A non-fungible token (NFT) is a digital asset. “Non-fungible” means that each item is unique, making them highly sought-after. An NFT can be bought and sold online through an open market and is traditionally traded using cryptocurrency.
NFTs have exploded in popularity over the last few years. In particular, celebrities have purchased NFT cartoon apes and video clips. As well as being used for gaming purposes and bragging rights, NFTs are also increasingly being seen as investment assets.
But should you purchase an NFT as an investment?
Our lawyers would never advise for or against any particular type of investment. Instead, we recommend talking to a suitably qualified and regulated financial advisor. But, as with other types of financial ventures, we have seen what can happen when investments go wrong. As such, we would caution anyone considering buying an NFT as an investment to ensure they understand the potential risks before handing over their money.
Here are a few things you should know before investing in NFTs.
- There is considerable debate over whether NFTs are an actual asset class. This is because, rather than owning a physical asset, NFTs are certificates of ownership of a digital asset.
- There can be issues over copyright. NFT ledgers claim to offer a public certificate of authenticity or proof of ownership, but the legal rights conveyed by an NFT can be uncertain. There have been cases of artists having their work sold by others as an NFT without permission. If you buy an NFT created from stolen art, you do not own the intellectual property rights, making it worthless.
- The hype surrounding NFTs can cause their value to be inflated and volatile. They are a very speculative asset.
- The Ethereum blockchain currently supports most NFTs. This uses massive amounts of energy, so there are environmental concerns over NFT generation.
- NFT scams are rife, and as NFT trading is an unregulated market, there is limited legal recourse for abuse or mis-selling.
Can you safely invest in NFTs?
There is money to be made in NFTs and some investors have managed to flip them for a substantial profit. But, as they are not a regulated financial product, getting your money back should an NFT investment go wrong can be challenging.
In addition, most UK financial advisors are not qualified or authorised to advise on NFTs. But getting proper financial advice before investing in an NFT – or any asset – is essential. As such, we recommend that anyone considering investing in NFTs takes advice from a suitably qualified and authorised NFT expert before doing so. And crucially, you should only invest in a proven NFT marketplace with verified processes for returning money should the investment not turn out genuine.
Can you get your money back if an NFT investment goes wrong?
Have you been persuaded to invest in risky, unregulated, and unsuitable investment schemes involving NFTs or other forms of crypto, and promises of significant returns did not materialise? If so, we might be able to help.
Representing individuals who have fallen victim to financial scams, we help our clients get their money back. And we have managed to reclaim hundreds of thousands of pounds for our clients.
