Law and Economics in the World of NFTs

Abstract

This thesis explores the legal and economic aspects of non-fungible tokens (NFTs) and their regulation within the EU. NFTs, as unique digital assets, have gained significant attention, particularly in the fields of art, collectibles, and digital economies. Despite their rapid growth, there remains considerable uncertainty regarding how NFTs should be regulated and how their value is determined. The purpose of this thesis is to examine the applicability of EU regulations, specifically MiCA, DAC8, and AMLD5, to NFTs, as well as how the NFT market functions economically and legally. The thesis employs a combined approach, integrating a legal analysis of EU legislation with an economic analysis of the NFT market. The legal part investigates how NFTs may fall under existing EU regulations, including the MiCA Regulation and the Fifth Anti-Money Laundering Directive (AMLD5), and the legal implications of such applicability. The economic analysis focuses on the factors driving price formation in the NFT market, including speculation, scarcity, and the reputation of creators, and how these factors differ from traditional economic assets. The thesis also highlights the risks associated with the NFT market, particularly regarding money laundering. Due to the anonymous and decentralized nature of NFT transactions, it is challenging to ensure sufficient control, which makes the market vulnerable to financial crime. This underscores the need for more precise and comprehensive regulation of NFTs. The conclusion of the thesis is that, although NFTs are not explicitly regulated under EU law, they can fall within existing regulatory frameworks depending on their usage. There is a clear need for more targeted regulation of the NFT market to both protect investors and prevent the market from being exploited for money laundering purposes. The thesis suggests that NFTs could play a central role in the future digital economy, but only if they are regulated in a way that ensures both stability and transparency. In conclusion, this thesis demonstrates that the regulation of NFTs is currently in a gray area and that there is a need for the EU to adapt its legislation to the rapid development occurring in the digital asset market.