Beware the NFT bandwagon, crypto lawyer warns shoppers

Creative Commons/Peter Gronemann

• NFT ownership concentrated on just 0.1 percent of crypto owners
• Potential buyers must recognise that crypto assets are highly volatile
• MAF, owner of 29 malls, hopes Web3 tech will future-proof business

As Gulf retail brands venture into non-fungible tokens (NFTs), customers need to be careful not to fall for fear-of-missing-out (FOMO) syndrome, and jump on the digital bandwagon without fully understanding what they’re buying into, a leading cryptocurrency and blockchain lawyer has said. 

Her warning comes as Dubai-based retail giant Majid Al Futtaim (MAF) and blockchain ecosystem and cryptocurrency infrastructure provider Binance announced a partnership to unlock Web3 capabilities for customers. 

The agreement will see MAF and Binance cooperate on a number of blockchain projects including listings of NFTs on Binance’s marketplace and crypto payment acceptance, according to a press statement. 

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MAF will integrate Binance Pay, contactless, borderless and secure cryptocurrency payment technology designed by Binance, allowing customers to purchase virtual assets at MAF’s various destinations, in line with regulations. 

Irina Heaver, a blockchain and crypto business lawyer, told AGBI:

“They’re possibly making it easier for an average person [to buy an NFT]. You cannot use credit cards to buy an NFT. You need to connect to your MetaMask wallet. An average person doesn’t know what a MetaMask wallet is and how to operate it. So perhaps MAF will allow [people to buy NFTs with] credit cards, or cash, or sell it in malls.” 

Alain Bejjani, MAF CEO, said there is “voracious appetite for exceptional customer experiences in both the physical and digital world”. 

But Heaver, who is based in Dubai and Switzerland and represents clients worldwide, warned that customers must tread with caution. 

“It’s fantastic that MAF is moving into this space as it means more people will learn about these things,” she said. “But then I question why an average person who doesn’t really understand what an NFT is would want to buy these NFTs? I’m also worried about the FOMO factor. People might think they are missing out on making money, so they’ll buy NFT tokens.” 

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NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated, and can represent real-world items like artwork and real estate. NFT ownership is concentrated to just 0.1 percent of crypto owners – a few hundred thousand people – according to 2021 data from blockchain analysis platform Chainalysis.

Heaver added that potential buyers must recognise that crypto assets are highly volatile.

“The second there’s negative news, these assets drop in price immediately because they’re so volatile,” she said, citing the example of Twitter founder Jack Dorsey’s NFT of his first-ever Twitter post that sold for a whopping $2.9 million but drew bids of only a few hundred dollars at an auction a few months later – a 99 percent plunge in value.

“People have to be very careful about how much of their net worth they are allocating to crypto assets,” she added.

Ashish Panjabi, chief operating officer at Jacky’s Retail, told AGBI that retail trends are moving more towards “pride of ownership” but that metaverse technologies are still at a stage of “trial and error”.

“We [retailers] are still trying to see what sticks,” he said, likening the buzz around metaverse commerce to the initial interest in virtual reality and augmented reality that still has yet to fully take off. 

He added, however, that Dubai is the “natural place” for such concepts to be tested owing to its world-class physical and virtual infrastructure.

“We are at the centre of anything that’s innovative in the world,” Panjabi said.

Heaver added that MAF’s move to bridge the gap between physical and Web3 experiences was “following all giant retailers from all over the world” including the likes of Gucci, Burberry, Balenciaga and Dolce and Gabbana.

“They don’t want to get disrupted… they want to retain and increase their market share.” 

MAF, which owns and operates 29 shopping malls, 13 hotels and four mixed-use communities across the Middle East, Africa and Asia, said the partnership would enable the mall operator to harness Web3 technologies to “future-proof the business and benefit millions of customers in the Mena region”.

Web3 is a movement that aims to create a new iteration of the World Wide Web based on blockchain technology.