EU to the rescue of NFTs in the App store and beyond

Oct 27, 2022

On October 24, Apple updated the App Store rules regarding the application of blockchain technology, and more specifically, regarding NFTs and cryptocurrencies.

The new rules allow in-app purchases of NFTs, but NFTs purchased elsewhere are prohibited from being used for anything other than being displayed. Apps are allowed to use Apple's in-app purchase functionality to sell and market services related to NFTs, such as "mining, listing and transferring."

Apps will not be allowed to include buttons, external links or other calls to action, which could offer users a way to circumvent app store fees when purchasing NFTs. It also prevents apps from using QR codes or cryptocurrencies, to prevent them from being used to unlock content or functionality within an app.

The rationale behind the measures? Apple wants to apply to all payments related to NFTs the 30% commission it applies to virtually all transactions on the App Store.

But it so happens that last Tuesday, November 1, the European Union's new Digital Markets Act, or DMA, came into force. This new regulation will force Apple (and other tech giants) to allow third-party stores to be used on platforms such as iOS. In addition, companies selling apps and services on iOS 16 (or Android or Windows 11) will be able to use the payment system of their choice, or charge outside these platforms without, as until now, being banned.

In other words, within the EU, Apple will not be able to prevent the free use of NFTs within its platform, thus protecting the commercial sense of NFTs. Not only because they may be purchased at reasonable prices through payment methods with commissions much lower than Apple's 30%, but also because they will be able to offer incentives to users who buy and use NFTs. Recall that an NFT can be a song, a video game asset, an image or any other type of digital asset. 

To get an idea of the potential of this technology, let's review application examples: 

Video game developers can, for the first time, allow their players to own the assets they get during their in-game play. Let's take a virtual race car. If you embed an NFT in it you can guarantee ownership. If you do the same with all valuable assets in a game, their owners can deduct use or sell them.

Or musicians, painters and artists in general can now manage royalties in a pre-programmed way in smart contracts, transparently. In fact, new revenue streams can be created.  Say a digital artist sells a special and unique painting or video on their website. Now, in addition to selling it for full price to the first buyer, they can take a (let's assume decreasing) percentage each time their work is re-sold.

The Digital Markets Act gives wings to the battle that many companies, including music giant Spotify and video game giant Epic Games, are waging with Apple for applying strong anti-competitive measures, and allows the EU to set itself up as a favorable environment for the new economy that the widespread use of NFTs enables.

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