Italian Fashion Houses and Sports Clubs Leading the Way on NFTs: Could Their Progress Be Hamped by Lax Regulation?

 

NFTs have been around for a fair few years, but, since 2021, they have gone through something of a boom. With more people tuned into the possibilities blockchain offers, NFTs have taken over the digital landscape in a way that is indicative of the Web3 future we are venturing into. Italian fashion houses and sports clubs, such as Gucci and AC Milan, have taken advantage of this by plugging into the crypto world and selling their products as NFTs. In many ways, they have been paving the way into an entirely new creative landscape, but it isn’t necessarily plain sailing. 

Just as the horizon has opened up and NFTs have become a more regular digital presence, clouds have been steadily hazing the view again. With lax regulation, the risks involved in NFTs could potentially skewer their future of being a tangibly valuable asset. In order to understand how this is happening, it is first important to understand the context.

What Is the Difference Between A Crypto Coin And NFT? 

NFTs exist in the same world as crypto, but the two assets are fundamentally different. Non-fungibility entails irreplaceability. Like the Mona Lisa, even the best copy in the world cannot be considered the real thing. It can’t be replaced, while a fungible token – like a dollar bill or a Bitcoin – can be seen as interchangeable with any other dollar bill or Bitcoin. 

Right now, it is easy to track coins like bitcoin and their value, yet NFTs are not coins and their value is not necessarily something you can track. Due to it being a non-fungible token, it is, instead, the value that a seller or buyer deems that it is. 

What Is a Non-Fungible Token?

Ownership of a non-fungible token is designed to be recorded on the blockchain just as you would trade Ether or Bitcoin. 

The seller of the NFT and the investor bidding on the NFT would decide its value. It comes in the form of digital art, games and entertainment, and much like the traditional versions of these trades, the value is discerned subjectively. An NFT is the price that the investor values at within the context of what the NFT is and what the market is doing. Much like art and their verifiable “originals”, the owner of said NFT would then be the only person to own such a token, and therefore it cannot be recreated or traded out for an identical copy. 

Versions potentially can be viewed across the web, but ownership cannot be forged or copied. 

So There’s Value In Its Originality? 

Exactly. The singularity of NFTs contribute to their value. This can be an important revolution for creators in the marketplace, as it is possible to programme NFTs to have royalty features. This means that whenever there are secondary marketplace sales, the creator of the NFT can gain royalties if the work is resold, meaning they provide a new way to support artists and brands.

Who Has Embraced NFTs?

Many companies, ranging from art, sports, and fashion, have already begun to take advantage of NFTs. Just last year, the Italian luxury fashion house Dolce & Gabbana sold their first-ever NFT, Collezioni Genesi, for 1,885 ETH ($5.7 million). As well as this, the sports club AS Roma signed an exclusive $42 million partnership agreement with an NFT company – part of the deal stating they must create digital assets and collectables through the Digitalbits blockchain. Even Gucci is getting in on the action, with its own “Gucci Grail” NFT being minted on the Ethereum blockchain.

In short, those in the know are taking advantage of increased investor footfall. But as stated earlier, creating, and selling NFTs is not without risk. Although NFTs have technically been active in the digital world since 2014, it is only recently that brands, companies, and celebrities have been involved in boosting their popularity. In tangent with this, far more people are becoming aware of the lax regulations involved with selling, buying or investing in an NFT.

What Are The Regulations, Then?

As of today, there are still no regulations for NFTs, meaning there is no legal protection for those who create or invest in them. In late 2021, a link to an online auction for a Banksy NFT was placed on the artist's website, where it was sold for over $300,000. Due to many platforms being unable to verify the identity of sellers, the authenticity of this NFT was not verified and subsequently turned out to be a scam. Although the money was eventually paid back due to intense press coverage, this would not always be the case. So far, it is easy to create fake marketplaces, fake sellers, and unverified investments. For companies such as Dolce & Gabbana or AS Roma, for instance, this is a big issue which could negatively affect their progress. After all, if a seller can be unverified then there is nothing stopping them from impersonating real artists and real brands, before selling copies of their work as NFTs for a fraction of the price.

Is Anything Being Done to Change This?

Of course, while these issues are ongoing, there are steps being made to regulate cryptocurrency and consequentially make trading of NFT more controlled. Just two months ago, Italy issued a new decree requiring all currency service providers to enrol in a special section of the OAM register. This will help Italy to monitor cryptocurrency exchanges and prevent the risk of money laundering. CONSOB (the Italian Companies and Exchange Commision) are also keeping a close eye on all of crypto’s developments. While their regulations are potentially stunting the growth of crypto right now, they are acutely aware that crypto is going to play a big part in the future of finance, and they are doing everything they can to supervise a healthy rise in popularity. This will, of course, include the use of NFTs, which Italy is currently a creative hub for.

As well as this, while the risks may seem harmful, there are ways for companies to regulate the verifiability of NFTs through social media platforms or through a more secure website. The crypto world is growing rapidly and any company striving for growth and accommodation will not want to be left behind. With NFT’s ability to fashion a new marketplace with high growth potential, it is unlikely that sellers or investors will be put off by the current lack of regulations or, for that instance, regulations that may arrive in the future. With the incoming prospect of Web3 and the rapid growth of cryptocurrencies, it is looking like NFTs are the way forward. Even without regulation, any business will know that the risks are outweighed by the wealth of opportunities which NFT trading can bring.