The government’s proposed crypto crackdown has been welcomed by creatives who were once excited about what blockchain technology could offer the art world.
The tech’s reputation has endured months of bruising press since the peak of crypto hype in 2021-22, culminating with the arrest and ongoing fraud trial of former crypto billionaire Sam Bankman-Fried.
This week, Treasurer Jim Chalmers unveiled a paper recommending greater regulation of crypto exchanges in Australia.
Adam Sullivan is a Sydney-based artist who began using technology in 2019 through NFTs.
NFT stands for non-fungible token. When an NFT is sold, it gives the buyer a unique receipt that authenticates the purchase of a digital asset on the blockchain.
He hopes that, through regulation, the technology can take “the right path” and allow people to sell music and art as digital assets via blockchain.
“Trust (in crypto) is definitely out of the question at the moment, and rightly so,” he said.
“A lot of really shady things happened across the board and I’m glad it’s being brought to light.
“I am excited about the proposed regulations, so we can begin to rebuild trust.”
The multifaceted artist – who releases music and art under the pseudonym Made By Tsuki – remembers a brief moment when blockchain technology seemed to offer real “excitement” and utility to the world of art.
“I discovered blockchain in 2019 (when it was) suggested by a fan who supported my music and wanted to purchase and display my digital art,” Mr. Sullivan said.
“I was trying to find an easy way to sell my digital art the same way I sold my paintings.
“Blockchain has allowed me to combine my art and music into one piece.
“The climb was exciting as I began to understand the impact of technology.
“It was a home and ecosystem for my audiovisual paintings.
“With clear provenance and automatic royalty collection, the door was open.”
Then came the “cryptobros”
Adam says that once NFTs entered the mainstream, “bad actors” took advantage of the “lack of regulation.”
“There was a time before cryptobros and NFTs were in the news, it felt like this technology really worked and was for digital artists,” he said.
“We’re years past that point now, and the way blockchain is used is so minimal that it’s just a niche use case now.
“Right now, the reputational damage is too big an obstacle and blockchain doesn’t work for me personally.”
A future for NFTs and artists
Jay Mogis is a specialist in digital media licensing and intellectual property. He suggests that it is likely the “transparency” of blockchain that has attracted artists to use NFTs in a “traditionally very heavy industry”.
“The hype for NFTs arose from the dissatisfaction of mostly emerging creators with existing structures,” he said.
Dr. Mogis suggests that NFTs could ultimately become a “consumer technology” that will help artists manage how their content is attributed and exchanged.
“NFTs could very well function as the tools that traditional copyright industries use to become extremely efficient and transparent,” he said.
“File sharing decentralized the music audience. It took a while for innovators and copyright holders to find a way. And it remains an ever-changing dynamic.”
Dr Mogis says NFTs are still in their “early stages” and the recent reputational damage can be reversed.
“Some early wins selling NFTs for some later translated into a massive influx of investment into the market,” he said.
“But the audience remained quite specialized, which drove down the value of the underlying cryptocurrencies.
“Eventually, NFTs will become a widespread technology, but it will take time. Significant products will see cryptocurrency prices regain value.
“All regulations must be inspired by international principles, like copyright in the context of free trade agreements.
“A unified global regulatory approach could result in a best-of-both-worlds (creator/consumer) regulatory scenario and avoid duplication of administration by territory and/or region.”
Loading Instagram content
Mr Sullivan hopes the next phase of crypto will be “more stable”, allowing the “right regulatory mix” to be formed.
“The next step is education,” he said.
“Let’s get our hands dirty with technology so that when the time comes, we’re ready.
“Time is a key ingredient in regaining the confidence we built a year ago.
“It was like eight steps forward and seven steps back.”
A “moldy barrel”
Cryptologist and cybersecurity expert Shaanan Cohney, from the University of Melbourne, says that despite the “careful thinking” behind the government’s proposed regulations, the technology still has a long way to go to repair the damage done to its reputation.
“Most of the excitement about cryptocurrencies comes from the idea of being able to make money quickly,” Dr. Cohney said.
“What has happened in recent years has been a perfect storm and political moment for NFTs.
“The pandemic, coupled with low interest rates, has pushed people towards cryptocurrencies as well as the appeal of new technologies.
“We’ve seen a typical hype cycle, and I can’t imagine all of these factors coming together again anytime soon.”
Dr. Cohney says there is still controversy over whether blockchain properly validates the purchase of artwork via NFTs.
“The challenge of purchasing art via blockchain is how we define legal possession of something online, particularly when the item on the blockchain is not actually the artwork itself. -same, but the receipt,” he said.
“There is a legal question: ‘Does this receipt actually give you legal rights?'”
“Those (who are) pro-NFT would say it’s the meaning attached to a work of art, just like having a fake Picasso is not the same as having a real Picasso.”
Dr. Cohney co-authored a 2019 work research paper which revealed that the majority of all cryptocurrency projects were either misleading or fraudulent.
He says the government’s proposed regulations will provide more security for Australians investing in crypto.
“The proposed regulations seek to control people who operate crypto businesses domestically to Australian consumers,” he said.
“For organizations to present themselves as reputable, they will need to operate onshore or in a jurisdiction where Australia has police power.”
Dr. Cohney cautions that, even when properly regulated, “most cryptocurrency products are only suitable for investors who have money to lose.”
“My fear is that the barrel itself is moldy, so sorting the bad apples from the good ones won’t do much,” he said.
“Offering cryptocurrencies and cryptocurrency projects to the general public will remain inappropriate for the foreseeable future.”