Non-Fungible Tokens: The Future is Now?
The term 'non-fungible token' has been everywhere recently. Historically it has been limited to the furthest corners of LinkedIn, but today it…
By Francesca Ffiske / April 16, 2021
The term 'non-fungible token' has been everywhere recently. Historically it has been limited to the furthest corners of LinkedIn, but today it has been splashed across mainstream media, from the FT to the Guardian.
What is a non-fungible token (NFT)? Not to be confused with a non-fungible item, which consists of works of art and other irreplaceable objects, an NFT is a unit of data on a digital ledger, or 'blockchain', and represents a unique digital file – which means this file's authenticity and ownership can be made secure. Yes, it can be 'shared' infinitely, but only one person will own it. This can be a video, an item, or (no, really) a pair of virtual Gucci sneakers retailing at $17.99 a pair…
Why is this relevant now? Well, unless you have been living off-the-grid, you will have seen a few newsworthy NFT sales recently. Christie's has just sold their first digital-only NFT piece of art entitled 'The First 5000 Days' for over $69 million, about which Noah Davies, a specialist in Post-War & Contemporary Art at Christie's in New York said 'Christie's has never offered a new media artwork of this scale or importance before [...] Acquiring Beeple's work is a unique opportunity to own an entry in the blockchain itself created by one of the world's leading digital artists'. Just this week, an NFT piece of real-estate known as the 'Mars House', sold for $500,000. If you think that's a bit steep for a virtual house, you should know it also comes with its own 'ambient soundtrack'.
When researching this, I came across several articles looking to try to understand, psychologically, why one would spend big bucks on something that anyone with a screen can view for free. The analysis was anything from 'because they're cool', to one which thought they were symptomatic of a dying society (I will leave you to decide which is the more likely).
Why is this relevant for the Private Client lawyer? While NFTs have been around since 2017, it's this year that high net worth investors and collectors seem to be paying them attention. Their introduction, along with cryptocurrencies like bitcoin, make up a new branch of assets that the Private Client advisor will need to understand – especially with the next generation of clients. Whether it's in regard to asset protection and how to build them into trust structures, risk, tax planning for the transactions, or trying to navigate issues of situs and jurisdiction application, it is likely that the management of NFTs will be crossing the desks of Private Client lawyers with increasing regularity.
Have you seen an upturn in NFT and cryptocurrency assets amongst your clients? Let us know what you think.