NFTs, or Non-Fungible Tokens, have been amongst the best-performing asset classes in recent years. They were only for hardcore enthusiasts, but now they dominate the world of art and fintech. NFTs have so much to offer, from creating new experiences in the digital world to providing transparent proof of ownership. But, despite their allure, why are NFTs not selling in India?
What are NFTs?
A digital asset that runs on a blockchain network is known as a non-fungible token. Each NFT is a unique digital asset, and non-fungible means an asset with a unique code. NFTs have unique identifiers, unlike crypto coins, where two can be identical. No two NFTs can be the same because each NFT has proof of ownership. NFTs can take many forms, such as art, movies, music, or even virtual real estate in the metaverse.
How do NFTs work?
Buying and selling NFTs
One user can own an NFT at a time. A record of ownership is stored in the blockchain network using unique identification methods. This ownership record is transferred to a buyer when an NFT owner decides to sell their NFT. The blockchain network will show the new buyer as the new owner of the NFT and will also store this transaction. The verification process of NFTs is transparent.
You must have a crypto wallet to own an NFT. Users can store crypto tokens and other digital assets using their crypto wallet. Once you have a crypto wallet, find an NFT you like and buy it using your crypto wallet.
Technology
Smart contracts are built into a blockchain network and are used to enable NFTs. Smart contracts are automatic actions on the blockchain that are executed by simple lines of code. NFTs are minted or created using these smart contracts. The original creator of an NFT is assigned ownership using smart contract technology. These contracts also make it possible to transfer ownership to other blockchain users.
Why are people buying NFTs?
So who buys NFTs? What are the benefits of an NFT? There are many reasons why users might want to buy NFTs.
- Collecting art: We see many pieces of digital art that we love online. NFTs enable you to own these pieces as crypto assets. Users can support the original artist of the digital artwork by buying directly from them without any middlemen.
- Trading: NFTs are a high liquidity market. Investors can buy and sell NFTs quickly. The NFT market has over $46 billion in trading volume in 2022. Skilled crypto traders can make high returns in a short time by trading in NFTs.
- Memorabilia: Bollywood stars have also entered the NFT market. One of the biggest stars in India, Amitabh Bachchan, has also released his NFT collection. The collection includes poems, a Big B Cryptopunk poster, and movies. If you are a die-hard fan of some movie stars, NFTs can offer a way to collect unique memorabilia.
NFT supply and demand imbalance in India
There are many opportunities in India for NFTs, but creators and buyers look at these opportunities differently.
Creators can easily monetize their work using NFTs. Creators can convert their digital art into an NFT with a simple process. India also has a vibrant art scene and a rich history. Many art forms in India can be converted to NFTs. From traditional art forms to modern-day designs and artwork in the movie industry, they can also be NFTs.
Indian celebrities and NFT
- The famous singer, Ritviz, collaborated with artist Santanu Hazarika to sell two of his music albums as NFTs. The collection includes new artwork and 21 songs. The NFT sold in less than a minute after going live for sale.
- Manish Malhotra sold a collection of NFTs that included sketches of his famous designs in 2021. This collection was also sold within minutes of going online. Some of the NFTs were worth $4,000 each.
Celebrities abroad
While the response to NFT is currently lukewarm in India, it has been positive elsewhere. Actress Mila Kunis sold her NFT series called stoner cat for over $8 million. Snoop Dogg also sold an NFT collection recently, earning over $100,000 in two days.
The Indian market is the difference between its popularity in India and abroad. Indians have never been collectors historically. Usually, Indians do not invest heavily in art and have not warmed up to art as an asset class. NFTs need to have utility for them to work in India, said Sandeep Sangli, Kalamint founder.
If art had more practical applications, there would be scope for more engagements with NFTs in India. This practicality is the reason why GameFi is becoming popular. Gaming in India has exploded in the last few years. This fame has led to the popularity of play-to-earn games in India. The gaming industry has unique NFT features such as in-game tokens and cosmetics that can lead the growth of NFTs in India.
How are NFTs taxed?
Virtual digital assets and NFTs will be taxed at 30% as per the 2022 budget in India. Also, the Central Board of Direct Taxes has clarified what comes under digital assets and what does not. The following do not come under digital assets.
- Subscriptions to OTT platforms and websites
- Vouchers and gift cards are used as discounts.
- Loyalty cards, reward points, and mileage points
Additionally, NFT transfers that lead to the transfer of an underlying tangible asset also do not come under digital assets. As long as this transfer is legally binding. This transfer will instead be taxed as a capital asset sale.
Lastly, there might also be a 2% equalization levy on NFTs purchased from artists abroad or crypto exchanges. This equalization levy applies to all online transactions made to a company abroad.
Are NFTs legal in India?
There is no legal framework in India currently for NFTs. Currently, NFTs can be bought and traded in India, but there is a lack of clarity about the status of NFTs in the future. You can buy NFTs through several crypto exchanges in India. NFTs also enable artists to directly list their work.
NFTs have a bright future in India despite currently having fewer NFT holders. The long-awaited cryptocurrency bill will bring clarity to the status of NFTs and other digital assets as a whole. But this crypto bill is yet to be tabled by the government.
