Written evidence submitted by MoonPay


Re: Call for Evidence on Non-fungible tokens (NFTs) and the Blockchain


We are pleased to respond to the Digital, Culture, Media and Sport Committee’s Call for Evidence on NFTs and the blockchain. Protecting against the misuse of digital assets will promote market integrity in this new ecosystem, enabling both the continued development of digital assets and the growth of the UK economy. At the outset, please allow us to emphasize that the digital asset ecosystem is constantly evolving, and now extends beyond financial instruments.


While originally focused on cryptocurrencies, blockchain uses have proliferated in recent years to become Web3,[1] with many smart contract applications that focus on non-financial use cases. These smart contract applications are not an asset class in themselves – instead, they are broader technology that enables a new form of digital ownership with the power to transform industries and improve customer engagement. For example, in the public sector, blockchain-based smart contracts are showing potential to make buying and selling property over the HM Land Registry more efficient.[2] In the private sector, enterprises and major brands across various industries are beginning to use this technology to shift to a new model: smart contract-powered offerings based on ownership, engagement, and authenticity. NFTs represent an important innovation in this space.


Smart contract-powered NFTs generally present a lower risk profile than cryptocurrencies, which, as shown by this past year’s volatility across broad asset classes, have some of the same risks as traditional financial products. NFTs also capture a wide spectrum of use cases. Accordingly, it is critical that regulation be risk-based,  distinguishing not only NFTs from cryptocurrencies, but also between different types of NFTs (e.g., collectible items, membership passes, certificates of authenticity, proof of attendance) based on the rights granted in smart contracts and associated agreements. Regulatory certainty maintaining these distinctions will be essential to grow this new ecosystem.


In addition to these main themes, the letter below addresses the risks and benefits of NFTs generally, how these themes are playing out in the international context, and the Committee’s specific questions.


About MoonPay

MoonPay launched in 2019 with a simple aim: to increase cryptocurrency adoption. The MoonPay group operates an online platform with a simple and easy way to purchase and sell cryptocurrency and NFTs. MoonPay has developed an embeddable widget and API (application programming interface), which third party application developers can integrate into their companies’ products and allow customers to access MoonPay services. In addition, MoonPay reaches customers directly through its own website, moonpay.com.


While certain services provided by MoonPay around the world are not subject to financial licensing requirements, MoonPay proactively seeks to comply with evolving regulatory requirements where applicable. In the UK, for example, MoonPay is registered as a cryptoasset exchange provider with the Financial Conduct Authority. Outside of the UK, MoonPay is applying for licenses in the European Union (e.g., Ireland) and is also authorized to operate in Singapore. Finally, in the US, we are registered as a Money Services Business with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), are licensed or have confirmed licensing exemptions in  47  states/territories (with applications submitted for the remaining 7 states/territories), and we are also applying for a Broker-Dealer license with with the Securities and Exchange Commission (SEC) and for Financial Industry Regulatory Authority (FINRA) membership.


With the experience gained from enabling millions of fiat/crypto transactions, we realized that creators, brands and enterprises encounter a long and painful path to get into Web3 because the smart contract journey is generally complex, expensive and out of reach. In June 2022, MoonPay launched Hypermint, a Web3 software as a service solution that enables anyone to create and manage certain smart contract types through a single platform. Now, we at MoonPay are not only aiming to increase cryptocurrency adoption, we are also on a mission to make Web3 technology mainstream.


NFTs: Benefits, Risks, and Regulation

While the cryptocurrency ecosystem has been growing for over a decade and continues to evolve, we now see potential in smart contracts. Similar to the early days of cryptocurrency, a lack of user-friendly smart contract solutions has hampered the ability of creators, brands, and enterprises to properly implement an NFT strategy. There simply hasn’t been an easy way to deploy smart contracts at scale. We launched Hypermint to realize this opportunity and enable the new creator economy, which is generating value for all parts of its ecosystem, including creators, intermediaries, and NFT holders. Smart contract-powered NFTs enable a new form of verifiable digital ownership, bringing efficiency, transparency, and trust to conventional business models in both the public and private sectors. Among other uses, we expect that NFTs will ultimately enable more robust and cost-effective product experiences to end consumers.


We agree that there are certain risks associated with NFTs and fully support the Committee's initiative to address these risks. Acquiring an NFT gives an individual ownership of rights enumerated in the smart contract that underlies the NFT (for which the relevant blockchain stores an immutable ownership record) and any associated licensing agreements. Typically, rights are assigned by the NFT’s creator, and NFT marketplaces can verify an NFT’s authenticity. For example, the leading NFT marketplace which is also serviced by MoonPay, OpenSea, displays check marks to indicate which NFT seller accounts they have verified and the NFT’s smart contract address. That being said, many counterfeit NFTs are being circulated on NFT marketplaces. To this end, OpenSea, for example, provides redress mechanisms, including the ability to report fraud and copyright infringement.


To best enable the Web3 ecosystem to address risks and continue to grow, it is important that regulation (1) distinguish the broad category of smart contract-powered NFTs from the specific blockchain application of digital currencies, which have some of the same risks as traditional financial products and also (2) distinguish between the various types of NFTs based on the rights granted in smart contracts and associated agreements.


First, NFTs are not generally subject to the same risks as cryptocurrency, like the excessive use of leverage and speculative trading that helped precipitate the recent “crypto winter.”  As Anthony Brown MP recently noted, NFTs “are completely different because they are not cryptocurrency in quite the same way.”[3]


Second, NFT use cases vary widely, allowing virtually anything, whether it be a work of art, an event ticket, or even a real-world asset like real property, to be represented as a unique digital unit of data on the blockchain. While the realities of the economy will assign value to many of these use cases, smart contracts also present an opportunity for low risk, blockchain-based digital property without significant intrinsic financial value (e.g., certificates that prove attendance). For example, we recently partnered with Universal Studios theme parks for a Halloween themed scavenger hunt, where visitors searched for QR codes that minted proof of attendance NFTs when scanned.[4]


Due to the dynamic nature of this new ecosystem, continued dialogue with industry will allow policy makers to direct resources where they are most needed as new use cases develop.


International Context

Persistent regulatory risk exists for digital assets – whether through lack of regulation or inconsistent global regulatory standards. As a global financial center, the UK’s leadership in clarifying regulation and providing level playing fields will help deliver on the Government’s “Global Britain” agenda, promoting both innovation and market integrity while ensuring that English law remains at the cutting edge of legal innovation. In the event of inaction, however, offshore jurisdictions are likely to either continue attempting to draw innovators with updated regulatory frameworks, or continue allowing certain risk concerns to materialize in unregulated markets.


From our global perspective, we see policy makers realizing the important distinctions between Web3 use cases as they study how smart contracts should be regulated. Web3 is truly global and consistent global standards will enable the ecosystem to flourish in a responsible and sustainable manner.


Setting an early standard for global policy, the Financial Action Task Force (FATF) issued guidance that distinguishes NFTs from cryptocurrencies, noting that NFTs should generally not be considered virtual assets but that an NFT’s practical function should be considered (i.e., whether they are used as collectibles rather than as payment or investment instruments).[5] The guidance provides a commendable baseline policy, which should continue to develop alongside NFT use cases and also allow policymakers to both take a risk-based approach to this new ecosystem and efficiently use their resources while allowing the ecosystem to grow.


We note in this context that the European Union’s efforts to harmonize multiple aspects of digital asset regulation through the Markets in Crypto Assets Regulation (MiCA) can also be seen as a lead in establishing standards. The latest available text of MiCA reflects the FATF guidance on NFTs, excluding NFTs[6] but also noting that this exclusion is without prejudice to any such asset’s qualification as a financial instrument.[7] The current text also commits the European Commission to issue an assessment of NFT markets and the adequacy of regulatory treatment of such assets.[8]


The United States is taking a similar approach in studying the ecosystem before implementing any NFT-specific measures. While legislative proposals thus far have not focused on NFTs, President Biden issued an Executive Order (14067) in March 2022 that directed various government agencies to broadly study how to ensure the responsible development of digital assets.[9] Following the order, US Treasury released a report outlining the opportunities and risks of NFTs[10] and also committed to release an NFT illicit finance risk assessment by July 2023.[11] 


Specific Responses

  1. Is the UK’s light-touch NFT regulation sufficient?

We recognize that “light-touch” is meant to reference an approach that is not overly prescriptive,[12] and is instead principles-based.  As a general matter, we agree that it is useful that the regulatory framework establish principles but avoid being overly prescriptive about items like corporate models and products/services. Prescriptive frameworks tend to stifle innovation, particularly in a phase of rapid technological advancement like the one we are currently experiencing with NFTs. In this context, we particularly caution against any approach that fails to: (1) appreciate that smart contract-based NFTs are a technology powering digital goods, not an asset class themselves, and (2) distinguish between the various types of NFTs, which, as explained throughout this comment letter, have a diverse and broadening array of uses, risks and benefits, many of which are non-financial. As John Glen, Economic Secretary to HM Treasury, recently noted, “we should be thinking in terms of regulatory ‘code’ … like computer code… which we refine and rewrite when we need to… tailored and proportionate, yes… but also nimble and tech-neutral[.]”[13]


In this context, we support the recent statement from HM Treasury which voiced alignment with this approach. In answer to a Written Parliamentary Question in the House of Lords (UIN HL3559), Baroness Penn MP responded that the Government proposed to exclude NFTs from the financial promotions regime[14] “on the basis that NFTs can represent a wide array of different assets which might constitute non-financial services products.”[15] HM Treasury also noted that NFTs are at an early stage of development and that regulating NFTs in the same scope of fungible crypto-assets under the regime could have unintended consequences.[16]


  1. What are the potential harms to vulnerable people of NFT speculation?

Price discovery is a common feature across property and assets, with various types of speculation that occur in the course of time. Speculation occurs in areas as diverse as shipping expeditions, real property, various financial assets, and yes, some cryptocurrencies and certain sub-categories of NFTs which might be considered collectibles. It is important to reiterate in this context that smart contract-based NFTs are a technology that can be used to power digital goods, but are not an asset class themselves.


We are also witnessing the maturation of Web3 markets – NFT markets in particular are evolving rapidly and remain at an early stage of development. As these markets mature, we expect volatility to decline. Nevertheless, we share the sentiment that underlies this question: individual consumers investing in an asset primarily for the purpose of the speculation should be aware of the risks of price volatility, which implies the potential for significant loss of value as well as gain. This understanding is what drives the need for promoting financial literacy and is consistent with expectations of transparency related to those offering or promoting assets in general.


  1. Do blockchains offer security to British investors?

As noted above, blockchains store immutable ownership records. Any changes to a blockchain need to be validated by multiple peer-to-peer devices (“nodes”) which are constantly cross-checking with each other.[17] This feature mitigates the risk of simple copying/counterfeiting, and can be of great benefit when, for example, smart contracts are deployed to serve as certificates of authenticity.


4.   What are the potential benefits to individuals and society of NFT speculation?

Also as noted above, smart contract-powered NFTs have the potential to transform both public and private sector operations, bringing new opportunities for blockchain-based efficiencies and consumer engagement in areas as diverse as HM Land Registry and Universal Studios theme parks. Not all NFTs are the same – they capture a broad spectrum of use cases (e.g., collectible items, membership passes, certificates of authenticity, proof of attendance), many of which will not be subject to speculation. Separately, as their markets mature, asset classes based on smart contracts are likely to become less volatile.



We hope these comments are helpful for the Digital, Culture, Media and Sport Committee’s study of NFTs and the blockchain. We are fully aligned with the Committee’s efforts to reduce risk in the digital asset ecosystem, in no small part because our business is built on expanding opportunities while simultaneously helping to reduce risk.



Jim Esposito

Chief Operating Officer



For which MoonPay’s contact person is:

Seth Lubin

Senior Regulatory Counsel



[1] Commonly defined as the third iteration of internet technology, which more easily allows users to own content, in addition to being able to read content (like Web1’s static websites) or read and write content (like Web2’s social media).

[2]Could blockchain be the future of the property market?, HM Land Registry Blog (24 May 2019). Available at: https://hmlandregistry.blog.gov.uk/2019/05/24/could-blockchain-be-the-future-of-the


[3] Oral Evidence: The crypto-asset industry (HC 615), House of Commons Treasury Committee (14 Nov. 2022), Q41, Available at: https://committees.parliament.uk/oralevidence/11549/html/.

[4] Universal Studio planning Halloween-themed NFT scavenger hunts, Fortune Magazine (21 Sept. 2022). Available at: https://fortune.com/crypto/2022/09/21/universal-studios-planning-halloween-themed-nft-scavenger-hunts/.

[5] Updated Guidance for a Risk-Based Approach, Virtual Assets and Virtual Asset Service Providers, Financial Action Task Force (Oct. 2021), para.53. Available at: https://www.fatf-gafi.org/media/


[6] Proposal for a Regulation in the European Parliament and of the Council on Markers in Crypto-assets, and amending Directive (EU) 2019/1937 (5 Oct. 2022), Art. 2, Sec. 2a. Available at: https://data.consilium.europa.eu/doc/document/ST-13198-2022-INIT/en/pdf.

[7] Ibid, recitals, Sec. 6c.

[8] Ibid, recitals, Art. 122b, Sec. 2(da).

[9]Available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/


[10] Crypto-Assets: Implications for Consumers, Investors and Businesses, US Department of the Treasury (Sept. 2022), pp. 23-25. Available at: https://home.treasury.gov/system/files/136/


[11] Action Plan to Address Illicit Financing Risks of Digital Assets, US Department of the Treasury (Sept. 2022) p.10. Available at: https://home.treasury.gov/system/files/136/Digital-Asset-Action-Plan.pdf.

[12] See “Policy paper: UK Digital Strategy”, Department for Digital, Culture Media & Sport, p.19 (13 July 2022). Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/


[13] Keynote Speech by John Glen, Economic Secretary to the Treasury, at the Innovate Finance Global Summit (4 April 2022). Available at: https://www.gov.uk/government/speeches/keynote-speech-by-


[14] Cryptoasset promotions: Consultation response, HM Treasury (Jan. 2022), para. 4.13. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/


[15] 2 Dec. 2022. Available at: https://questions-statements.parliament.uk/written-questions/detail/


[16] Ibid; HM Treasury (Jan. 2022), supra note 14.

[17] For more information, see “What is blockchain” (13 Oct. 2022), MoonPay blog. Available at: https://www.moonpay.com/blog/what-is-blockchain.