NFTs have brought significant monetization potential to the cryptoverse and have allowed creators to get more value for their work.
However, they have come in for a lot of criticism lately as lawmakers mull over their regulations. There are fears that sophisticated money laundering networks are using NFTs to clean dirty money. This is due to the anonymity they provide.
This intrinsic ownership has also caused a rise in unsolved NFT theft cases, which have been further complicated by the decentralized nature of many NFT projects. Furthermore, the entities behind the theft schemes often take advantage of many account intrusion techniques, such as phishing and SIM swapping attacks, to breach the accounts of NFT owners.
Existing restrictions on NFT operations
Major jurisdictions around the world are striving to regulate NFTs. The United States has already banned some marketplaces, such as Chatex, implicated in money laundering schemes. The platform is said to have been used by REvil to hide ill-gotten money through a series of NFT transactions.
As a general rule, the US does not appear to be banning all NFT markets, addresses, and items.
On the other hand, China has embraced NFTs largely because they represent ownership of physical assets. While it has banned cryptocurrency trading and mining, the government wants people to buy and sell NFTs on regulated platforms. NFT transactions in these markets can only be done with the digital yuan, which is owned by the government.
The government has already unveiled plans to develop a centralized NFT industry. The state-backed Blockchain Services Network (BSN) agency has already taken charge of developing the infrastructure. As expected, only digital operations in yuan will be supported.
As for smaller economies, some jurisdictions, such as South Korea, have banned some categories of NFT ecosystems. For example, the East Asian nation has taken a tough stance against NFT games. According to the South Korean Game Administration and Classification Committee, NFT games are banned because they encourage speculation, like gambling.
KYC for NFT: a compromise between law and decentralization
Innovators in the gaming and collectible markets saw significant growth after the influx of NFT projects in 2021. The boom caught the attention of enthusiasts and policymakers alike.
Having started to empower art creators, NFT technology has been abused by some malicious entities. It is increasingly associated with money laundering operations and tax evasion schemes. This turn of events has given rise to the Know-Your-Customer (KYC) debate.
A section of crypto experts believe that the industry would be wise to implement strict KYC rules to prevent widespread exploitation of the technology. This would make it easier for NFT networks to be secure and work with recognized regulated financial institutions.
How can NFT holders protect their assets from being frozen or stolen?
NFT investors can prevent their assets from being frozen or stolen in many ways. The most popular among them is the use of non-custodial wallets. They allow wallet owners to have full custody of their wallet keys.
The best way to store keys to a non-custodial wallet is to write the alphanumeric code on a piece of paper and keep it in a safe place. AlphaWallet and Metamask are some examples of top rated non-custodial wallets.
Cold storage wallets are also a great alternative. They limit access to stored assets through encryption. In addition, the strategy protects them against the most common hacker attacks.
Lastly, NFT investors should be careful and do some research before participating in NFT Airdrops. This helps prevent rug pulling.
Guest post by Ryan Wilkinson of Blockasset.co
Ryan Wilkinson, Product Manager at Blockasset.co since February 2021. He is responsible for product related issues, deals with all developers, product concept creation and completion. Negotiations with new investors, sponsors and advisors and communication with key partners. Management of issuance and distribution of tokens. Working for Blockasset allows you to combine and apply all of your skills from your previous jobs. At this level, he focuses on developing technical solutions, resulting in excellent results for our company.
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This post NFT regulation: who benefits, who loses and how to protect your rares
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