What are the compliant ways to play with NFT digital collections?

Recently, the long-dormant NFT digital collectibles market has seen a long-lost bustle.

PUNK 3493, a long-destroyed coin in the CryptoPunks series of the blue-chip project, was "reborn" as a MEME coin with the help of AI technology, which not only attracted community attention and heated discussions, but also made the floor price of CryptoPunks exceed $100,000. At the same time, traditional companies have also started more cross-border cooperation, such as the joint series of activities launched by McDonald's and the NFT project Doodles, which not only introduced NFT into offline consumption scenarios, but also attracted more traditional users to participate.

These explorations tell us that NFT is still constantly looking for new growth points, whether it is technological innovation or scenario expansion. However, the development of NFT has never been just about technology or market popularity. The compliance issues behind its prosperity have always been there.

There are obvious differences in regulatory attitudes towards NFTs in different regions around the world: in the United States, the question of whether NFTs are securities is still under debate between the project owner and the SEC; in China, NFTs are referred to as "digital collections" by more practitioners, focusing on cultural promotion and non-financialization, which provides certain norms for market development, but also limits some innovation space. This diverse regulatory attitude reflects the complexity of NFTs around the world and also puts forward higher requirements for the healthy development of the industry.

Against this complex background, Mankiw has written this article to focus on the mainstream gameplay of global NFT digital collections, and based on actual cases, explore how these gameplays balance innovation and compliance, and further explore directions suitable for future development.

Collectible NFT

The birth of NFT is an exploration of scarcity and ownership in the digital world. Through blockchain technology, NFT can ensure its own immutability and transparency , and give the power of digital assets to the holder. Although NFT was not originally intended for collectibles, the issuance of CryptoPunks attracted widespread attention, marking the rise of NFT in the field of digital art. After that, multiple PFP (Profile Picture) art projects were launched one after another and quickly became blue chips, attracting not only the attention of a large number of blockchain enthusiasts, but also the interest of the art world, sports world and celebrity circles.

In October 2020, the NBA partnered with Dapper Labs to launch NBA Top Shot, turning classic moments of basketball games into NFTs, with transaction volume exceeding US$1 billion; in March 2021, Beeple's "Everydays: The First 5000 Days" was sold at Christie's for US$69 million, shocking the art world; in the same month, Kings of Leon released a new album in the form of NFT, becoming the first band to release an album in the form of NFT.

However, the value of collectible NFTs is highly dependent on scarcity and market circulation . Once user enthusiasm declines, the price system is likely to collapse. The 2024 NFT Issuance Report shows that 98% of NFTs are almost "dead", 64% of projects have less than 10 mintage, and 84% of the highest prices are the same as the mintage price.

In addition, NFT projects also face copyright disputes and securitization risks.

In some cases, buying an NFT does not mean buying the copyright of the work. For example, the CryptoPunks project clearly stipulates that after users hold NFTs, they have the non-commercial use rights of the avatar. In addition, NFT projects that focus on digital ownership can also be caught up in copyright disputes. For example, the Pepe the Frog NFT project did not obtain authorization from the original author Matt Furie, but privately minted NFTs for sale, and was eventually sued for copyright.

In addition, NFT's inherent financial gameplay makes it easy to trigger securitization regulation. For example, a Boston judge ruled in 2024 that DraftKings' digital trading cards met the "Howey Test" and were identified as securities. It should be noted that many NFT projects attract users by promising profit sharing or future appreciation expectations at the time of issuance, but these actions may also violate securities laws.

In contrast, China has adopted a more cautious regulatory strategy for NFTs, defining NFTs as digital collections, giving them a clearer positioning as cultural and artistic works rather than investment tools . A more representative example is the digital collections of the Dunhuang Museum, which digitizes traditional cultural elements through blockchain technology, not only allowing historical treasures to be presented in a new form, but also emphasizing the attributes of cultural communication. In order to avoid speculative risks, domestic platforms generally prohibit speculation and restrict secondary market transactions. While protecting the rights and interests of users, this regulatory approach also limits NFT's exploration of financialization, forming a development path with Chinese characteristics.

Gamifying NFTs

If NFT wants to gain real value, the combination with GameFi is the most natural direction. Through games, NFT is no longer just a static digital asset, but is integrated into the dynamic and interactive virtual world, providing players with more sense of participation and profit opportunities.

Representative projects in the blockchain gaming field demonstrate the diverse application scenarios and potential of NFT in games:

CryptoKitties , as the beginning of NFT games, gives virtual cats "uniqueness" and "irreplicability" through NFT, allowing players to own digital pets that can be bred and traded, thus realizing the on-chain confirmation of game assets for the first time;

Axie Infinity further expands the role of NFTs. Each Axie is not only a unique asset, but also generates revenue through battles and reproduction. This model transforms NFTs from mere collectibles to economic tools that can create value;

BAYC , whose Otherside project explores the combination of NFT and the virtual world, allows players to own virtual land, which can be traded in the market as NFT, providing an asset foundation for the construction of the metaverse.

Compared with traditional games, the introduction of NFT means that gamers’ efforts are no longer limited to in-game achievements, but they have real value returns. At the same time, the on-chain records of NFT assets ensure transparency and traceability, further enhancing the security of assets and player trust.

However, the exploration of gamified NFTs also faces compliance challenges. First, there is controversy over whether NFT game assets will be classified as financial instruments, especially projects with appreciation expectations and profit sharing, which may be regarded as securities and need to meet stricter regulatory requirements. Secondly, the frequent occurrence of cross-border transactions also makes blockchain games easy to be used for illegal activities such as money laundering. For example, the South Korean government explicitly prohibits the "earn while playing" model, believing that it has gambling attributes and poses compliance risks.

In China, the gamification of NFTs is subject to stricter restrictions. Although the combination of NFTs and games is not completely prohibited, most projects choose to enter in the form of digital collections, attracting players' interest by launching limited edition character skins or props, rather than directly operating in a "play and earn" mode. For example, the producer of the martial arts game "Swordsman Online III" recently announced on its social media that it would open a vote on whether to set NFT codes for its limited appearance in the game. This form not only meets the players' collection needs for virtual assets, but also avoids touching the red line of financial supervision.

Branded NFT

Traditional enterprises want to expand into Web3. At present, NFT digital collections are their preferred way. Through NFT technology, brands can connect with users in a new way and help enterprises complete digital transformation. Globally, enterprises generally choose to combine NFT gameplay in the field of brand co-branding or membership rights.

From the perspective of brand co-branding, NFT has injected more creativity and vitality into brand cooperation. In 2024, McDonald's cooperated with NFT brand Doodles to launch co-branded coffee cups and digital collections, combining online and offline experiences to inject vitality into brand innovation. Similarly, Nike acquired RTFKT Studios to launch virtual sports shoes NFT, perfectly integrating virtual world equipment with brand trend positioning, allowing users to show their recognition of the brand in the metaverse.

In terms of membership rights, NFT has become a key part of brand loyalty programs. Starbucks' Odyssey program provides members with exclusive event participation opportunities and reward redemption through NFT. Users can not only enjoy coffee, but also experience the convenience and fun of Web3. This "holding is equity" model not only allows users to establish a deeper connection with the brand, but also makes membership services more attractive.

In China, brand NFTs are more likely to be introduced in the form of digital collections, avoiding financial risks by emphasizing cultural attributes. For example, the Bored Ape co-branded clothing series launched by Li Ning combines NFTs with real goods to attract young people through flash events; Anta's digital museum displays brand history and innovation through virtual space, integrating brand culture into digital experience. In addition, Renee, a guest at the 81st Mankiw Afternoon Tea at Mankiw Law Firm, shared her environmental protection charity project PEOPLEARTH. By launching a variety of environmental protection activities and issuing corresponding NFTs as participation rewards, the project successfully attracted user participation and built a new model that combines member rights and public welfare activities.

Compared with traditional forms of brand promotion, the advantages of brand NFTs are their scarcity and traceability, which bring users a stronger sense of value. For example, after users hold brand NFTs, they can not only participate in exclusive activities, but also realize value-added through market transactions. However, the exploration of brand NFTs is also accompanied by certain challenges:

Intellectual property issues : Unauthorized NFT projects may use brand elements without authorization, bringing legal risks and damage to brand image;

Market speculation risk : Excessive speculation may cause users to lose confidence in branded NFTs, thereby weakening their long-term value.

RWA+NFT

The technical characteristics of NFT provide new possibilities for the digital mapping of real assets (RWA). Through NFT, physical assets such as real estate and luxury goods can achieve digital ownership confirmation, convenient transactions, and improved liquidity, which not only promotes the innovation of the traditional asset market, but also gives NFT more practical value.

The exploration of RWA+NFT has different attempts and cases both internationally and domestically. Internationally, Propy has been committed to confirming the ownership of real estate assets through NFT technology. Its pilot project shows that users can directly obtain property ownership by purchasing NFT, and smart contracts automatically transfer property rights when payment is completed. In China, some luxury projects try to combine high-value jewelry with NFT to provide consumers with value-added services such as anti-counterfeiting traceability and transaction record tracking. For example, a well-known luxury brand recently launched a limited edition NFT watch, which not only increases the collection value, but also injects new vitality into its online and offline ecology.

However, the compliance of RWA+NFT remains a key challenge to its development. First, the legal attributes of NFT have not yet been clarified in many countries, especially whether NFT holders have ownership of real assets; second, the property transactions and tax issues involved vary from country to country, especially in cross-border transactions, there may be double taxation risks; finally, the lack of a unified regulatory framework in the market also makes NFTs easy to be used for money laundering or other illegal activities.

Despite this, RWA+NFT has also demonstrated its huge market potential. In terms of liquidity, NFT assets can lower the transaction threshold for high-value goods, allowing more investors to participate; in terms of transparency, blockchain technology ensures that transaction records are public and cannot be tampered with, bringing users a higher sense of security. However, high compliance costs and insufficient user education have also become bottlenecks restricting its large-scale promotion.

Compared with the traditional asset management model, RWA+NFT is a bold and forward-looking exploration. It not only allows real assets to be integrated into the digital economy in a new way, but also injects more practical functions and values into NFT. In the future, with the improvement of laws and technologies, this model may become a bridge between digital assets and the real economy.

Attorney Mankiw's Summary

The rise of NFT not only represents a revolution in digital assets, but also a profound integration of technology, culture and business models. From digital art to games, to brand cooperation and real-world asset mapping, various ways of playing have demonstrated the unlimited potential of NFT. However, the regulatory challenges that come with the innovation of NFT cannot be ignored, especially in China. If you want to build a localized project, regulation and culture are two aspects that cannot be ignored. Therefore, while promoting technological progress, how to balance innovation and compliance will be the core issue of future development.

Based on previous experience in Web3, especially in the field of digital collections in China, Mankiw believes that the development of NFT digital collection projects needs to consider the following aspects:

Clarify legal supervision . Whether it is a digital collection or an NFT project with financial attributes, it is recommended that the project party work closely with legal advisors at the beginning of the design to clarify the legal attributes of its products and avoid touching the red line.

Strengthen user protection . The complexity and speculation of the NFT market make user protection particularly important. Whether through transparent trading mechanisms or comprehensive user education, we should ensure that users fully understand their rights and risks.

Explore cross-border cooperation . Brand and RWA-type NFTs have shown their broad market potential. Especially in China, RWA has become a hot topic in blockchain. Project owners should combine their own resources to explore more business models that meet regulatory requirements and expand the practical application scenarios of NFTs through cross-border cooperation.

In the future, NFT may become an important bridge between virtual and reality, which will not only change the way we trade, but also have a profound impact on cultural communication, asset management, brand marketing and other fields. In the context of the joint progress of technology and law, the story of NFT may have just begun.