NFTs and Financial Institutions: Planning an Implementation That Manages the Risks

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New report finds NFTs will prove to be a pivotal solution that links real-world assets to the internet. Recognizing this, large institutions have jumped in, despite many reported thefts. It’s clearly time for every FI to learn about NFTs and why market demand is so high, and then to identify the risks and mitigation strategies and plan for the future.

Published on: May 10, 2022
Author: Tim Sloane
Alternate Point of Contact: Amy Dunckelmann

NFTs Will Drive Net New Spending Across a Wide Business and Consumer Demographic, but FIs Need to Mitigate Criminal Activity

New Mercator research delivers an in-depth look at what NFTs are and how various markets will impact your existing account holders. Mercator identifies the risks associated with most existing NFT platforms and suggests mechanisms the financial industry could implement to reduce those risks, both for themselves and for all those consumers who decide to participate in this market.

Given the high visibility of NFTs in the popular press, it is unlikely many of your customer’s haven’t already heard about them. It is also likely many of your customers will be very interested in how they can use them. After all, 33 to 40 percent of Americans are active collectors and collections can be monetized using NFTs. There are also 2 million artists and 179 million monthly gamers in the U.S., all of whom are potential NFT participants and are probably among your account holders.

“This research identifies how NFTs work, the markets that will be impacted first, and why criminal activity has yet to be thwarted, which makes participation by regulated entities risky. We also identify approaches regulated entities can take to reduce risk and identify fraud, and benefit the NFT participants,” commented Tim Sloane, Vice President of Payments Innovation and Director of the Emerging Technology Services Practice at Mercator Advisory Group. “If your financial institution doesn’t address the approaching NFT needs of your customers, they may simply move all their assets to someplace that does”.

This report is 25 pages long and has 3 exhibits.

Companies and other organizations mentioned in this report: Adidas, American Express, Artist-in-Residence Program, Binance, Bored Ape Yacht Club, Cent, Chainalysis, CipherTrace, Cloud Security Alliance, Coca-Cola, Coinbase, Crypto.com, Decentraland, Disney, DraftKings, Drife, Elliptic, Ethereum, Fanaply, FIS, Fiserv, Flyfish Club, Gucci, IBM, Jack Henry, JPMorgan Chase, KnownOrigin, Larva Labs, Mastercard, McDonald’s, Mintable, NBA Top Shot, New York Stock Exchange, Nifty Gateway, Nike, OpenSea, Oracle, Original Penguin, Polygon, Prada, Rarible, Ray-Ban, Solana, Sorare, StockX, Stripe, SuperRare, Taco Bell, The New York Times, The Sandbox, Under Armour, Visa, Zora.

 


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