Taiwan's Central Bank Warns of Investment Risk in NFTs Market

Taiwan's Central Bank has issued a warning about the dangers of NFTs, saying they are unsuitable for retail investment due to their low liquidity and high risk.

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At its second quarterly board of supervisors meeting last week, the central bank flagged concerns about the risks of NFT and DeFi investments. It called NFTs in particular a "niche market" with high risk that is not suitable for general investors, according to local reports.

Currently, only a few countries have included NFTs in the scope of financial supervision. This lack of regulation is another major concern for the central bank, as it allows criminals to take advantage of loopholes to launder money and commit fraud and other illegal acts through NFTs.

There is also no clear definition of NFT ownership and copyright anywhere in the world currently, the central bank notes. Because NFTs cannot be traded in the market solely on the basis of blockchain technology, it is difficult to determine who owns them, it says.

NFTs are also prone to speculation. A recent survey found that less than 30 percent of investors profit from selling NFTs, while one-third of NFTs produced are never sold.

Despite rapid growth over the past year, the NFT market has recently shown signs of cooling. According to blockchain analytics firm Chainalysis, only 491,000 accounts were buying or selling NFTs in May, down from about 1 million accounts at the start of the year.

Source: Regulation Asia