- NFTs had a great year in 2021, but with the latest news about the digital asset, there seem to be potential issues arising on the landscape.
- In regards to regulatory violations, SEC has raised concerns about the creators and marketplaces of NFTs.
- The SEC attorneys also extracted valuable information on potentially illegal token offerings in the past few months.
2021 proved to be a great year for NFTs, with celebrities and star players investing in it. However, the latest news about the non-fungible tokens( NFTs) are not optimistic and even signal potential issues for cryptocurrencies and other blockchain-based assets. Besides, various regulators around the world have raised serious concerns regarding the ever-increasing hype around this asset class.
The U.S. Securities and Exchange Commission or SEC has raised concerns about NFT marketplaces and creators in regards to regulatory violations. The SEC even held an investigation to determine if some people are also using NFTs for traditional security purposes.
According to some reports, the SEC attorneys also lend out subpoenas to extract information on potentially illegal token offerings in the last few months. Fractional NFTs that enable people to hold and trade a share of an asset was its target.
It is being assumed that the recent crackdowns adhered to Chairperson Gensler’s vision to ensure that the crypto markets stay under proper regulation. However, once NFTs cleared the Howey Test, an SEC standard to figure out whether there is an “investment contract” involved in a transaction, they will be considered securities.
Popularly known as “Crypto Mom”, Commissioner Hester Pierce quoted saying last December that some NFTs could fall under the influence of the SEC. In an interview, she explained that some NFTs might fall under their jurisdiction by the ever-expanding landscape. She also warned people saying that people should keep in mind that potential NFTs might run into the securities regulatory regime.
A popular-crypto exchange, BlockFi, recently came under the SEC’s radar. In February this year, state regulators and the SEC fined $100 million. In the future, more exchanges can meet with a similar fate looking at the increasing scrutiny.
Many Cryptocurrency exchanges have faced a similar fate by SEC under Chairman Gary Gensler. For regulatory oversight, the digital asset industry also locked horns with the CFTC.
One crucial question is if digital assets, including NFTs, are securities because, in that situation, the same rules will be applied to them as they do to stocks. Ripple Labs, creator, and distributor of XRP, had to go through a lot in this regard.
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