When it comes to accounting, taxation, and interpretation of NFTs, they are different from virtual digital assets.
The word “fungible” looks to describe the interchangeability of different assets or goods of similar type. People often see fungibility as meaning that anything is interchangeable with another thing, but just because two things are equivalent in value does not mean they are interchangeable. For example, money is fungible, but two 2,000 rupee notes will never be able to replace a single 500 rupee note because they do not have the same value. Cryptocurrencies and other commodities are also examples of things that are fungible, but they are not always interchangeable.
A non-fungible asset is one that is unique and cannot be replaced by something else. Digital representation of ownership of that item recorded on a blockchain are referred to as “NFTs” . In simple terms, NFTs are anything that has value, be it digital or physical.
NFTs are everything digital and cannot be readily exchanged, unlike cryptocurrencies which only exist digitally. Non-fungibility makes them one-of-a-kind and can’t be divided.
The NFT market in India is picking up rapidly, with celebrities and brands like Amitabh Bachchan and Rajnikanth launching their own NFT collectibles. The global NFT market will hit $80 billion by 2025.
NFTs are unique in that they can both be claimed without having to spend money and have a sort of digital ownership rights by registering an NFT.
It can be used in different ways, including certifying the authenticity of a physical product, verifying an individual’s identify or time served in a specific discipline.
For example, the space experts at Isro have partnered with Vyomanaut to reward their fans with digital collectibles that contain value and can be traded on specialized platforms.
India needs to engage technology companies and policy formulators to create an supportive framework for NFTs. The classification of cryptoassets is a critical factor for establishing this supportive framework.
Given its large talent pool, India has the potential and the opportunity to be the leading innovator in the Web3 space. Countries like Singapore are refraining from issuing any regulations for the burgeoning NFT market, allowing them to take a tech-neutral stance. Similarly, in the UK, the government is regulating cryptos while looking to keep NFTs out, intending to mint their own crypto tokens. The EU’s AML regulatory framework defines regulations specific oNFTs without providing much detail. Courts in Singapore and the UK have also recognized NFTs as assets that need protection like other assets, signifying their legal protection moving forward.
Although businesses are flocking to work in the digital asset space, there is a need for the government to say what virtual assets are and how they will react to them.