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Non-Fungible Tokens (NFTs) in Singapore: A Beginner’s Guide

nft singapore
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Wow! The American Artist Beeple sold his “Everydays – The First 5,000 days” for USD69.3 million last year. Yes, it is an NFT(non-fungible token). Mr. Harfiiz Karim, a local artist in Singapore, earned a total of USD100,000 for his digital artwork online this year. Believe it or not, NPTs have become a popular art investing trend nowadays. 

An NFT is a digital art bearing itself on blockchain technology. In recent years, a trendy phrase has been a hot topic circulating on social media or search results – “Non-Fungible Token or NFT Singapore” on the internet. Celebrities like Singers Justin Bieber and Lil Baby, Sports stars, e.g., Serena Williams and Mike Tyson, also promote and own NFTs.

So, what is an NFT? Is it legal, safe, and moneymaking in NFT investing in Singapore? Singapore, a regional financial hub in South East Asia, has seen herself as one of the innovative technology centers around the world. It is not unusual for Singapore will become an active NFT marketplace for trades and investing activities. Read more on how to buy NFT in Singapore.

Does the Singapore Government regulate NFTs? 

Singapore has no laws specific to NFTs, though the Parliament passed a “Payment Service Act” in 2019 specifying cryptocurrency as a payment medium to goods and services. 

Non-fungible tokens are not part of the act. The Monetary Authority of Singapore alleges to keep a neutral and open attitude and legislate NFT activities if necessary. You, as an investor or collector, should consider the following issues.

1. Seller’s Authenticity

Investors should take care of an ownership issue when they purchase NFTs. Blockchain technology is an open system where an NFT’s details and transactions are public except the owner’s identity. That’s why blockchain technology is popular for its anonymity besides security.

Nevertheless, it may lead to fraud due to a lack of trust. You should do due diligence concerning a seller’s authenticity to avoid loss.

2. Buyer’s Recourse

A clear picture of what right you own upon purchasing an NFT in law from a vendor. An NFT buyer does not own an underlying digital artwork’s rights and intellectual property. He owns the token itself only.

In effect, the vendor retains the above rights unless the author consents to transfer the above rights to a buyer. In this case, the price may change and need agreement from the buyer and seller.

Besides the copyright and ownership transfer, buyers may choose to license the underlying digital asset on restricting use period and frequency or for a royalty instead. 

3. How should a Buyer and Seller make an NFT contract enforced?

Unlike the general sale, NFT investing has a “smart contract” mechanism to enforce a deal. A smart contract is self-executing instructions embedded on an NFT to carry out contract terms agreed to. A typical smart contract term may entitle an NFT creator to a certain percentage of subsequent resales.

Besides, a buyer may initiate a contract with a vendor for copyright transfer for the buyer’s protection. The agreement should be binding and subject to Singapore’s laws.

4. Pay first or Transfer first?

As the blockchain sale is not based on a trust system, a buyer or a seller may face an issue of who should pay or transfer an NFT first. Some platforms may require a seller to transfer a digital asset first before a buyer pays. A better solution is through a conventional and enforceable sales contract for both parties’ protection. However, a seller or buyer may not be in Singapore, and it is also unrealistic to enforce the agreement upon a breach of contract when one party is abroad. You should consult an expert before investing in NFTs.

What is an NFT, and How does it work?

What is an NFT?

An NFT is a digital asset possessed by an investor or collector. A non-fungible token can be in the form of a piece of art, tweets, music, videos, or real estate on virtual land.

As NFTs have a legal status like ownership, you can own and trade NPFs online because of their digital formats. Most NFTs exist on the secure Ethereum blockchain technology, which houses cryptocurrencies like Bitcoins, Tether. Like physical artwork, each NFT is unique, and its value is distinct from other NFTs.

How does it work?

Most investors or collectors trade NFTs using Ethereum on the blockchain. Being an open and secure computerized network, blockchain, like a ledger, has all transactions and activities in public view except for NFTs’ owners’ identities.

When you buy an NFT, you do not necessarily have a right to original work. That means you purchase an image or video modeled against a piece of art, and therefore, you do not have a right to physical work. You can make a deal with the seller by integrating a smart contract into the NFT by limiting display frequency or even destroying a physical artwork.

NFTs have other use of purposes. Institutions can use them to store open data and verify tickets for authenticity.

nft search

Opportunities and Pitfalls of NFTs

Opportunities

NFT, like cryptocurrencies, is a new field for investments and real-life applications.

  • Investments: NFT investing is a new investment tool storing value like physical artwork, music, videos. In recent years, auction houses have made successful deals regarding NFTs like Beeple’s Everydays – The First 5,000 days. 
  • Investment funds are also available to invest in NFTs. Financial institutions offer fractional shares in buying non-fungible tokens.
  • Fractional share investing: Financial institutions have offered fractional NFT share investing. The advantage is twofold: 1. Diversification: Through fractional investments, investors can participate in more NFTs and reduce growth. 2. Small sum investment: high potential NFTs are expensive investments like CryptoPunks worth 100ETH(approximately USD240000). Investors with small funds may share the NFT growth if they buy fractional shares of the NFT.
  • Real-life applications: Banks may use NFTs as authorization in making deals. Governments may use NFTs as data proof, and corporations can access NFTs in verifying clients’ identities for commercial transactions. In the future, an NFT can be a digital representation for activities in place of hard or physical data for efficiency and data accuracy. 

Pitfalls

  • Regulations: NFT is a new type of investment worldwide. However, the Government has fewer laws to protect NPT creators like intellectual property rights and investors.  The Payment Services Act of 2019, related to virtual currencies, defines cryptocurrencies as digital payment tokens for goods and services and prevents money laundering and terrorism financing. Unlike cryptocurrency service providers, the Monetary Authority of Singapore (MAS) does not formally regulate NFTs but adopts a close and neutral stance on monitoring NFT activities.
  • Investment: Regarding the NFT fractional share investing, the MAS views it as a collective investment scheme adhering to investment trust rules. NFT trades and activities are not within the gambit of any laws and regulations until now. Nevertheless, the agency keeps an eye on NFT orderly developments and may legislate any laws if it deems necessary.
  • Bubbles: You may notice the recent price surges among definite NFTs are proceeding a bubble burst. The rising price phenomena exist in renowned artists’ works only. Nonetheless, a large number of NFTs are lining the market. The price differences for a similar NFT can be huge. Research before investing is the best approach to investing, including NFTs.

Where and How to buy and sell NFTs in Singapore

The most popular blockchain for NFTs is Ethereum though there are many others. Therefore, you need a crypto wallet and the currency – Ethereum to buy these digital assets. Next, you may go to several NFT marketplaces for shopping one in your favor. 

Well-known NFT market websites include Opensea.io, Rarible, and Foundation, where NFT trades are active. The marketplaces charge you a fee for a transaction. The fee structure varies and is subject to the marketplace.

On the other side, you should choose a platform from the above popular for your NFTs if you plan to sell. The chance of getting the best bidding prices is higher than the rest. Research is a must work. Listing your NFTs is easy on Opensea.io and Rarible, but you may do more on Foundation marketplace. You need members to invite or vote for your work to be listed.

Final Words

An NFT is new to most investors. It may become future mainstream for investments and real-life uses. However, the regulating issues are uncertain and necessitate further observation and clarifications before the digital asset goes further.

Takeaways:

  • No clear regulations on the investing and use of Non-fungible tokens
  • Copyright, intellectual property, and ownership of NFTs doesn’t belong to buyers.
  • It may not be easy to verify an NFT owner’s identity.
  • It may be challenging to enforce terms of contracts upon violations if it is an international deal.

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