetize it?”
Finally, there’s an opportunity to mix the worlds of Web2 and Web3 to help build a community and spread a message, which not only increases retention but also drives player acquisition. During MetaBeat, held in San Francisco earlier in the month, Freeverse launched the free MetaBeat NFT, which was also worthless. To level it up, users could engage with social media in a variety of ways — retweet conference hashtags, collect likes on their tweets, present proof of ownership at the conference door, and so on.
“Brands are engaging with their users on social media and rewarding them for that engagement in the Web3 world with tokens that can be upgraded and can unlock rewards, features, prizes, and so on, whether they’re virtual or real,” he explained.
Done correctly, allowing users to extract value from the economy generates more value for the economy in the long run, which is a very powerful tool to use. So what’s stopping developers from using earned value within the Web3 world?
New NFT Marketplace Blur Closes in on OpenSea in 24-Hour Trade Volume
New NFT (non-fungible token) marketplace Blur conducted 1,160 ETH of single-day trading on its platform, according to Dune Analytics, placing it just behind OpenSea in terms of the 24-hour trading volume.
According to the dashboard, which was created by NFT data aggregator Sealaunch, OpenSea still maintains a sizable lead on Blur, although trading on Wednesday topped other Ethereum blockchain-based competitors like LooksRare and X2Y2.
The platform also had 2,527 unique users on Wednesday and made 10,911 sales. Other data-tracking tools, including DappRadar, which doesn't yet track data from Blur, supported the dashboard's 24-hour trading volume numbers, placing OpenSea with $8.9 million in the top spot. Blur was second, followed by X2Y2 with $1.7 million and LooksRare with $406,000.
Blur celebrated the milestone on Twitter, saying that it "became the #2 NFT marketplace by volume (excluding wash trades)!" as well as the "#1 aggregator" for NFTs.
NFT Marketplace LooksRare Switches to Optional Royalties
Non-fungible token (NFT) marketplace LooksRare said in a statement on Thursday that it will no longer require collectors to pay royalties to creators when purchasing digital collectibles.
The platform, which has the fifth-largest trading daily volume among NFT marketplaces according to DappRadar, said that rather than supporting royalties “by default” it will instead distribute 25% of platform fees to creators and collection owners. Buyers can now “opt-in” to pay royalties at checkout.
The platform’s “Trading Rewards” distribution ratio has also been updated to favor sellers.
“The growth of zero-royalty marketplaces has eroded the general willingness to pay royalties throughout the NFT space,”
the company explained, adding that its new royalty structure is meant to be “a competitive solution that still benefits creators.”
LooksRare’s decision follows a trend of NFT platforms dropping requirements for artist payouts. In August, marketplace X2Y2 ended its royalty requirements, making them optional at the discretion of the buyer. And earlier this month, Solana blockchain-based marketplace Magic Eden followed suit.
While conversations around whether buyers should be obligated to pay royalties to NFT creators for their art, LooksRare specifies that its 25% protocol fee will still support both parties by sharing the burden associated with listing tokens on the platform.
“The industry is trending towards zero royalties, but it’s still our responsibility to support creators in the new landscape,”
LooksRare said in the statement.
National Policies & Legal Updates
UK Lawmakers Vote to Recognize Crypto as Regulated Financial Instruments
Lawmakers in the U.K. voted in favor of recognizing crypto assets as regulated financial instruments and products in the country on Tuesday.
The House of Commons, the Parliament's lower house, met on Tuesday for a line-by-line reading of the proposed Financial Services and Markets Bill, which broadly covers the U.K.'s post-Brexit economic strategy. The lawmakers considered a list of proposed amendments to the bill, including one put forward by parliamentarian Andrew Griffith to include crypto assets in the scope of regulated financial services in the country.
The draft bill already included measures to extend existing regulations to payments-focused stablecoins, which are cryptocurrencies pegged to the value of other assets like the U.S. dollar or gold.
"The substance here is to treat them [crypto] like other forms of financial assets and not to prefer them, but also to bring them within the scope of regulation for the first time," Griffith, the financial services and city minister said during the parliamentary meeting before lawmakers voted largely in favor of keeping the amendment in the legislative package.
The local crypto industry, which recently welcomed the news of Rishi Sunak's appointment as the country's new Prime Minister, stands to welcome the efforts to give legal recognition to digital assets broadly. The markets bill – and by extension, the stablecoin rules – was introduced during Sunak's time as finance minister in the Boris Johnson administration.
The crypto provision, which relies on the definition of "crypto asset" inserted by a new clause 14, "clarifies that crypto assets could be brought within the scope of the existing provisions" of the Financial Services and Markets Act 2000 relating to regulated financial activities, Griffith said. The measures could regulate crypto promotions and outlaw companies that are not authorized to operate in the country.
"The Treasury will consult on its approach with industry and stakeholders ahead of using the powers to ensure the framework reflects the unique benefits and risks posed by crypto activities,"
The inclusion of crypto in the scope of the bill will make sure the country's Treasury is equipped to respond to developments in the crypto sector quickly and deliver regulation in an "agile" way that is consistent with the country's broader approach to regulating the financial services sector, according to Griffith.
New NFT Rules Possible if Lawmakers Ask, EU Official Says
Further European Union legislation on non-fungible tokens could be issued if requested by lawmakers, an official from the bloc's executive arm said on Wednesday.
"The parliament is working on a resolution on NFTs,” said Peter Kerstens, head of the European Commission’s financial technology task force, while speaking of a procedure under which members of the European Parliament choose to set out their wishes on a particular policy issue.
The EU’s Markets in Crypto Assets law (MiCA) left the treatment of NFTs, which offer digital proofs of ownership, somewhat ambiguous. But that uncertainty could leave the door open for further policy actions, said Kerstens, who is also a senior adviser at the commission department responsible for financial services.
While, legally, the commission isn’t obliged to comply with lawmakers' wishes, “if there is a strong political indication or wish for an initiative, that may move the Commission into presenting it,” Kerstens said. “If we don't act on it, we'll have a lot of explaining to do, and I think we'll end up having an unhappy parliament. We don’t like an unhappy Parliament.”
Later at the same event, EU lawmaker Eva Kaili confirmed she will be holding the pen on the Parliament’s new report – and she wants to avoid the controversies of MiCA, which focuses on regulating individual entities such as crypto wallet companies.
“We need to rethink the regulatory approach and move towards implementing activity-based regulation … rather than an entity-based one for NFTs,” said Kaili, a Greek left-wing lawmaker, adding that she wouldn’t seek to constrain the sector too much.
“It should not be in just one box of media … it deserves a custom regime ... they can be used in many industries,” she said, adding that the final report would take as long as six months to draft.
MiCA requires crypto companies to register with the authorities and meet consumer protection and financial stability norms. But officials also worry that, although NFTs ostensibly represent articles like artworks, they are prone to the same kind of abusive behavior that plagues more conventional financial markets, such as price manipulation.
While, in principle, MiCA applies only to fungible tokens, there’s a “lot of prose” in the final draft concerning exactly when self-proclaimed NFTs might actually fall under the law – and the framework doesn’t always get it right, Kerstens said.
The legislation “has a very peculiar sentence in there which says that if an NFT is part of a large series or a collection, that’s an indicator that it’s fungible, which is actually incorrect,” Kerstens said.
Whether or not it’s right, there’s great confusion about exactly what NFT creators and exchanges like OpenSea will be expected to do once the law takes effect in 2024.
“We haven't seen a case where existing NFTs in the market would fall into MiCA," Gabriel Cumenge, deputy assistant secretary at the French Ministry of Economy, told the same conference hosted by Blockchain for Europe on Tuesday.
Cumenge's view appears likely to be disputed by other crypto experts. Patrick Hansen, previously a venture adviser at Presight Capital and now employed by stablecoin issuer Circle, has previously argued that MiCA could end up covering 95% of the market as NFTs are often issued as collections.
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