UK lawmakers open probe into NFT regulation – ‘there are fears the bubble could burst’

Members of the UK’s Digital, Culture, Media and Sport Committee have opened a request to hear from the public about the potential benefits and risks of non-fungible tokens, or NFTs, and blockchain on the country’s economy.

In an announcement on November 4, the DCMS committee said its investigation was related to the sudden growth in the NFT market, responding to fears that assets may be overvalued and risk the bubble bursting. According to the committee, NFT regulation in the UK is “largely non-existent” and DCMS plans to assess the assets ahead of a review by the Treasury Department.

What are the risks and benefits of NFTs and the wider blockchain? We want to assess whether NFT investors, especially vulnerable speculators, are put at risk by the market and whether there is a need for regulation. For more details see pic.twitter.com/dvMTSwPYv1

— Digital, Culture, Media and Sports Committee (@CommonsDCMS) 4 November 2022

“NFTs swept through the digital world so quickly that we didn’t have time to stop and assess,” said committee chair Julian Knight. “Now that the market is swinging wildly and there are fears that the bubble may burst, we need to understand the risks, benefits and regulatory requirements of this cutting-edge technology.”

The legislator added:

“Our inquiry will examine whether greater regulation is needed to protect these consumers and wider markets from volatile investments. This inquiry will also help Parliament understand the opportunities presented by an exciting new technology that could democratize how assets are bought and sold.”

Citing examples, including the NFT of Jack Dorsey’s first tweet, the committee urged users to submit evidence before the Jan. 6 deadline for an analysis of both the benefits and risks of the technology on the economy. DCMS noted that global NFT sales were approximately $17 billion at the end of 2021, but fell by more than 90% from August 2021 to March 2022.

Related: The UK cannot afford to send mixed messages on crypto

The UK government has also moved forward with its Financial Services and Markets Bill, which aimed to expand the country’s regulatory framework for stablecoins. Prime Minister Rishi Sunak, although in office for less than two weeks, previously expressed support for the creation of a Royal Mint NFT and the UK establishing a digital central bank currency.