Seoul, South Korea — An official told Korean Blockchain Week that non-tradable tokens (NFTs) that are part of a collection will have to enforce new European Union (EU) crypto rules aimed at alerting investors to the risks. The disclosures came despite previous claims that it would be excluded from the Crypto Asset Markets (MiCA) law.
The EU reached a political agreement on MiCA at the end of June, and how to handle NFTs, which offer a digital way to prove ownership of assets such as artworks, was a key discussion point in the talks. In theory, according to official statements, the latest draft of the law exempts NFTs unless they create another type of crypto-asset. In practice, the statements of Peter Kerstens of the European Commission show that carving can provide insufficient relief.
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EU legislators “take a very narrow view of what is an NFT,” said Kerstens, who is advisor for technological innovation said, implying few assets will benefit from the exemption.
“If a token is issued as a collection, or as a series – even though the issuer may call it an NFT and even though each individual token in that series may be unique – it’s not considered to be an NFT, so the requirements will apply,” Kerstens said
This means that those exporting NFT collections will have to publish a white paper detailing the protocol used by NFTs and will be barred from making outlandish promises about future values that might lead people to buy, he added.
EU national governments felt that the inclusion of NFTs in MiCA would be an unfair extension of a bill originally designed to protect investors. But European Parliament lawmakers who were forced to sign the legislative agreement were more hawkish, arguing that the NFT market is prone to price manipulation. Kerstens himself had previously said that it would be “stupid” to require one white paper (one stock) for each NFT.
The idea that NFT platforms like OpenSea may have to seek regulatory clearance has raised concerns about the crushing of innovation in the emerging industry. The European Commission, the EU’s executive arm in general, proposed the first draft of MiCA in 2020. Since then, it has mediated negotiations in the Council of Europe and Parliament to amend the law.
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Korean regulators are still hesitant about how to regulate the crypto-asset industry. The EU’s approach can be crucial in determining its direction. Korean government officials told local media in June that work on the Digital Asset Base Act will begin in earnest in October after President Joe Biden published reports ordered by the crypto-related executive order.