Digital Assets: Non-Fungible Tokens

Through the latter half of 2022 and into early 2023, UK Finance came together with our associate member CMS to write a comprehensive and insightful report on Non-Fungible Tokens, representing a type of digital asset that may have uses in financial markets.

Through that period, we have continued to see significant amounts of market and regulatory activity. The UK Jurisdiction Task Force (UKJT) published a Legal Statement on cryptoassets and smart contracts, the Law Commission of England and Wales published papers on digital assets, smart contracts, electronic trade documents, and other related topics, and HM Treasury (HMT) published its much-anticipated consultation on the future financial services regulatory regime for cryptoassets.The Department of Culture, Media and Sport (DCMS) has continued to be active: following its January consultation, it has now been hearing evidence at Committee level.

This report aims to build our market understanding, to deliver clarity on NFTs and the broader digital assets ecosystem and what is needed to ensure that an ethical and innovative market can flourish in the UK. Our report calls out how digital assets work, how they are regulated, how they can be used by financial institutions (to provide better infrastructure, to develop new products, and more), and how to interpret what can at times be confusing terminology. For UK Finance, this report has demonstrated how broad and varied the industry viewpoints on this ecosystem still are.

As is often the case, we cannot represent all views equally, but we have sought to adhere to an overall aim to give non-experts a tool to help them get going, and to give those from the TradFi side a view of the possible opportunities available in this technology. The report is designed to complement our much wider programme of member work on New Digital Assets and Money, which includes work on CBDCs, stablecoins, cryptocurrencies, securities tokenisation and more.