NFTs (or Non-Fungible Tokens) have been a hot topic for quite some time now, and rarely out of mainstream news. Parent company of Facebook, Meta announced only last week that they are planning on implementing an NFT marketplace within the Instagram app. Despite the bear market gripping the NFT and crypto industries, it does look like the level of consumer access and popularity of NFTs is increasing. An NFT is a unique cryptographic token that exists on the blockchain, commonly, but by no means always, linked to a digital artwork. They are not to be confused with cryptocurrencies. Every NFT is unique and distinct from every other NFT, while units of the same cryptocurrency like Bitcoin or Ethereum are fungible, or interchangeable with each other.
Creators on Instagram will soon be able to create (or “mint”), display and sell their own NFTs on the platform. As part of the update, creators will have access to a toolkit within the Instagram app that will allow them to mint the NFT and showcase it through their accounts, potentially leading to a sale – through the platform – for the creator. Meta’s plans will help creators monetise and find new audiences for their digital art. Meta has also indicated that it will not be charging minting or sale fees on NFTs until at least 2024 and that it will initially absorb any gas fees (the sums payable for recording a transaction to a blockchain, itself)
The process of buying and selling NFTs within the platform will take place via a traditional in-app purchase across both iOS and Android. For now, Meta is testing the feature with a small group of creators in the United States and if successful, plans to expand the programme out to more countries in the future. This is not Meta’s first move into the NFT space, having already enabled, earlier this year, the ability for Instagram users to connect their crypto wallets to their account and display their NFTs.
If successful, Instagram could grow to rival OpenSea, the dominant NFT marketplace which sees over 120 million website visits each month.
Of course, this move brings with it a number of legal considerations that must be thought about, first and foremost being security. The company has already been hit with a number of privacy and data scandals in recent years. For the Instagram NFT platform to be a success it must build up consumer confidence with respect to its security and privacy measures. Executives will be extremely keen to avoid privacy and hacking scandals and the stakes will be especially high given that the initiative will no doubt introduce a lot of people who do not have much experience of the crypto space.
Prospective NFT sellers and buyers should also be aware of IP rights issues in relation to the digital assets. Ownership of an NFT does not necessarily result in ownership of the copyright in any linked artwork and it is certainly possible for anyone to create an NFT that links, without authorisation, to a third party’s copyright work.
It follows that owning an NFT does not necessarily mean that you can use the underlying artwork for commercial purposes. Any rights to use or access of the NFT should be set out in the terms and conditions applicable to the purchase and it will be interesting to see how Instagram plans to police these issues. The motto “buyer beware” certainly applies here.
There are also a number of potential tax consequences associated with the buying and selling of NFTs and cryptocurrencies that those new to the space are unlikely to fully grasp. In the UK for example, there are potential income tax, capital gains tax, corporation tax and VAT ramifications. HMRC is currently developing guidance on the taxation of NFTs, to supplement its existing Cryptoassets Manual.
Consumers wishing to dabble within the NFT market will do well to learn what they can about these legal implications. In spite of the risks and complexities, though, this move by Meta does show that NFTs are becoming increasingly mainstream and it will drive many people to engage with crypto technology for the first time. When they have, do not be surprised if Instagram turns on the monetisation taps and begins to charge them fees for the privilege.
Creators on Instagram will be able to make and sell their own NFTs — digital assets representing art or imagery that cannot be replicated — directly to fans, both on and off the platform, Meta said on Wednesday