US Regulators Investigate NFTs for Possible Securities Law Violation

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US Regulators Investigate NFTs for Possible Securities Law Violation By Hannah Perez

The SEC has sent subpoenas to the creators of NFTs and various markets requesting more information about NFT offerings.


Financial regulators in the United States are closely scrutinizing tokens non-fungible securities (NFTs) to determine if they should be considered securities, and therefore be regulated by federal securities law.

In accordance with Bloomberg, the US Securities and Exchange Commission (SEC) is investigating the creators and markets of NFTs to determine if any of these assets violate the agency’s rules. The publication cited sources familiar with first reporting the investigations.

One approach to watchdog investigation is know if certain NFTs “are being used to raise money like traditional securitiespeople said. SEC enforcement attorneys have been sending subpoenas to various NFT project creators, as well as cryptocurrency exchanges, requesting information about digital collectible offerings.

Part of the focus of the investigation is to seek more information on so-called fractional NFTs, the unnamed sources said. Fractional NFTs are assets that can be divided into smaller units to be bought and sold at lower cost.

The SEC is keeping a close eye on NFTs

The burgeoning digital asset space has come under increased regulatory scrutiny in recent months. Especially, crypto lending products. For example, the SEC ordered the company BlockFibased in New Jersey, will pay a record $100 million fine for not registering their crypto loan products from “high performance” as values.

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The review has been part of a larger effort by the Commission, under the chairmanship of Gary Gensler, to ensure that the cryptocurrency market adheres to its regulations.

However, the topic of security classification within the crypto market has been a recurring one. The SEC has not considered Bitcoin nor to Ether as securities due to its use as a currency and its decentralized nature, but has been suspicious of other assets. Among them, of XRP of Ripple Labsa company with which it is currently in legal dispute to determine whether its token is a value or not.

Recent reports suggest that the SEC is paying more attention to the NFT space; possibly in the face of concern that projects in the nascent sector are finding new variations from unregistered values ​​that have been kept on the sidelines by the regulator.

It should be noted that NFTs are digital assets based on blockchain denoting the right to sell or trade an attached asset, such as a work of art or sports collectible. For its part, a value is considered to be a negotiable financial instrument that investors buy with the intention of obtaining profits while financing a company.

“Crypto Mom” had already warned him

Some agency officials have previously warned of the possibility of stricter regulations on the sector. Among them, SEC Commissioner Herter Pierce, who has been affectionately nicknamed “Crypto Mom” for his favorable views on cryptocurrencies.

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In March of last year Pierce argued that NFTs could “ask the same kind of questions that ICOs askedreferring to the boom in initial coin offerings in 2018, many of which faced enforcement action from the SEC. As well had warned investors that fractional NFTs could be considered unregistered securities. More recently, in an interview for Coin Desk TV in December, it had signaled that the SEC would take a more vigilant approach to NFTs.

Given the breadth of the NFT landscape, certain parties may be within our jurisdictionPeople need to think about potential places where NFTs could enter the securities regulatory regime.

Also the chairman of the SEC had previously stressed that he believes that many crypto tokens are probably securities that should be under the control of the regulatory agency.

If they were to be considered securities, NFTs would be regulated like US stocks, and would require agency approval. However, it is worth noting, as Bloombergthat an SEC investigation does not necessarily lead to an enforcement action.

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Article by Hannah Estefanía Pérez / DailyBitcoin

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WARNING: This is an informative article. DiarioBitcoin is a means of communication, it does not promote, endorse or recommend any investment in particular. It is worth noting that investments in crypto assets are not regulated in some countries. May not be suitable for retail investors as the full amount invested could be lost. Check the laws of your country before investing.

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