Global Web3 metaverse and tax initiatives continue in the face of a market meltdown

In her monthly Expert Take column, Selva Ozelli, an international tax attorney and CPA, covers the intersection between emerging technologies and sustainability, and provides the latest developments around taxes, AML/CFT regulations and legal issues affecting crypto and blockchain.

In 2021, nonfungible tokens became the biggest disrupter in art, with artists minting, exhibiting and auctioning them and investors buying, selling and trading them. But by May 2022, NFT sales had dropped 92% from the market peak. According to data aggregator Layoffs.fyi, more than 17,000 technology laborers lost their jobs in May. The recent downturn is similar to 2018, when leading cryptocurrencies like Bitcoin (BTC) and Ether (ETH) fell by 80% or more.

Immune to the digital asset market’s manic depressive volatility, Web3 developers, institutional investors, and regulators preparing to tax metaverse profits are calmly continuing with business as usual across the world.

The NFT bear market might have cautioned high-level financiers at the World Economic Forum in Davos, Switzerland, as central banks start to tighten monetary policy against a backdrop of slowing economic activity. And gone are the days when central bankers fretted hedge fund managers — they are more concerned about the new crowd at the door, the “Metaversians,” who are digitizing various aspects of life in 3D with artificial intelligence.

Canada

The digital asset market meltdown was foreseen by Brian Shuster, founder and CEO of Canada-based Utherverse, who has developed more than 100 patents and pending patents for core internet technologies and the Metaverse. He told me: “There’s a ton of companies out there building out the Metaverse, and frankly, most companies claiming to offer properties and tokens have dangerously underestimated the complexity of the task at hand.” He continued:

“The digital asset market meltdown is healthy for those companies which offer viable and sustainable Web3 products and technologies such as Ethereum and Avalanche to continue on. I will be launching my Utherverse utility token during 3Q of 2022.”

Meanwhile, Calgary-based Accelerate Financial Technologies announced it would establish the Accelerate Non-Fungible Token (NFT) Fund, targeting high-net-worth investors willing to take a risk on Web3 investment products and digital collectibles available on the blockchain.

China

With the floor price of some major NFT collections crashing over 50% over the past month amid broad sell-offs, the digital asset market meltdown has not slowed down infrastructural investment into the Metaverse in China, with NFT investment funds and fund of funds popping up every day.

Yifan He, CEO of Red Date (Hong Kong) Technology — a Chinese state-backed blockchain company — told me: “Blockchain-based Service Network (BSN) will launch the national NFT infrastructure in China. The NFT is a digital certificate or a unit of data being stored on the blockchain. Owing to their uniqueness and indivisibility, NFTs are widely used in digital art and copyrighted content. However, their potential use cases go well beyond what we see today in the art world. Technically, an NFT can be applied to any scenario where proof of interest is required, from collectible ownership and IP of creative works to documentation such as ID cards, academic certificates, real estate licenses, etc. The technology can be used to verify the authenticity of documents while also preventing them from being tampered with or stolen, as well as facilitating verification, confirmation and tracking.”

He added: “However, most NFTs today are minted on public chain technologies that are not allowed in the Chinese market. To support NFT technology development in China, the BSN has modified the public chain technologies to ‘open permissioned blockchains’ (OPBs) to overcome…