The storms of the last month in the world of crypto are sending the industry through a process of dilution: projects – some of them huge – are being ejected from the market, and others are adapting to the new situation. This week we will talk about the developments in the hottest field of the past year: the NFT.
In the large NFS stock exchange OpenSea, the signs of the crisis are evident, the floor prices of the collections, even the most sought-after ones – like the bored monkeys, have been cut. Prices are denominated in Yttrium, and the decline in floor prices is in addition to the strong decline in the Yttrium exchange rate against the dollar.
Despite this, the field continues to evolve: Earlier this month, software company Salesforce announced that it was developing an NFT service in the cloud. The Alibaba cloud company, which belongs to the Chinese Alibaba Group, has also started operating in the field of trading at NFT, and it aims to build trading arenas, and provide storage services and marketing channels to artists. Recently, the field is slowly starting to break out of the art boundaries, for example, flight tickets have been launched at NFT, which also include the option of entering exhibitions and attractions.
Interesting developments in the regulatory arena as well
Interesting developments in the field are also found in the regulatory arena. In early June, the U.S. Department of Justice announced that it had filed an indictment against a product manager on OpenSea, the largest NFT trading platform, which was responsible for selecting the works to be displayed on the site’s home page.
According to the indictment, the same former employee, Nathaniel Chastain, opened several anonymous accounts on the site and a number of anonymous digital wallets, through which he used to cheaply purchase works just before uploading them to the home page, and then, after the home page exposure and price increase, he was selling Them at a profit of two to five times the price at which he purchased the works.
Chastain is charged with two counts: fraud and money laundering, and the Justice Department statement said the charge is due to trading on inside information on a digital asset, as that employee had prior information about the identity of the works to be uploaded to the OS home site, and used it for personal gain. This is where an interesting question actually arises: Trading on the basis of inside information is prohibited when it comes to securities. How do you apply such a ban to NFT, which at least for now, is not defined as a security?
OpenSea is the largest trading platform for NFTs, with millions of users and NFTs offered for sale. Each new collection has to compete for the attention of the users, and the people of the site choose the works that are displayed on the home page and get considerable exposure.
“Attempt to confuse securities law and investor protection”
“There is an attempt here to mix worlds of securities law and investor protection, and a world of consumers who paid what they thought was worth paying, to someone who earned at the expense of the company that hired him,” notes Adv. Shaul Aderet, a leading partner in the blockchain department Wine for lawyers.
“In recent years, we have seen attempts by the various regulators in the United States and Israel to expand their authority, and apply it to all crypto products. “In recent months we have heard in the US claims that regulation and supervision of the field of stable cryptocurrencies should be applied. Now we are seeing an attempt to apply the principles and rules of the capital market to a website for trading digital works of art,” says Aderet.
The indictment defines the NFT as a digital asset, and a statement issued by the Ministry of Justice states that the indictment “is intended to exterminate internal trade – whether it takes place on the stock exchange or in the blockchain”, that is, for them the NFT trading arena is subject to the same rules value.
And what is the status of the NFT in Israel? The regulators are all waiting for the Minister of Finance to decide on the structure of regulation in everything related to the crypto field. However, it should be noted that a few months ago the Tax Authority issued a clarification regarding the NFT matter, according to which it considers it “an intangible strong right in an image or virtual figure, meets the definition of an asset and is not for personal use.” This definition makes it possible to tax the NFT in the way that all digital currencies are taxed, i.e. capital gains tax on sale or conversion.
The impostors of Mike Tyson and Kim Kardashian
The NFT domain, which has been one of the leading domains in the crypto world for the past year, also suffers from the difficulties that characterize the world: security issues, cyber attacks and scams. The Israeli cyber company BrandShield has conducted research on NFT scams related to celebrities who have promoted crypto content over the past year. The ten American celebrities who have promoted NFT, crypto wallets and digital assets over the past year have had over 16.5 thousand impersonators on social networks: Twitter (44%), Facebook 28%), Instagram (4%) and Pinterest (24%). Leading the way are Tom Brady, Matt Damon, Mike Tyson and Kim Kardashian.
In addition, the cyber company identified over 41,000 fake NFTs impersonating the official NFT of those popular celebrities, and some of the fake profiles on the networks promoted links to those fake NFTs on the OS. Mapping shows that 75.5% belonged to Tom Brady, 16.65% belonged to Mike Tyson and 4.23% belonged to Kim Kardashian.
“Many celebrities are unaware of the consequences when they agree to promote crypto-related content under legitimate advertising agreements. In the end, criminals use these promotions maliciously, focusing primarily on the fan base of those celebrities,” notes Yoav Keren, BrandShield CEO.