The future trend of NFTs and regulatory approach worldwide
Bholdus CEO & Founder and Industry thought leaders in the US shares the future trend of NFTs and regulatory approach worldwide
In the Asia NFTs and DeFi Conference panel discussion, Ronald Le, Founder and CEO of Bholdus, and other panelists shared much beneficial information about NFT, DeFi, Metaverse, and Regulatory frameworks.
CC Global and The Blockchainer organized the conference from September 9 to 11, 2021. The first 3D online conference attracted 20,000 people from leading NFT & DeFi projects, regulators, experts, investors, etc.
The panelists included:
- Vince Turcotte, Sales Director, APAC, Eventus
- Alan Konevsky, Interim CEO and Chief Legal Officer, TZERO Group
- Michele Maccarone, Renowned NY/LA Art Dealer
- Ronald Le, CEO and Founder, Bholdus
- David Carman, Co-Founder of the Global Digital Asset and Cryptocurrency Association, moderated the panel.
You can rewatch the session here
NFT and digital art
The panel started with why Michele Maccarone chose the NFTs and how she operated her new digital art gallery. Accordingly, she came about the NFT space to create a market for digital art and conceptual art in her world. As a specialist in digital art, installation art, and abstract art, she realised that selling ethereal works was more difficult. She wished for a way that digital and conceptual art could be authenticated so that a market could be established and built. Then she came across the concept of NFTs thanks to one of her friend's suggestions.
She started talking to her artists about transitioning their digital works and selling them as NFT instead of digital art being printed out as a photograph a year and a half ago. But she got a lot of resistance since they all wanted to have in-person exhibitions. Finally, after one of her artists had a successful sale on NFT gateway, many people turned around and wanted to produce and exhibit NFTs. She is now building a digital gallery platform that translates from the traditional gallery model to the Metaverse. Michele is interested in smart contracts since they can capture the history of conceptual art and revive the careers of artists that are long past.
Michelle emphasised the importance of authentication with digital art by discussing the different issues that NFTs are solving in the traditional art space. With NFT, she can manage the provenance and authenticity of each addition to the artwork. It is also solving the problem of creating a market for works that are not collected yet. At the same time, NFT helps increase the value of the art, too. For example, the most expensive digital art or photography used to cap off at a million dollars. However, with NFT, they are selling for tens of millions of dollars. Michele shared that she considers NFT a long-term project, not a money grab for the moment. She firmly believed in real innovation technology coded NFT, and there would be a long term established market. Besides, in her opinion, artists are innovators and inventors. Technology is a form of art also. She has an interest in the idea of collaboration between fine art technology and entertainment. Technology is becoming a space for culture, and our screens will be where we experience the culture more and more. She believed that everything was moving toward the Metaverse and digital.
Smart contract and its benefit to the artist
To answer the above question, Ronald said the smart contract was a part of blockchain technology innovation. It isn't easy to do business with each other if we do not know each other, and a smart contract helps to reduce the need for trust. It also makes the system more transparent. Giving an example of selling artwork to different people, with smart contracts, all the transactions related to the artwork can be monitored closely and immutable on the blockchain.
Michelle added that historically, artists do not receive royalties or percentages of future sales without smart contracts. And it is a problem in the art world. But with smart contracts, artists in the States have opportunities to receive their royalties and percentages of future sales. Smart contracts will revolutionise the gallery and auction businesses and facilitate so much of an artist's community.
Alan agreed with the viewpoint of Ronald. He once again affirmed that the smart contract could bridge the trust gap. The smart contract reduces the layers of intermediaries that bring opaqueness, cost, friction, lack of access, value leakage opportunities for asymmetry of access and information, therefore the potential for mischief. This is thanks to a distributed ecosystem subject to a consensus-building process across the numerous nodes distributed across the world.
Alan added that when more people own virtual intangible assets, there will be a need to ensure provenance, record-keeping,g and trade-in transparent marketplaces. Blockchain and smart contracts will solve that.
In Vince's opinion, the smart contract is nothing more than a box of code. Under certain conditions, the code is activated, and it could be something as mundane as filling out a form to sell and move a package of goods. Instead of going through all steps from computing the shipping cost, then insurance and financing, it now can be done automatically by smart contract.
The smart contract is where things become interesting with the immutability and long history of the transaction record. However, there are a couple of risks. We are still in the early days, and an error or a bug in code may last forever once we embed it in a smart contract. That would be great when this happens on a large scale, for instance, on a blockchain network like Ethereum, where they can fork it. But it can also be very costly if it happens on a smaller scale where we do not have an extensive consensus-building process around it. Hence, he suggested that we make sure that we do not get ahead of our technology.
For Michele, Metaverse means the future world. Her dream is to put artists into the Metaverse, a universe where they can build their worlds. And she wants to live there, too.
Ronald added that Metaverse is a borderless world or the virtual world. In the difficult situation of COVID-19, many people face the difficulty of making money. But in the Philippines, one of the largest markets for Axie Infinity, many people can play a game and earn money right now. The GameFi business around the world can transform into different types of business models as well. It can be play-to-earn, work-to-earn, live-to-earn, watch-to-learn, or anything they can do virtually to make a living. For Metaverse, it is scalable in terms of feasibility. It will also open new types of the virtual workplace for everyone to make a living.
Alan talked about the change which was happening whether people liked it or not. The difference is creating a need for people who will need to interact with these items of value that are now intangible. And we are going to live with a temporary ecosystem where we have some old, some new. But the outcome is that people can interact with digitally native presentations of these assets directly through a global single technology layer that is self-regulating.
As Vince's answer, in the financial services environment, there is one example called Pyth. It uses the Solana blockchain to build a series of oracles that are price references in decentralised finance. They have several contributors from cryptocurrencies and regular securities, futures, options in foreign exchanges, equities, bonds, etc.
They are providing reference prices through Pyth that will be used as oracles. And those oracles are used to mark prices within decentralised finance exchange.
In Vince's opinion, firstly, he thinks DeFi is good since it disrupts the traditional world of financial market data owned by exchanges who then distribute through large second parties.
Secondly, what he likes is Jack Dorsey's moonshot. He always speaks very enthusiastically about the lightning network and how that second layer transaction network could up the power of Bitcoin. He considers bitcoin to be the currency of the internet. According to Vince, we can start putting together Dapps and DeFi protocol using Bitcoin, and the last piece is the lightning network. He gave an example of an advertisement for a new wallet on Twitter. He can click on that to move some of his Bitcoin over there. And he starts using it to transact not just in the world of Bitcoin but fiat transactions as well using the lightning network. In his viewpoint, if the combination of these factors is real-world applications, these are things that happen right now. And they are going to both disrupt existing financial services structures which makes them exceptionally interesting.
He added that DeFi would not be a significant threat to banks or traditional services providers like visas, master cards, and discoveries of the world American Express. It will not be a significant threat to them immediately. Still, over a longer haul, a medium horizon of two to five years, it will significantly impact how they do business.
Alan added that when people say this intermediate in the short term, they usually mean I want to be your intermediary and not somebody else. That is one of the reasons why regulators are skeptical and cautious about the DeFi journey and digital assets, generally including cryptos. Because, in their opinion, it seems to be centralized to them.
Ronald continued with the situation in the emerging countries where more than 60 percent of people are underserved by the bank. But nowadays, with the internet, using a laptop or mobile phone, they can enter the entire world and access financial industries. Ronald gave an example of SMEs in those countries, emphasising the difficulties that SMEs face to seek funding or gain a customer base. But DeFi is going to be the game-changer for this type of business.
DeFi and Regulatory frameworks
Vince strongly believed that there was a need for another association around DeFi to become the spokesperson for the industry or the standard center that enough people would adopt.
Alen agreed and added there also needed to be a global reach. He shared Gensler, SEC chairman's viewpoint that we should look at a worldwide ecosystem. To survive, it must be regulated, and the regulation must be global. Previous attempts at getting global at minimum coordination on financial regulatory topics have been met with mixed to little success. And financial services and another piece of regulation is still vulcanized and national.
A vast majority of the human population is unbanked to underbanked. So DeFi products and services do wonders for that segment of the people. Likewise, when talking about bitcoin as a media or a store of value, people may say it has been a failure because price volatility depends on whom. If living in a country of hyperinflation, bitcoin is a good store of value because it may go up and down five to ten percent, and it is not going up a thousand percent a day as your local currency is devaluing.
As an industry, Alan would love to talk about concepts because it is exciting, and it is figuring out the origin of the universe, or Metaverse as the case might be. But we cannot regulate ideas, Metaverse of DeFi. That was why he agreed with regulators who face the challenge. He also highlighted that as an industry, they must develop a better consumer articulation of what they are going, why it is better, and how they think it should be regulated.
Vince said that when talking about regulation, we should talk about who we are regulating. In traditional CFTC or any other country, there is always a point of a locus for the regulators. It may be the exchange, intermediaries, or individuals. But we are now in a world where they will only be regulating individuals. And there will be, for instance, the standards of licensing and the general market knowledge that you are required to have if you act as an intermediary. So, the challenge for regulators is how they do both regulate and protect people in that pool.
Alan added that it was a bit of a chicken and egg problem because it was hard to develop products in an uncertain environment. It is hard to regulate concepts and not specific products. However, on balance, the industry needs to lead with specificity.
Global coordination to drive the regulatory environment
Alan did not think that a new sovereign supranational agency would be a possibility. In his view, the most viable outcome would be greater coordination at a political and regulatory level among the existing agencies.
Vince had a different idea since he believed that there was room for industry associations. He lived through the birth of the swaps market and watched how it took a prominent role there. And with a background in financial futures, he has experienced how the various industry associations stepped up and helped guide the regulators. And the regulators tended to hear their input, and he would love to see an industry association come together with a coherent plan.
Ronald added that the top leading crypto businesses should focus on those countries, like Ethereum, Binance, Solana, or even Bholdus. They should work closely with the regulators, giving them the sandbox environment or open-source code to try out different technology solutions. We need more people to come and knock on the door to central banks, for example, MAS in Singapore or SEC in the US.
Vince agreed with the idea, final sharing about the same case in Hongkong and these types of initiatives were very symbiotic. The regulators learn a great deal, and many startup-level people are incented to build products alongside the regulators.
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