Interview With Finance Magnates

The following is an extract from an interview with Charli at Finance Magnates about NFTs. Charli works extensively in the financial services marketing space.

Do NFT tokens have any value in terms of promotion and advertising or building brand awareness?

It’s a really good question and one we are seeing play out first hand at Contentworks. Brands today are facing a whole new world of digital consumerism. In this emerging scenario, content creators are phasing out traditional marketing to build person-to-person communities. NFTs are a powerful way to create an abundance of intellectual properties, which will make them very valuable in the modern creator’s economy.

One of the main reasons brands have tremendous use cases for NFTs is that these coins are so versatile. They can be used to represent digital files, art, videos, music, and even other types of creative work, including fashion, real-estate and much more. Moreover, they have immense global appeal today. A survey by Adweek/Harris Poll revealed that 81% of respondents were “aware” of NFTs and 40% were familiar with them. It also showed that millennials who earn more than $100,000 are most likely to invest in this form of digital currency, as are “collectors.”

In fact, with celebrities like Paris Hilton among its fans, NFTs are gaining in mainstream popularity.

“I see NFTs, or non-fungible tokens, as the future of the creator economy. They use blockchain technology to help creators increase the value of their work and share it with fans in real time. And blockchain technology will allow artists to get paid on secondary sales as well. That’s never happened before and it is mind-blowing how much that can change things for artists.” Paris recently said on her blog.

This presents brands with huge potential for consumer interaction and storytelling. With NFTs, brands can create a buzz about a new product, create scarce and exclusive collectible assets to tell the brand story, or even support causes through token sales. Consumers today like to see brands driving sustainability efforts, which can be seen in the rise of ESG investments. Investors could be found taking assistance of companies like Window ESG to get information and stats on ESG investment options. So, brands might look to attract this demographic with NFTs.

Many brands, including giants like Coca Cola, Taco Bell, Charmin, and Nike, have done it well. Luxury and premium brands see huge potential with NFTs, as they already thrive on the element of “exclusivity.” It’s “only a matter of time” before a brand like Gucci releases an NFT.

In Q3 2021, NFT sales exceeded $10 billion. Is such rapid growth in this industry causing more companies you work with to join the newest trend?

NFTs are not just about digital art and sports memorabilia. The finance sector stands to gain a lot from the emerging use cases of NFTs. In the coming years, we might be looking at everything from bonds to insurance, and even debt management being verified using blockchain-based NFTs. They could be used to record tradable rights, and represent many financial instruments like asset packages and loan agreements with banks.

One area where NFTs will likely be adopted sooner than others is DeFi. The DeFi industry exploded in 2020, recording 14x growth. It is valued at $81.85 billion, as of November 2021. Major investment players will explore this sector given the numerous advantages of decentralising investment, including lower friction for transactions, greater transparency and security, real-time results, and a high level of customisability of financial services. Fractionalised investments are another area where NFTs will thrive. This will allow a more democratised investment landscape.

The adoption of NFTs in the financial industry is still in its early stages. For instance, Teller Finance, which has developed an algorithmic credit risk protocol, is using collectible NFTs to raise liquidity for its protocol. NFTX has created and launched trading of NFT index funds. Some prominent brokers, like eToro, are also offering clients the opportunity to trade in companies like Enjin (ENJ). The Enjin blockchain enables gamers to invest in NFTs, and the ENJ token plays a crucial part in the valuation of the NFTs.

However, the industry is plagued by extremes of stringent regulatory guidelines or no guidelines at all depending on the region. For most crypto assets, it’s challenging to define their legal nature and apply the appropriate regulatory regime. Does it qualify as a financial instrument, e-money, or security? What are the regulations for money laundering and tax?

The EU has completely excluded NFT from its scope in its draft of Regulation on Markets in Cryptoassets, MiCA. In the US, the IRS and the Federal Reserve need to consult creators and carve regulations that don’t stifle innovation. The regulatory climate in the US has created uncertainty regarding blockchain innovation. China’s strict stance isn’t helping matters either.

NFT is a tool that seems like a natural addition to the offerings of cryptocurrency exchanges. However, do you see a scenario or solution where FX/CFD brokers can also profit from these non-fungible tokens?

One of the most attractive avenues for CFD brokers to tap into this market is by offering clients access to NFT stocks. NFT sales increased to $2.5 billion in the first 6 months of 2021, compared to just $94 million in 2020. With over 17K daily active traders, NFT trading volumes surged to $400 million in 30 days in March 2021.

Investors are eager to participate in this market and can do so by trading CFDs of popular NFT stocks like Twitter Inc., Cloudfare Inc, Mattel Inc., or Dolphin Entertainment Inc. This could be feasible for traders who are interested in NFTs but find them risky in the direct NFT marketplaces.

With CFDs, they will have the flexibility to go long or short and benefit from enhanced risk management tools via robust trading platforms. As the trend grows, these shares might witness increased speculation, bearish and bullish, leading to more trading opportunities. However, greater volatility also means greater risk, and FX/CFD brokers will need to adhere to regulatory guidelines for investor protection. As always FOMO (fear of missing out) is hugely at play. As we follow market trends on Twitter, Reddit and other platforms frequented by traders, we can see these hashtags picking up and discussions centring around them.

We are keenly watching the space and have already started producing NFT centric content and social media posts for our clients.

Charlotte Day – Creative Director, Contentworks Agency

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