H5-1404 | NFTs “The Big View”

 

 

 

 

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  1. The process of Minting is simply using codes to add the digital content as a Token on the Ethereum blockchain.
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  2. Once the work has been Minted (added to the blockchain) it will be treated as an NFT and cannot be edited or deleted
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  3. Once an individual purchases an NFT, they buy the digital file on a blockchain that shows that they own the unique piece of digital content
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  4. “The issue is that perceptions of what the buyer is paying for are not easily framed in legal terms. NFT marketplaces do not always accurately describe the value proposition of the goods they are selling. The truth is that the value of any NFT is speculative. Its value is determined by what someone else is willing to pay for it and nothing else
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  5. NFTs are not only used for artworks but can be used for a myriad of things such as; creating virtual land
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  6. Crypto-enthusiasts predict that the NBA could generate over $500,000,000 in revenue from the sale of their Top Shots since people already buy trading cards of players for exorbitant prices
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  7. NFT buyers do not actually own the NFTs. What they own are blockchain receipts (digital files) that act like a receipt for the purchase they are made and not the actual NFT
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  8. buyers are advised to look at how their ownership rights
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  9. they give to the buyer is a licence to use the NFT and not a transfer of the copyright.
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    (i) a personal licence to use and display the art associated with the NFT, as well as
    (ii) a commercial licence to make merchandise that displays that art associated with the NFT, a license subject to a $100,000 gross revenue per year limit
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  10. Kings of Leon, a rock band that recently released their album as an NFT, stated emphatically that the buyer only has a license to display the album for personal use and cannot use it for commercial purposes or in films or music

 

Classification of NFTs | Regulatory – Tax

  1. Once the creator finds a buyer who pays for the NFT, the creator has earned income which will be subject to income tax.
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  2. If the buyer sells it for a higher price, it should be classified as property which should attract capital gains tax upon the resale of the NFT.
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  3. If the NFTs are offered to the public, with the promise that its value may increase and the holders can sell it at a profit, and the NFT is being promoted by celebrities or individuals, it may be an investment more than a digital work of art at that point.
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  4. In this case, the NFT may be classified as a security and may be subject to security rules and regulations as well as the various taxes that accompany securities.
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  5. Consequently, due to the ability of NFTs to be used for various things, regulators will be faced with the dilemma of properly classifying them for tax purposes and also to understand whose purview they fall under for regulation and control.
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  6. Potential buyers of NFTs should see whether they are going to be subject to compliance and trade regulations, anti-money laundering and bribery laws, and other relevant rule
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