Non-fungible tokens, or NFTs, are digital assets that get listed and traded on alternative marketplaces. Like any other (non-crypto) digital exchange, users can browse through thousands of NFTs and purchase one from a listing ⁠– this also means they can get delisted, too. The same thing is true about cryptocurrencies themselves.

But what exactly is delisting, and why does it happen? Keep reading to find out.

What Does Delisting An NFT Mean?

The term “delisting” refers to the act of removing social tokens, digital items, and crypto art assets from the largest marketplaces on the web. The team or individual managing the asset can initiate the delisting process. Likewise, a digital marketplace can delist an NFT due to a violation of the terms of service. 

Why Do Assets Get Delisted?

If you’ve ever explored crypto and NFT Twitter, you might already know that there are many reasons digital tokens and assets can be delisted. But what are they? Keep reading to find out.

Non-Compliance With Listing Requirements

Crypto markets, just like any traditional art market or exchange, have their terms, conditions, and requirements for listing cryptocurrency tokens or assets. All teams and individuals listing their NFTs and currencies agree to be bound by a platform’s requirements when listing, which means that a non-compliant token or NFT can be removed from a centralized platform anytime.

As a result, users absorb the risk of listing or purchasing an NFT or token that can be delisted ⁠– a source of controversy in the crypto community.

Legislation

Smart contracts and other blockchain mechanics are still in their infancy stages, but the legislation and regulation around it are burgeoning. As a result, changes in laws around NFT art collections and crypto itself directly influence decentralized exchanges, particularly in the United States. 

These marketplaces have chosen to self-regulate, which means they take full responsibility for any possible legal issues with the SEC. If a project, token, or NFT violates any laws, there’s a relatively high chance it will get pulled from the platform.

Low Liquidity

Crypto exchanges make money primarily from gas prices and exchange fees. Every time users initiate transactions using their platform, they make money. But how does this relate to which NFTs or coins get delisted?

The answer is simple: more transactions = more money. As a result of their business models, crypto exchanges are more incentivized to support assets with a high trading volume or liquidity. On top of this, every NFT or token requires resources to maintain, and centralized exchanges are likely to follow the money. 

As a result, low-volume or low liquidity assets are more likely to get delisted.

Security Issues

For the blockchain, security is paramount. As a result, it’s always a massive kerfuffle when a crypto platform or NFT gets hacked or exploited. 

One prominent example is CryptoPunks V1, which had an exploit in its smart contract that allowed users to withdraw the ETH used to purchase the asset. Unfortunately, this meant that whoever was selling the CryptoPunks assets (be it Larva Labs themselves or a secondary seller) didn’t make any money.

As a result, Larva Labs filed a DMCA takedown for the CryptoPunks on OpenSea, resulting in delisting all assets from that collection. From this, CryptoPunks V2 was later born.

Owner-Initiated Cancelation Or Delisting

Owner-initiated delisting is one of the most common reasons crypto exchange tokens and assets are removed from their marketplaces. For example, creators may feel that they listed their NFTs at a price too low for the current market and want to relist at a higher asking bid. In this case, they’d have to delist their NFT from the marketplace before relisting at their appropriate price point.

However, users need to note that both the listing and delisting of an NFT incur gas fees, making the process costly for fickle sellers.

What Happens When An NFT Or Cryptocurrency Gets Delisted?

What happens if you’re holding onto a cryptocurrency or NFT and it gets delisted? Unfortunately, there’s no easy answer that encompasses all possible scenarios. However, there may be a few common paths depending on the asset type.

For example, if you’re holding crypto that’ll be delisted from a major exchange, you’ll find out long before the actual date. That’s because crypto token teams usually inform their holders when they receive the notice, so they can be traded out for supported currencies.

However, if you have an NFT that was delisted after purchasing it, you may be out of luck. Users have reported delisted NFTs disappearing from their crypto wallets altogether. 

Final Thoughts On Delisting

Delisting a cryptocurrency or NFT is costly, but it’s sometimes necessary to maintain security or comply with legislation. Unfortunately, delisting an asset may also mean that token and NFT holders end up on the losing end of the deal, making it a controversial topic within the crypto community. 

However, there is one way to curb potential losses from delisted tokens and NFTs: research. After all, an informed investor is a rich one. There are usually warning signs that an NFT is stolen (such as lacking verification on the exchange) or has a low trading volume for cryptocurrency.