NFTs: Future or Fad

The APAC region has been particularly receptive to NFTs with Central and Southeast Asia counting for 35% of the $22 billion in global trade of these digital tokens last year. Asia is emerging as the frontrunner in the global NFT market with Southeast Asians making up most NFT-based web traffic last year, according to a report by research firm Finder.

However, NFTs are proving to be controversial, with valid questions abound regarding sustainability, security, and the legal framework surrounding their ownership. What then can the Asian financial industry learn from the NFT landscape?

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What is the impact of NFTs and DLT on banks and how do you manage risk?

We’ve heard plenty about blockchain in recent years and its ability to manage peer-to-peer transactions without the need for a centralized authority such as a bank.

While cryptocurrencies such as Bitcoin are taking a long-predicted nosedive right now, digital ledger technology [DLT] such as blockchain is continuing to grow in popularity and is likely to see wider adoption in the banking and payment industries. However, with blockchain being such a paradigm shift in the way banking institutions operate the uptake has been slow.

Much of this hesitance is due to the uncertainty which surrounds blockchain and the potential bad press which follows the technology around. The computing power needed for the complex bidding process which generates the algorithmic strings which make DLTs possible is significant. 

With global climate change now an ever-present concern, companies in all industries are seeking ways to reduce the environmental impact of their operations – something widespread adoption of DLT tech files in the face of. 

NFTs possess all the problems associated with the blockchain, plus the additional concerns around security and the stability of the value of the assets. We already know that NFTs bought for significant amounts have struggled to recoup their value in subsequent sales.

NFTs are also incredibly vulnerable to phishing frauds and several high profile NFT collectors have had their asset stolen. Compounding this issue is the fact that the NFT space is still largely unregulated – something which is ironically often vaunted as a positive by NFT advocates – meaning there can often be truly little recompense for those who are victims of such crimes.

Therefore, banks and other financial brands which want to deploy NFT and DLT in their operations need to carefully consider the impact such technologies will have in the environment – and thus their reputation as a climate aware company – and how to manage the security and financial risks associated with them.

To know more about how the growth of NFTs can  change the trajectory of the banking and payments industry and the impact of NFT Future in Asia and the global market,