Thank you, Mr. Chair and members of the committee.
My name is Alison Kutler. I am head of government affairs at Dapper Labs. I'm pleased to join you today on behalf of our company, and want to open with our eagerness to work alongside government as a trusted resource while you explore a regulatory path forward for our vast and diverse industry.
By way of introduction, Dapper Labs is an exciting Canadian success story headquartered in Vancouver. We are the creator of the NFT and continue to be a world leader.
When we talk about NFTs, many people think of a picture of a funny ape that someone purchased with a Bitcoin, but our industry is very diverse. There are many different kinds of NFTs. Some enable access to communities, events or games. Some provide royalties or other rewards. They validate credentials or asset ownership, and are simply appreciated as art collectibles or mementoes.
NFTs possess three distinct characteristics that distinguish them from cryptocurrencies and other fungible tokens on the blockchain. NFTs are unique in nature, non-interchangeable and non-divisible. At Dapper we make digital collectible NFTs—you can think of them as digital trading cards—which also facilitate highly interactive experiences and are revolutionizing fandom. Our digital collectibles provide real utility. They strengthen relationships between fans and their favourite players and teams and entertainers, providing new creative channels for brand expression, engaged and exciting communities, and opportunities for consumers to be rewarded for their fandom, online and off-line.
As policy-makers around the world consider the role of NFTs in society, Dapper Labs serves as a great example of how digital collectibles can be a source of innovation that helps make blockchain technology accessible to everyone. In 2020 we launched NBA Top Shot, taking digital collectible NFTs mainstream and becoming the first blockchain product to surpass a million community members. We have developed the world's leading blockchain studio and continue to build consumer-facing experiences that allow people to interact with Web3 technology in a way that is easily accessible, secure, transparent and fun.
As the pioneers here, we also recognize and embrace the responsibility to set the bar high with best practices for how this new industry can promote innovation while ensuring that consumers are protected. We have instituted a comprehensive set of industry best practices, including a “know your customer” protocol, enhanced due diligence, sanctions screening and a transaction monitoring program. We also fully disclose the terms of each individual digital collectible NFT product prior to a purchase, so that consumers understand what they own.
All of Dapper Labs' digital collectible NFTs are built on the Flow blockchain, which is environmentally sustainable. Minting an NFT on Flow uses less energy than a Google search or an Instagram post.
It's important to remember that Web3 is complex. It can't be regulated through a one-size-fits-all approach or simply by copying existing financial services laws. We would like to ensure that NFT creators, big and small, can continue to innovate and develop ways for society to benefit from this exciting new technology. This is not to say that NFTs should not be regulated, just that they shouldn't be governed by what would be overly burdensome rules taken from other sectors. Rather, we would welcome a regulatory regime that will recognize the unique characteristics of NFTs and how they are used in the digital economy.
First and foremost, we need to establish clear definitions on what an NFT is and directions for how NFT service providers should be treated. We think seriously about fraud protection and implementing AML rules and KYC protocols that are proportionate to the risk. We also believe in standards for intellectual property protection and, in partnership with provincial regulators and agencies, enhanced consumer protection standards.
Most importantly, we support an open and engaged dialogue between industry and government. We hope Dapper Labs can be an example for Canadian policy-makers of the type of innovation that should be encouraged to make blockchain technology accessible to more communities, while doing so safely and responsibly.
Thank you for your time today. I look forward to answering your questions.