German Regulator Proposes Individual Approach to NFTs

Because NFTs are difficult to classify, BaFin has proposed an exemption from licensing requirements.

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The German Federal Financial Supervisory Authority (BaFin) does not currently plan to designate NFTs as securities, instead proposing to treat them on a case-by-case basis.  

On 8 March, BaFin published an article explaining that they are currently considering the legal classification of NFTs. Currently, regulators do not see that they meet the criteria to be classified as securities. However, this could change in the future if, for example, 1,000 NFTs were to be created with identical redemption and interest requirements. A further caveat is that if the NFT contains any rights of use or ownership documentation, such as a distribution security, then it could be classified as an investment.

The Authority recommends approaching the classification of an NFT as a 'cryptoasset' on a case-by-case basis. As NFTs lack the possibility of immediate convertibility, BaFin considers it unlikely that they could be classified as such. Currently, NFTs do not even have the status of "electronic money" due to their lack of standardization.

Given the complexity of classification, BaFin does not foresee that NFTs will meet the conditions of the Payment Services Supervision Act in the near future. Indeed, NFTs cannot even be subject to BaFin's supervision under anti-money laundering rules, as is the case with traditional cryptocurrencies. This would only be applicable if NFTs were to be designated as a separate "crypto asset."

The Metajuice metaverse platform has stated that nearly three out of four NFT collectors buying on their platform, do so solely for the status of uniqueness and the aesthetics of the NFTs. Based on a survey conducted by the platform, only 13% of participants said they buy NFTs in order to sell them on in the future.

Source: cointelegraph.com