Rishi Sunak’s NFT announcement - ‘national embarrassment’

NFTs are marketed as a means of using blockchain technology – a sort of public ledger – to enforce property rights over “one-of-a-kind” digital “assets”, such as cartoon ape avatars. 

The government-backed Royal Mint NFT has come as a shock. In an article for OpenDemocracy – the writer says that whilst the government has released few details of its own planned NFT, in principle, we can expect it to mean the Royal Mint selling ownership of a digital file such as an image, in a similar manner to which it sells other collectables such as coins.

We don’t know how many the Royal Mint will produce or how much they’ll sell for, but “those details are less important than what the gesture represents.” 

NFTs have taken off over the past year especially since celebrities have jumped on the bandwagon, but governments getting behind NFTs should worry us. 

NFTs don’t pose a threat themselves – they’ll likely end up in “the dustbin of history alongside all other fads devised by big tech and financial scammers.” But governments buying into NFTs raise red flags because it tells us “they have drunk the crypto bro kool-aid being pushed by Silicon Valley billionaires.” 

The problem with Rishi’s NFT announcement is that “gimmicky digital tokens” won’t help people put food on the table or heat their homes. And the government knows this but “like grifters the world over, they see it as an opportunity to make money.” 

The NFT news is part of a wider government announcement to make the UK a “global cryptoasset technology hub” – hoping the City will skim profits off of cryptobubbles. “Unsurprisingly, the government’s plan includes “enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market”. Tax breaks, in other words.” 

With Brexit threatening the City of London’s role as a global hub for finance, the government is keen to turn Britain leaving the single market into an opportunity to cut back financial regulation and compete with other jurisdictions for business. 

The government’s new approach to regulation may force regulators to change their tune and cut protections against crypto scams, regardless of the consequences for ordinary people.

Cryptobubbles will make a few people in the City lots of money, but it’s not good news for the rest. The “vast majority of cryptoassets” will provide little to no value and their inflated valuations have all the markings of a speculative bubble, which will leave regular people bearing the costs when it bursts. 

The government’s press release failed to make a convincing case for the utility of cryptoassets – making an argument that so-called stablecoins “could provide a more efficient means of payment and widen consumer choice.”

There are issues with our current digital payments system, which is in need of systemic reform. But central banks, such as Bank of England, are already working on a better solution – the central bank digital currencies (CBDCs) which will allow the public to transact in public digital money through their own accounts at the central bank – thus eliminating unnecessary middlemen.

There is also a concern about what these new forms of digital money mean for privacy. For payment methods to be popular there must be strong protections that minimise the collection and exploitation of personal data, whether by banks, tech companies or governments. 

The UK government needs to preserve the role of cash – the main privacy-protecting payment technology – not just in physical notes and coins, but in digital form as well. 

ECASH legislation introduced in the US Congress aims to replicate the features of cash, as a publicly issued token with unparalleled privacy protections – this is what Rishi Sunak should be focused on, instead of support for crypto gimmicks and ponzi schemes.