The Intersection of NFTs and Structured Finance

Blockchain technology, cryptocurrencies, stablecoins and non-fungible 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 Professor 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, Professor Schwarcz reveals the risks to investors and markets, if the tokenization of non-traditional 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. This Essay engages with Professor Schwarcz's groundbreaking work and extends his analysis by examining NFT monetization through a private law lens. We explore how commercial law doctrines—particularly those governing secured transactions, sales of goods, and property rights—apply to NFT-backed financing structures. We demonstrate that existing private law frameworks provide important protections and mechanisms for NFT monetizations, but also reveal significant gaps that could undermine market stability. Our analysis shows that a comprehensive approach to NFT monetization must integrate both public law regulation and private law doctrines to achieve optimal results. We conclude by proposing complementary private law reforms that would enhance the safety and efficiency of NFT-backed structured finance while preserving the innovative potential of blockchain technology.