Disclosure: The views and opinions expressed here are the author's own and do not necessarily represent those of crypto.news editorial.
This is the third of a three-part interview series with William Quigley, cryptocurrency and blockchain investor and co-founder of WAX and Tether, conducted exclusively by Selva Ozeri for crypto.news. Part one is about the prison sentences of Sam Bankman-Fried and Changpeng Zhao. Part two is about cryptocurrency and banking. Part three is about the future of NFTs.
1) In part 1 of the interview, you mentioned that you are the co-founder of Worldwide Asset eXchange (WAX), the first decentralized marketplace for trading virtual items in video games. Tell us about WAX.io, the number one Web3 gaming platform.
WAX was built specifically to cater to the demands of blockchain gamers and NFT collectors. Initially, WAX was built on the Ethereum blockchain, but the platform's prohibitively high gas fees and slow speeds led them to develop the WAX blockchain and wallet.
The WAX Blockchain is the largest NFT ecosystem with 250+ million NFT assets and 30,000+ dApps for NFT projects. The WAX Platform processes 23+ million transactions per day for 30,000+ dApps and 15 million users. The WAX Blockchain is lightning fast, secure, and carbon neutral.
WAX, the world's leading blockchain for NFTs, dApps, and digital games based on daily active users, was designed to be eco-friendly from the start. Our carbon neutral status is not just a claim, it is certified by Climate Care, demonstrating our commitment to minimizing our impact on the environment.
This Earth Day, we launched the Earthen WAX Walker NFT drop: for every Earthen Walker NFT claimed, WAX will plant a tree. This initiative combines our passion for innovative digital collectibles with tangible action to benefit the planet, offering an exclusive collection of digital art that can contribute to reforestation efforts around the world.
2) Crypto analytics firm dapp Gambl report for 2023 found 95% of NFTs are practically worthless. Reports show that around 79% of NFT collections remain unsold after the NFT craze in 2021-2022. The value of the popular Bored Yacht Ape NFT has fallen by around 90% from its market high. As the NFT market crashed at the end of 2021, I I wrote that NFTs will continue to exist in the future.What do you think about the future of NFTs?
According to Zion Market Research, the NFT market size is expected to be valued at $36.12 billion in 2023 and reach $217.07 billion by the end of 2032, indicating a compound annual growth rate of approximately 22.05% from 2024 to 2032.
The global NFT market cap today is $68.68 billion, a +1.12% change over the last 24 hours, and we expect most of this growth to come from utility NFTs, collectible NFTs, and Web3 gaming NFTs.
3) In 2021, art NFTs appeared to be the art world's biggest disruptor, with artists minting, exhibiting, and auctioning art NFTs, and investors buying, selling, and trading art NFTs. Nicole Sales Giles, “Christie's is a pioneer in digital art, and we are excited to be working with them,” said David Gregg, vice president and director of digital art sales for Christie's Post-War and Contemporary Art department.At Christie's, we view digital art as just another collecting category of contemporary art. The Web3 art community is collectively building something very special. In the future, I think the art world will look back on today's friendship between artists, builders, curators and collectors as “when it all began.” What are your thoughts and views on the future of art NFTs?
The global art market fell 4% last year to $65 billion, but much of that was driven by sales of a small number of artworks. Art NFTs are likely to be traded by global art businesses such as Christie's, Sotheby's and Phillips.
WAX is focused on collectible NFTs and gaming NFTs that see high owner-traded volume, and we hope that the collectible Earthen WAX Walker NFT drop will generate strong interest from collectors and plant a lot of trees.
4) Profits from collectible NFTs are taxed at a 28% rate, which is higher than the current capital gains tax rate. What are your thoughts on the high tax rate being applied to collectible NFTs, and will the high tax rate deter people from investing in NFT collectibles?
The global collectibles market, valued at over $360 billion in 2020, is expected to grow significantly by around 4% over the forecast period 2022-2028. The 28% tax rate increase therefore indicates that the US Internal Revenue Service (IRS) is anticipating significant growth in the collectible NFT sales sector and wants to tax it at a higher rate than the current capital gains tax rate.
5) The IRS recently 1099-DA The form has been submitted in draft form. Jonathan Cutler, a senior manager in Deloitte's Washington tax team, which advises on digital asset reporting, said: “The proposed digital asset reporting form will be available in August 2023. RulesNFTs are included in the reporting if they are “digital representations of value recorded on a cryptographically secured distributed ledger (or similar technology).” In April, the IRS released a draft form for reporting NFTs or other digital assets, the 1099-DA form. Importantly, the cover page states that this early draft release is based solely on proposed regulations and is subject to change based on a large amount of public comment. Until the IRS and Treasury digest those comments, it will be difficult to glean any meaningful information, whether from this draft form or otherwise, regarding the final scope of the definition of “digital asset” for reporting purposes. Do you have any comments on the draft 1099-DA form as it applies to NFTs?
If the draft 1099-DA is finalized in its current form, NFT marketplaces will be required to issue 1099-DAs. After all, collectible NFTs are subject to a high tax rate.
6) New NFT project brings cannabis sales out of dark web markets and into the NFT marketplace. Cannabis billionaire Maximillian White, also known as the Elon Musk of cannabis, said, “Weeks after being released from Dubai prison, I partnered with British rapper Fredo to launch the first Dr. Green NFT for sale on my own NFT marketplace, drgreennft.com, allowing owners of Ethereum-based NFTs to legally sell recreational cannabis worldwide. The global cannabis market is expected to be worth approximately $33 billion by the end of 2024 and exceed $69 billion by 2029, with a compound annual growth rate of 15.4%.” Do you have any thoughts or comments about this first-of-its-kind cannabis NFT initiative?
no comments.
7) NFTs appear set to be the next wave of SEC enforcement actions in the digital asset space. Last year, the SEC classified two NFT projects as securities. In August 2023, The SEC indicted Impact Theory LLC.Impact Theory, a Los Angeles-based media and entertainment company, agreed to conduct a non-registered offering of crypto securities in the form of NFTs. Impact Theory claims to be the next Disney company, your former employer, and raised approximately $30 million from hundreds of investors through the offering. Two weeks later, in September 2023, SEC sues Stoner Cats, settles 2, LLC (SC2) has determined that SC2's NFT offering, called Stoner Cats, which raised $8 million, was a security and therefore SC2 engaged in an unregistered securities offering. What is your view on SEC enforcement actions in the NFT space?
I was not aware of the two settlements the SEC made regarding the NFT project, the upcoming Disney Company, and an animated web series called Stoner Cats with Mila Kunis and Ashton Kutcher.
However, in these two cases, it appears that the offering documents for the NFTs were not properly drafted by counsel. The top three ways that NFTs can be classified as securities are through NFT fractions, passive income offerings, or participation in governance such as staking. Thus, the SEC determined that these NFTs were securities because they were offered and sold to investors as investment contracts. Thus, these NFT projects violated the federal securities laws by offering and selling NFTs to the public in unregistered offerings that were not exempt from registration.
Given the regulatory compliance involved in issuing securities, such classification should be avoided, and NFT features and offering documents should be carefully considered prior to launch.
8) The majority of existing NFT projects, from art, gaming, sports, the metaverse, and even cannabis, are built on the Ethereum blockchain. The SEC issued the Wells Notice. The SEC has revealed that it may take potential action against Ethereum-based ConsenSys for violating federal securities laws through MetaMask staking and other products. The SEC seeks to regulate ETH as a security following Ethereum's successful change of consensus mechanism by moving from proof-of-work to proof-of-stake in September 2022. This view is shared by the New York Attorney General's Office (NYAG) ahead of the SEC's March 9, 2023 filing. filed lawsuit against cryptocurrency trading platform The suit alleges that KuCoin “failed to register as a securities and commodities broker-dealer and falsely represented itself as an exchange,” specifically alleging that the ETH traded on its platform is a security. BlackRock CEO Larry Fink has said he's not worried about the SEC classifying Ethereum's ETH as a security. What are your thoughts on the possibility of ETH being classified as a security? How would this impact the NFT market?
No Comment.
