MusicArt, a new NFT platform built on the BSV blockchain focussed on the tokenisation and trade of music artwork, has partnered with London-based law firm Gherson Solicitors to secure compliance with anti-money laundering (AML) regulations in the United Kingdom. This step allows the company to build trust with its users and sets it apart from the many other NFT marketplaces operating outside the umbrella of these regulations across the world.
MusicArt’s stable of NFTs are set to include everything from album artwork and music posters to lyric sheets, with plans to add support for tokenised books, magazines and music tracks. The regulatory landscape within the cutting-edge industry of NFT platforms is changeable and difficult to address, which is why the company partnered with Gherson to ensure their continued compliance with AML regulations.
Gherson advised MusicArt on all aspects of legal and regulatory compliance, ensuring the company complied with all aspects of AML regulations in the United Kingdom. It also successfully registered with HM Revenue and Customs for Anti-Money Laundering Supervision to secure its compliance status. The firm also leveraged its knowledge of the fintech and blockchain space to create policies and procedures specifically tailored to MusicArt’s operating environment.
‘Advising MusicArt on compliance with all aspects of the U.K.’s anti-money laundering law and regulations was incredibly exciting. NFTs are new to the mainstream market which meant that navigating the bespoke issues was new and different,’ said Thomas Cattee, Head of White-Collar Crime, Regulatory and Investigations at Gherson.
‘As is the case with the implementation of any new technology, we needed to steer through the corresponding regulatory and compliance issues. We wish the team at MusicArt all the very best with its novel, and environmentally friendly, platform in the future.’
Bitcoin Association speaks to MusicArt Co-founder Peter Ruppert to find out more about how the company reached compliance with U.K. AML regulations.
A complex process based on expert understanding
The guidance offered by Gherson was supported by the firm’s deep understanding of blockchain technology and how the operations of an NFT marketplace relate to the longstanding regulations around anti-money laundering.
‘Ensuring compliance with U.K. AML regulation for an NFT marketplace involves a complex, multi-stage process requiring expert understanding of the unique features of this novel technology on a specific case-by-case basis, and then applying this to the relevant regulatory framework to determine the applicable regulations,’ Ruppert explains.
‘Combining a thorough understanding of both the unique features of blockchain technology and expert knowledge of the applicable regulations, Gherson Solicitors’ criminal litigation, regulation and investigations team was able to expertly guide MusicArt through this process and ensure compliance with all relevant regulations.’
The first stage of this guidance was to determine which of the specific AML regulations were applicable to the MusicArt platform.
‘This necessitated an expert examination of the particular NFTs involved, and then of the particular role that the business plays and the interactions that it manages. This task was assisted and underpinned by a firm understanding of the technology and the regulations,’ Ruppert says.
Once the applicable regulations had been determined, the work of drafting policies and procedures had to begin. It was also necessary for MusicArt to apply for the applicable regulatory licence and register with HM Revenue and Customs for Anti-Money Laundering Supervision.
This process required an examination of how the tokens minted and circulated on the BSV blockchain reflected in MusicArt’s policy and procedures, as well as addressing the risks present in a nascent blockchain-based business.
‘A consideration was given to both the risks arising from the characteristics and structures of the new technology, and it was therefore ensured that the policies and procedures addressed all these risks accordingly. A thorough understanding of the underlying technology then further enabled the Gherson team to ensure that all necessary practical steps were taken to ensure ongoing compliance,’ Ruppert says.
‘It is hoped that through MusicArt publicly ensuring and demonstrating compliance with the relevant regulations this will not just set an example for other NFT marketplaces to follow but will go towards ensuring that the NFT sector as a whole demonstrates exemplary compliance going forwards, which will be fantastic for the sector and its continued success.’
He added that the challenge of ensuring compliance between blockchain-based business operations and regulation was new and made only more difficult by a relative lack of experience and familiarity with the technology.
How the BSV blockchain aids regulation
One of the key aspects of the BSV blockchain that make it so attractive to enterprises is its regulation-friendly design. Ruppert acknowledges this and describes how the ledger can help to ensure regulatory compliance through enhanced auditability.
‘It should be noted generally that some of the unique features of blockchain technology with regards to transparency and record keeping can certainly be said to aid the regulation of this technology,’ he says.
‘The BSV blockchain allows us to store everything on-chain. We can upload the asset on-chain, store the contract with the meta data on-chain and the records of ownership.
We can easily create limited editions of thousands of NFTs. The BSV blockchain is scalable and the transactions fees are cheap.’
‘Because we can store everything on chain, we can track the chain of ownership, and we can follow the financial transactions. This helps to comply with AML,’ he adds.
The ability to store all data on-chain at cheap rates and with unbounded throughput capacity makes the BSV blockchain an ideal choice for an NFT marketplace like MusicArt, especially if they want to ensure continued compliance as they scale their catalogue and user base.
Ruppert notes that there are many NFT platforms operating around the world, on different blockchains and with varying degrees of accountability.
‘There are already many NFT platforms. Some of them even don’t have Terms of Service and like to stay anonymous,’ he says.
‘A regulatory friendly marketplace is more trustworthy. I think that in future it will be more and more necessary to comply with the regulations, so we are already prepared for the future.’
To find out more about MusicArt and its impressive catalogue of music artwork, visit the official website.