The Intersection of NFTs and Structured Finance

Blockchain technology, cryptocurrencies, stablecoins and nonfungible tokens (NFTs) continue to invade financial markets. Whether through partnerships between financial institutions and tech firms or through in-house initiatives at some of the nation's largest banks, blockchain-based products, services, and transactional structures are a major point of interest. In a recent work by Steven Schwarcz, the growing NFT market is analyzed using the traditional tools of structured finance. Creating a new conceptual model called non-cash-flow monetizations, Schwarcz reveals the risks to investors and markets if the tokenization of nontraditional and largely illiquid assets proliferates. Having identified the potential harms, he offers a package of regulatory solutions grounded in public law frameworks, which might mitigate, though not completely eliminate, these potential downsides. In this Response, we review Schwarcz's article and highlight how its insights advance the understanding of novel blockchain-based transactions and their disruption of the existing financial landscape. Additionally, we provide an analysis of the private law dimension of non-cash-flow monetizations—a perspective we believe is absent from much of the public discourse and relevant academic literature.