BaFin, the financial regulatory agency of Germany, has stated that they have not yet determined whether non-fungible tokens (NFTs) should be categorized as securities or not. The agency has recommended assessing each NFT on an individual basis to determine its classification.
The BaFin journal released an explanatory note on the legal classification of NFTs on March 8. At the present time, regulators do not believe that NFTs meet the requirements to be classified as securities. BaFin may consider NFTs to be securities in the future if, for instance, 1,000 NFTs represent the same repayment and interest claims.
Another concern raised is that any non-financial asset that provides evidence of ownership or exploitation rights, such as a distribution promise, may be viewed as an investment.
The agency advises designating NFTs as “crypto assets” on a case-by-case basis. However, according to BaFin, the likelihood that NFTs will be classified as “crypto assets” is even lower than the investment categorization due to the absence of instant exchangeability. Lack of standardization also exempts non-fiat currencies from the “e-money” classification.
BaFin does not expect NFTs to comply with the Payment Services Supervision Act’s licensing requirements due to classification issues. NFTs are likewise exempt from BaFin’s Anti-Money Laundering oversight, with the exception of fungibles, which are classified as financial instruments. NFTs classified individually as “crypto assets” would be subject to AML oversight.
Over three-quarters of NFT collectors on the metaverse platform Metajuice purchase NFTs for their status, uniqueness, and aesthetics, according to Metajuice. Only 13% of survey respondents indicated that they purchase NFTs with the intent to resell them in the future.
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