Russia Is Bullish On NFTs And The “further development of digital technologies”

Estimated Read Time: 7 min

Hey friends,

Great to have you join us during these turbulent times. Despite the recent volatility in the markets, the advancements of NFTs never seem to slow down. In today's edition we cover OpenSea’s latest announcement to Russia's new interest in NFTs, so let's jump into it!

OpenSea Decides To Not Make Royalties Optional

Last edition we covered OpenSeas decision to make creator royalties optional. To say the creator community didn't appreciate the choice would be an understatement, with many projects highly distressed about potentially losing an important revenue stream. Some projects like The Hundred's much anticipated Badam Bomb Squad decided to outright cancel their launch on OpenSea in order to stand strong with the artists who “built this industry”. To many people's surprise, OpenSea went back on its decision and announced it will continue to enforce royalties on its collections. Through a Twitter thread, OpenSea wrote “We’re awed by the passion we’ve seen from creators and collectors alike this week. We were looking for your feedback, and we heard it, loud and clear… We will continue to enforce creator fees on all existing collections”.

The largest NFT marketplace deciding to continue paying creators is no doubt good news for the current health of the space, but it doesn't hide the trend of new marketplaces increasing their market share through cheaper NFT listings that ignore the royalties. OpenSea says “Unless something changes soon, this space is trending toward significantly fewer fees paid to creators. No policy that we implement will reverse this trend if this behavior continues”. According to OpenSea, in the past week alone around half of the creator fees from the top 20 collections were ignored, they emphasized that “We’re at a collective inflection point… If everyone left in this ecosystem who believes that creator fees are important to our future links arms on this, we WILL ensure that fees are durable”. This pretty much sums up our current landscape, until royalties are enforced on-chain then the future will be dictated by the actions of the community.

Russia’s Central Bank Looking Into NFTs?

The Central Bank of Russia has just released a 33-page report on digital assets referencing NFTs and how they could be integrated into its traditional domestic financial system. Titled “Digital Assets in Russian Federation”, a telegram was published earlier this week by the Russian Central Bank (CBR) with focus areas on digital asset regulation, retail investor protections, digital property rights related to NFT smart contracts and tokenization, as well as reformed accounting and taxation proposals. All in all, the report was quite positive, with the CBR strongly supporting the “further development of digital technologies” provided they don’t create “uncontrollable” financial or cybersecurity risks for consumers.

When it comes to NFTs and smart contracts, the CBR was quite hopeful about the potential for tokenized off-chain assets as long as there was legislation to ensure a “legal connection” between the token holder and the token itself; “Russia has created the necessary legal framework for the issuance and circulation of digital assets [...] But so far the market is at the initial stage of its development [...] and is many times inferior to the market of traditional financial instruments. Its further development requires improved regulation”.

The report gave an overview of digital asset regulatory approaches from around the world, noting that some regulate digital assets as digital versions of the traditional assets they resemble or represent, while others create new and distinct regulations to govern them. The report mainly centered around how these new digital assets could be regulated as they continue to be incorporated into everyday technologies, a fair focal point if we ever want mainstream adoption. Russia is no doubt a sensitive subject in the news at the moment, but when focusing on this story alone and seeing the positive support for digital assets from an institution as influential as a world power's central bank, it's hard not to be bullish on this revolutionary technology.

FTX vs NFT Marketplaces

We would be hard-pressed not to talk about the elephant in the room with the FTX fiasco leading to a 25% drop in the entire crypto market at the time of writing, so let's have a look at how this has impacted our NFT world. To briefly summarize what's been happening, popular cryptocurrency exchange FTX has had some major financial woes leading the industry's third-largest exchange to almost collapse within a couple of days. FTX’s sister-company Alameda Research had received loans from FTX using customer deposits, these loans were backed in Solana and FTT (FTX’s native token). Now with FTT and SOL prices in the gutter from the bear market, Alameda research couldn't liquidate enough assets to pay back the loan to FTX, putting both parties in major turmoil and customers left without being to withdraw their funds.

How has it impacted NFTs? Well, Alameda's balance sheet had over $1.1 billion Solana, which is almost 10% of the entire token supply. As of writing, Solana has fallen nearly 70% in price and as the second most popular blockchain for NFTs, we have seen Solana NFT volume also plummet. The SOL crash has dropped $70,000 daily volume on OpenSea to just shy of $10,000, and leading SOL marketplace Magic Eden's daily trading volume fell from $2.5 million to just over $1 million. For the NFT market as a whole, NFTgo reports the total sales volume dropped 32% since the 7th of November, and OpenSea alone has dropped 41% in daily transaction counts. Another interesting ramification of the recent crash is FTX’s 92-NFT collection of the Bored Ape Yacht Club (BAYC), with an estimated value between 4,000-5,000 ETH. Their recent collapse has also seen a downfall of the BAYC’s floor price which is now down 15% in a couple of days reaching a new low 82% lower than the collections price in April. Although the macro of now is suffering, these prices are only one indicator of NFT technology and we will likely continue seeing governments, institutions, brands, and communities using NFTs not only as investments, but as the technological basis for the next generation of the internet, Web3.

As tough as these times are, it's important to remember that we are all facing and dealing with the current landscape together as a singular community of early adopters. We hope that through this newsletter we bring to light the long-term potential and momentum of this revolutionary technology, and despite what the monetary values may be saying, it doesn't represent the whole picture.

We hope you have a great couple of days while we curate the next edition of Morning NFtea. Have a great Monday and take care!

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DISCLAIMER:

None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.