the government wants to invest public funds in the market

The government would like to invest public money in NFTs to promote their development in France. An announcement that raises questions and arrives at the wrong time, when the sector is collapsing.

In the digital world, NFTs generate a lot of debate. New digital Eldorado for some, spectacular gogo-catcher for others, opinions differ. As a reminder, NFT stands for Non-Fungible Token, or “non-fungible token” in French. It is a sort of certificate of authenticity based mainly on the Ethereum blockchain – an exchange protocol that uses a technology for storing and transmitting data in the form of interconnected blocks, without any central body or intermediary, which allows to gain transparency, security and speed – and which assigns a monetary value to an asset – physical or digital. NFTs associated with a physical asset or digital work are deemed non-fungible, meaning non-interchangeable, secure, tamper-proof, and easily transferable to third parties. Their value – and by extension that of the property with which they are associated – is rather fluctuating and volatile (see our fact sheet). Some NFTs have been traded for astronomical sums, ranging up to tens of millions of dollars. But luck can change quickly.

The Government obviously has faith in this technology, as demonstrated by the recent statements by Jean-Noël Barrot, Minister Delegate for the Digital Transition. On October 18, 2022, during the opening of the NFT Factory – a 400 m² space aimed at making NFTs known to the general public and developing the French ecosystem of non-fungible tokens by supporting start-ups launching themselves into the domain – he thus declared the Minister that he had France “all the resources to become a European and global NFT platform”. “We must accompany this movement with the support of public money, within the framework of France 2030”, He added. A badly timed announcement…

NFTs and public funds: supporting the French market through taxes

As BFM reports, Jean-Noël Barrot announced the state’s willingness to finance the sector with public funds: “With global players in culture, video games and the luxury industry, France has everything it needs to become a European and global platform for NFTs. We must accompany this movement with the support of ‘public money’. Although he has not indicated the exact amount of this funding, it would be foreseen as part of France 2030, an investment plan of 30 billion euros spread over 5 years which should facilitate the emergence “future technology champions of tomorrow”. However, it is considered absolutely necessary to implement “a regulatory framework for NFTs, a still unidentified subject, especially in terms of legal certainty”. Indeed, NFTs are currently totally exempt from French legislation. In terms of the European MiCA – Market in crypto asset – regulation, NFTs are classified only if linked to a material work. Furthermore, all digital creations – and there are many – are in a legal vacuum.

In an interview with the specialized media The Big Whale, published on October 19, Jean-Noël Barrot provided a few more details, announcing that he had seized, with Bruno Le Maire and Gabriel Attal – Economy Minister and Action Minister respectively and Public Accounts – General Inspectorate of Finance “a global mission on NFTs. In particular, it will develop an overview of uses and may suggest ways of amending regulations to allow industry players to develop”, He explains. She refuses to be “in the field of fear” that this new object can arouse, but rather in that of ambition, for “mastering the technological bricks of web 3 in order not to depend on foreign powers, because the technological domain precedes the economic and cultural domain”.

NFTs and public funds: an investment that comes at the wrong time

The least we can say is that Jean-Noël Barrot’s announcement comes at the worst time. Indeed, the NFT sector is currently in the red – even if brands and companies continue to show interest – following the collapse of cryptocurrencies. Even the most famous collections, such as the Bored Ape Yacht Club by Yuga Labs, have lost a lot of value. This is explained by the fact that in 2022 token exchanges on the blockchain were greatly reduced. According to StockApps analysts, NFT sales fell 41% between the last half of 2021 and the second quarter of 2022. Inflation and the resulting economic crisis are no strangers to this and are forcing investors to divert assets too risky, like cryptocurrencies and NFTs, which represent nothing concrete. The first tweet’s NFT, originally sold for $2.8 million, only sold in April 2022 for $280…

© Yuga Labs

In any case, this is not what will obviously worry the minister delegate for the digital transition and his advisers. To stay positive, it should be noted that despite the collapse of the speculative market, projects are multiplying. eBay, a leader in online auctions, opened its own non-fungible token marketplace in spring 2022. Coca-Cola and Nike have also launched their own collection of NFTs. And what about Facebook, which just opened up its social network of over 2.9 billion users worldwide to non-fungible tokens, along with the Apple App Store! It is therefore in a bold and risky gamble that the French government is embarking on…

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