As the market for non-fungible tokens (NFT) grows – with NFT revenue now expected to exceed $130 billion by 2030 – the Federal government will need additional expertise to address the policy and regulatory needs of the market required to best protect consumers, a report from the Government Accountability Office (GAO) says.
GAO examined the new technology as its market is booming. The report looks at the technology, how it works, how mature it is, along with concerns, challenges, and opportunities. GAO defines NFTs as “a digital identifier … that represents a digital or physical asset,” and said they are primarily being used for digital collectibles at the moment.
“Revenue from NFTs could exceed $130 billion by 2030, and NFTs could help advance the digital economy. However, despite media attention and celebrity endorsements, they are poorly understood, and the current market is subject to speculation and fraud,” GAO wrote. “Also, lack of NFT expertise in the federal workforce makes it difficult to address statutory and regulatory challenges.”
The volatility of the NFT market is one concern GAO raised, and said the Federal government and private industry both have raised concerns regarding fraud and privacy. There is also a workforce component to GAO’s concerns, with the Federal government worried as it has long struggled to attract and retain tech talent.
“Some researchers suggest that sufficient expertise could help inform policymakers as they consider what actions, if any, are necessary to regulate NFTs,” GAO wrote.
NFTs currently depend on three technologies: blockchain, a decentralized ledger that uses cryptography; an NFT marketplace where people can mint, buy, or sell NFTs; and a digital wallet to pay for and store the NFTs.
NFTs were originally invented in 2014, but GAO notes that they exploded in popularity in 2021 and had an estimated market value of $50.1 billion. The rising demand for decentralized marketplaces and digital collectibles is behind the estimated 2030 market valuation.
The report ends with GAO posing two questions for how policymakers:
- “What, if anything, might policymakers do to better protect individuals or entities using NFTs, including through the use of regulatory or criminal enforcement mechanisms?” and
- “How could policymakers enhance the expertise of the federal workforce to address the use of NFTs and clarify the applicability of current statutory and regulatory frameworks to current and future NFT uses?”