The US Treasury Department acknowledges the use cases of NFTs in its recently published Crypto-Asset Report

Quick take:

• The US Treasury has acknowledged the use cases of NFTs in its report on cryptoassets published this month.
• The report appears to be aimed at educating non-crypto natives about the implications of Web3.
• With recent market movements, the US has been keeping a close eye on the NFT space over the past year.

The US Treasury Department published a report this month, outlining the implications of cryptoassets for consumers, investors and businesses.

The 58-page report outlines the use cases, risks and implications of cryptoassets and NFTs. Aimed at educating non-crypto natives, the report explains the definition of non-fungible tokens and recognized the growing role of NFTs in video games and other online entertainment systems as another use case.

The report also mentions that future applications of NFTs include enabling the registration and verification of transfers of property rights; facilitate automatic royalty payments for music and film; prevent duplication and falsifications in the title of other properties and consumables; enables more digital credentials, including identification, licensing, certification; and facilitate compliance with laws in the financial industry.

However, many of these applications of NFTs are already in use. For example, blockchain real estate firm Propy sells homes authenticated by NFTs, while NFT ticketing solutions are implemented by various Web2 and Web3 platforms to prevent counterfeiting. Various entertainment and fan engagement platforms have also licensed content for use in creating NFTs.

With the latest market movements, the US authorities have been keeping a close eye on the NFT space for the past year. The US Treasury warned of behavioral risks in the cryptoasset ecosystem that have resulted in financial harm to consumers, investors and businesses, including fraud, theft, hacks and insider trading.

The US Treasury report also says the NFT market has similar disclosure and integrity gaps. In June, the former product manager at market leader OpenSea was charged with NFT insider trading.

Consumers may also unknowingly purchase NFTs that may contain copyright infringement. “The industry has seen a significant increase in the number of lawsuits filed, with claims related to deceptive marketing tactics or for sales made under false pretenses,” the report mentions.

One such example is the high-profile lawsuit between Hermes and MetaBirkin creator Mason Rothschild, which sparked a wave of brands rushing to file Web3 trademarks. Rothschild’s motion to dismiss the lawsuit was denied in May, and Hermes eventually filed its own Web3 trademarks on August 26.

Despite the implications surrounding cryptoassets, the fact that governments in the US and other countries such as Singapore, Israel and Australia have looked at the NFT space bodes well for its legitimacy and the possibility of a basis for regulating NFTs in the future.

Keep yourself updated: