Nfts
Tokenization of art, games and the future of NFTs
Disclosure: The views and opinions expressed herein belong solely to the author and do not represent the views and opinions of crypto.news editorial.
This is part three of a three-part interview series with William Quigleycryptocurrency and blockchain investor and co-founder of WAX and Tether, led by Selva Ozelli exclusively for crypto.news. The first part concerns Prison sentences for Sam Bankman-Fried and Changpeng Zhao. The second part concerns cryptocurrency and banking. The third part concerns the future of NFTs.
1) In the first part of our interview, you mentioned that you co-founded Worldwide Asset eXchange (WAX), the first decentralized marketplace for trading virtual video game items. Tell us about WAX.io, the number one web3 gaming platform.
WAX was specifically designed to meet the demands of blockchain gamers and NFT collectors. We initially built WAX on the Ethereum blockchain; However, the exorbitant gas fees and slowness of the platform led us to develop the WAX blockchain and wallet.
The WAX blockchain has the largest NFT ecosystem, with over 250 million NFT assets and over 30,000 dApps on NFT projects. The WAX platform manages over 23 million transactions per day for over 30,000 dApps and 15 million users. The Wax blockchain is ultra-fast, secure and carbon neutral.
As the world’s leading blockchain for NFTs, dApps and digital gaming, based on the number of daily active users, WAX was designed from the ground up to be environmentally friendly. Our carbon neutral status is not just a claim: it is certified by Climate Care, demonstrating our commitment to maintaining a minimal environmental footprint.
This Earth Day, we launched the Earthen WAX Walker NFT drop. For every Earthen Walker NFT claimed, WAX will plant a tree. This initiative combines our passion for innovative digital collectibles with tangible actions to benefit our planet, offering a collection of exclusive digital art that will allow us to contribute to reforestation efforts globally.
2) A 2023 Crypto Analysis Company dappGambl Report find that 95% of NFTs are worth next to nothing. The report reveals that following the immense hype around NFTs between 2021 and 2022, approximately 79% of all NFT collections remained unsold. Popular Bored Yacht Ape NFT values are down around 90% from market highs. As NFT markets collapsed in late 2021, I wrote that NFTs are here to stay. What is your view on the future of NFTs?
According to Zion Market Research, the size of the NFT market was estimated to $36.12 billion in 2023 and is expected to reach $217.07 billion by the end of 2032, representing a compound annual growth rate of approximately 22.05% from 2024 to 2032.
Non-Fungible Token Industry Outlook | Source: Sion market study
The global NFT market capitalization today is $68.68 billion, a change of +1.12% over the last 24 hours. I expect most of this growth to be in utility NFTs, collectible NFTs, and Web3 gaming NFTs.
3) In 2021, art NFTs appeared to be the biggest disruptor in art, with artists creating, exhibiting, and auctioning and investors buying, selling, and trading art NFTs. Nicole Sales Gilles, Vice President and Director of Digital Art Sales for Post-War and Contemporary Art at Christie’s said: “At Christie’s, we view digital art as simply a category of contemporary art collecting. The web3 art community is collaboratively building something very special. I believe that in the future the art world will look back on today’s camaraderie between artists, builders, curators and collectors as the time “when it all began.” What are your thoughts and views on the future of artistic NFTs?
The art market abandoned 4% last year, to reach $65 billion a year globally, with a few art sales accounting for the bulk of that figure. Artistic NFTs are likely to be managed by global art companies such as Christie’s, Sotheby’s and Phillips.
At WAX, we focus on collectible NFTs and gaming NFTs with high trading volume by owners. We hope that our collection NFT Earth Wax Walker the fall generates intense collector interest so we can plant many trees.
4) Earnings from collectible NFTs are taxed at a rate of 28%, which is higher than current capital gains rates. What do you think about the higher tax rate applied to collectible NFTs? And will the higher tax rate hinder collectible NFT investing?
The global collectibles market, valued at over $360 billion in 2020, is expected grow at a significant rate of around 4% during the forecast period 2022-2028. Therefore, the higher tax rate of 28% shows that the Internal Revenue Service (IRS) forecasts strong growth in collectible NFT sales and would like to tax it at a higher tax rate than the current capital gains rate.
5) The IRS recently released the 1099-DA form in draft form. Jonathan Cutler, senior director of Deloitte’s national tax team in Washington, which advises on digital asset reporting, said: “As part of the August 2023 digital asset reporting proposal regulations, an NFT is included as reportable when it is “a digital representation of a value recorded on a distributed ledger secured by cryptography (or any similar technology). » In April, the draft form on which an NFT or other digital asset can be reported – Form 1099-DA – was released by the IRS. It is important to note that the cover page indicates that this draft version is based only on the proposed regulations and is subject to change based on public comment, the volume of which appears to be significant. Until these comments are digested by the IRS and Treasury, it is difficult to glean meaningful information, whether from this draft form or otherwise, about the final scope of the definition of “asset digital” for reporting purposes. Do you have any comments on the proposed Form 1099-DA that applies to NFTs?
If the draft 1099-DA is finalized in its current form, then NFT marketplaces will be required to issue 1099-DAs. After all, collectible NFTs are taxed at a higher rate.
6) A new NFT project is taking cannabis sales out of dark web marketplaces and bringing them to NFT marketplaces. Cannabis billionaire Maximillian White, often referred to as “the Elon Musk of cannabis”, said: “I signed a partnership deal with British rapper Fredo just weeks after his release from Dubai prison to launch the first like, Dr. Green. NFTs sold on my own NFT marketplace drgreennft.com, which will allow holders of Ethereum-based NFTs to legally sell recreational cannabis worldwide. The global cannabis market value is expected to reach approximately $33 billion by the end of 2024 and exceed $69 billion by 2029, with a compound AGR of 15.4%. Do you have any thoughts or comments on this first-of-its-kind cannabis NFT initiative?
No comments.
7) NFTs appear to be the next wave of SEC enforcement action in the digital asset space. Last year, the SEC classified two NFT projects as securities. In August 2023, the The SEC charged Impact Theory, LLC, a media and entertainment company headquartered in Los Angeles, which conducts an unregistered offering of crypto asset securities in the form of NFTs. Impact Theory raised about $30 million from hundreds of investors through this offering by claiming to be the next Disney company, your ex-employer. Two weeks later, in September 2023, the SEC charged and reached settlement with Stoner Cats 2, LLC (SC2), concluding that SC2’s NFT offering, which raised $8 million under the name Stoner Cats, was a security and that, therefore, SC2 engaged in an unregistered offering of ‘a title. What do you think of the SEC’s enforcement measures in the NFT field?
I was not aware of the SEC’s two deals with NFT projects, the upcoming Disney Company and the animated web series called Stoner Cats from Mila Kunis and Ashton Kutcher.
However, it appears to me that in both of these cases the NFT offering documents were poorly drafted by their lawyers. The three main elements that could result in NFT securities being classified are splitting an NFT, offering passive income, or participating in governance, such as staking. Thus, the SEC found that these NFTs were offered and sold to investors as investment contracts and, therefore, were securities. As a result, these NFT projects violated federal securities laws by offering and selling NFTs to the public in an unregistered offering that was otherwise not exempt from registration.
Given the regulatory compliance involved in issuing securities, this classification should be avoided and the features and offering materials of an NFT should be carefully reviewed prior to launch.
8) The vast majority of existing NFT projects in art, gaming, sports, metaverses and even cannabis are built on the Ethereum blockchain. In April, the The SEC has issued a Wells Notice to Ethereum-based Consensys, revealing that the agency could take potential action against Consensys for violating federal securities laws through its MetaMask Staking and other products. The SEC is seeking to regulate ETH as a security after Ethereum successfully changed its consensus mechanism from proof-of-work to proof-of-stake in September 2022. This view is also shared by the office of the New York State Attorney General (NYAG), who, prior to the SEC on March 9, 2023, filed a lawsuit against the cryptocurrency trading platform KuCoin for “failing to register as a securities and commodities broker and misrepresenting itself as an exchange,” alleging in particular that the ETH traded on the platform is a security. BlackRock CEO Larry Fink said he is not concerned about the SEC classifying Ethereum’s ETH as a security. What are your thoughts on the potential classification of ETH as a security? What impact will this have on the NFT market?
No comment.