After a banner year of 2021 for individual object sales through nonfungible tokens (NFTs), 2022 is poised to be the year of MetaFi. A recap of Beeple,
After a banner year of 2021 for individual object sales through nonfungible tokens (NFTs), 2022 is poised to be the year of MetaFi. A recap of Beeple, Christie’s, Visa and endless aping-in celebrities hardly feels necessary, except to point out that we seem to be standing on (or perhaps have already crossed over) a fundamental precipice. While the rocket-propelled ascent of NFT prices will not continue forever, numerous voices have predicted that a mature tech stack for discovering, vetting, valuing, trading and protecting collections of digital assets will soon emerge, without a crash.
But these optimistic takes may even be selling the area short. Namely, the premise of the “NFT-Fi” sector is to create value through liquidity, but it has remained an unstated assumption that this liquidity would be confined fundamentally to the world of crypto itself. While it is still early days, those boundaries may be eroding, and we may all need to open our meta-apertures even wider. In this regard, Switzerland stands out among numerous countries that have only started to pilot experiments with central bank-backed digital currencies (CBDCs). The confederacy of cantons, home to both Davos and Art Basel, is known for its rich history of innovation in both creative and financial assets, and its moves are worth tracking closely.
At the end of last year, the Six Digital Exchange (SDX), the digital entity of the SIX Group, the financial services company that operates the infrastructure of the Swiss national stock exchange, considered opening up their exchange to NFTs. This possible move dovetails with the advancement of a major experiment with CBDC. Taken together, these early steps will lend credence and endorsement to both digital currencies and the NFT secondary market, integrating many kinds of digital holdings more closely into the fabric of Swiss finance, itself.
To say that the international regulatory perimeter of tokenized assets is inchoate or poorly understood would be a wild understatement. Legal ambiguity, bad actors, technology failures, public panics and more can undermine the smooth functioning of digital marketplaces, with the potential for spillover impact on the conventional markets magnified by their growing imbrication. Recent hand-wringing over the identity exposure of the Bored Apes creators as well as revelations from the multibillion-dollar Bitfinex hack attests to the already enormous stakes of calibrating the needs for personal privacy and public disclosure.
As Web3 enters territory that blurs the line between not only physical and digital goods but also between private and public exchanges, it is imperative to consider how legal frameworks (and the path of least resistance through them) have shaped the analog version of this world that the crypto-forward future hopes to supplant.
Related: Will regulation adapt to crypto, or crypto to regulation? Experts answer
Fully grappling with these questions is far beyond the scope of a short article. But for the present discussion, we would like to briefly highlight the question of digital privacy as a nexus between art, law and economics. Based on tactics pioneered in Switzerland coincident with the rise of global finance in the 19th century, fine art has become a central means of moving assets through the shadows and edges of international law. This backdrop, poorly understood by those who are outside of the art industry, constitutes an enormously important context for the coming collision of international privacy laws, global digital art and the promise of a publicly verifiable blockchain.
The coming collision of public scrutiny and digital privacy
Regulators have been busy filling in the gaping holes left exposed by the vertiginous adoption, or in the case of Switzerland, legitimization of tokenized assets. But of course, any ambiguity in enforcement will ultimately undermine the smooth functioning of tokenized marketplaces, now with potential spillover impact on the world’s conventional markets.
Any updated government policy aimed at striking a balance between social interests and individual privacy could have rippling effects on investors, auction houses and art collectors. The General Data Protection Regulation (GDPR), one of the world’s toughest pieces of legislation on data privacy, has fast become the world’s blueprint for leveraging fines as a way to amplify the pain of breaches. Yet, records show that privacy breaches remain ubiquitous on a global scale. Penalties for violations of the European Union’s privacy law have soared nearly sevenfold in the past year. Data protection authorities have meted out $1.25 billion in fines over breaches of GDPR since early 2021, which was up from about $180 million a year earlier. Perhaps this coincides with the views of legal scholars who argued that monetary sanctions do not necessarily lead to better compliance and ultimately better data protection for individuals.
Related: Concerns around data…
cointelegraph.com