What are the Future Assets?

Nearly everyone has heard of, used or owned cryptocurrency at some point. Bitcoin, Ethereum, and other digital currencies make up cryptocurrency. Local and national headlines are made about cryptocurrency volatility, merchant acceptance, tax consequences and regulatory control. NFTs stand for Non-FungibleTokens.

Those who create and/or purchase NFTs can make fortunes. What are NFTs? How can they be used and why should we care? Meta, the parent company of Facebook, announced that it was entering the Metaverse. This new digital frontier has its own infrastructure, apps, assets and infrastructure.

Current Cryptocurrency Issues

Uncle Sam is the first major cryptocurrency issue. The IRS treats cryptocurrency gains and losses as taxable assets. This is the first major issue in cryptocurrency. When it comes to realized tax treatment, cryptocurrency is treated the same as any other asset. If the cryptocurrency is converted into US Dollars, IRS expects holders to recognize capital gains and losses. However, losses can be deducted.

The IRS will treat cryptocurrency in a similar way it treats stocks, bonds, and other assets. If the asset is held longer than one-year, holders of cryptocurrency should recognize any capital gains or losses. Short term traders and those who buy and sell cryptocurrency within a shorter time frame will be subject to the higher short term capital gains tax.

There is another major problem with cryptocurrency. This is the acceptance of cryptocurrency as an exchange for goods and services. Gucci is one of the most prominent brands that accept cryptocurrency.2 More businesses will be faced with the volatility and price fluctuations caused by cryptocurrency. Bitcoin, the largest cryptocurrency in terms of market value, has seen significant volatility. This affects many crypto wallet owners, as well as businesses.

While cryptocurrency struggles with taxation and volatility issues, its sister asset, Non-Fungible Tokens, is thriving.

Non-Fungible Tokens

Non-Fungible tokens, also known by their acronym NFTs, are digital assets which provide ownership certification. They are built on blockchain technology and can track who is buying and selling the assets.

There are a few places where you can buy NFTs. The largest such marketplace is known as OpenSea (https://opensea.io/). NFTs can be purchased using wallets. Users can also sell and purchase NFTs through listings on marketplaces. NFTs are gaining popularity as they allow for the digital version of products (such as art) to be able to be traced (for authenticity) and prevent duplications/forgeries. NFTs can also represent ownership of real-world or non-digital assets, such as real property.

In the next few years, the NFT market will be worth more than $80 billion.6 Legal implications and use of NFTs will also likely increase. Digitalization of well-known art, music, and literature is likely to lead to significant expansion in intellectual property law. Property law will be impacted by the growth in fractional NFT ownership, monetization of future sale proceeds and derivative works. A boom in NFTs is also causing significant changes to contract law, particularly via increased use of’smartcontracts span>

Smart Contracts are programs that run on a blockchain and that execute when certain conditions are met. They allow parties to lock in terms and for the blockchain monitor and verify that terms are being fulfilled. The program/contract can also assist in exchanging consideration with the parties without their involvement. Smart contracts are more secure than traditional contracts because the transaction cannot be modified once it has been programmed. The results can only ever be seen by the parties who have access to the program/contract.

Smart contracts can also be used to transact real estate. Smart contracts are used to expand real estate in the physical realm. However, smart contracts and NFTs as well as cryptocurrencies are increasingly being used in the digital world. This is called the ‘Metaverse .’

Metaverse

Facebook is the most popular social media network in the world, both in terms of users and market capitalization. This is a sign that the company and the tech world see the Metaverse as the future.8

The exact definition of the Metaverse remains to be determined by technology companies, governments and individuals. It is still being developed the infrastructure for the Metaverse. Metaverse can be described as a virtual world that is identical to the real world through virtual reality. It includes individuals, virtual real estate, and virtual infrastructure.9 This is due to massive corporate commitments such as Microsoft, Snap, Nvidia and Snap.

As the Metaverse grows, there are a few key issues that are being discussed by lawyers, CEOs, strategists and others. The key issues are how to deal intellectual property violations, security, privacy concerns, antitrust concerns and possible crimes in or about the Metaverse.10 Since the Metaverse will be an extension to the real world, legal issues surrounding property rights in the Metaverse and handling disputes in that universe, as well as related issues, will dominate the legal architecture surrounding it. The commercial aspects of the Metaverse, including the selling and buying of digital land, are being clarified.

Most people are familiar with commercial and residential properties. However, digital properties or land in the Metaverse are growing in popularity and attracting investors. There is a decentralized version of Metaverse that multiple verses participate in. This has made headlines for businesses and individuals spending millions on digital real estate.

Although money is flowing into digital land, critics are raising concerns. Mark Cuban, a billionaire and Shark Tank star, thinks that buying land in the Metaverse does not make sense because it is not based on utility. Also, virtual worlds are capable of creating infinite ‘lands’ to sell, thereby causing an endless supply and devaluation of existing digital land holdings. It is possible that the digital land on the platform will also disappear.

It is difficult to predict the future of cryptocurrencies and NFTs. It is likely that cryptocurrencies and NFTs will impact everyone, regardless of their financial status. This will have major commercial, legal and other implications. These worlds will become more accessible and easier to understand, allowing us to invest in them and reap the benefits. We can still watch the cryptocurrency markets and appreciate NFTs.

Raich Law PLLC is owned and founded by Sagar Raich. He practices business, real estate, and intellectual property law. He is licensed in Nevada, California, and earned his Master’s degree at Harvard University. Mr. Raich is an adjunct Professor at the University of Nevada, Las Vegas, has been published numerous times in law related magazines/articles/periodicals, and has appeared on television and other media.

The post Assets for the Future? was first published on Vegas Legal Magazine.

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