After Cryptocurrencies, The SEC Clamps Down on NFTs Over Illegal Offerings

Bishal Kumar Chanda
10.03.2022

The US Securities and Exchange Commission (SEC) is scrutinizing the compliance of NFT creators and crypto exchanges. Through this, the agency plans to release a ruling on whether some assets are violating its rules. In contrast to the fear in the market, this news can instead positively influence the industry as mass adoption is the step after regulation. 

The probe's focus is to determine if the creators and exchanges are using NFTs to raise funds like traditional securities. The securities in question are tradable and fungible financial instruments to raise capital in public and private markets. Some of the most common options are stocks, bonds, ETF shares, etc. These assets also come under specific tax implications and government regulations. Thereby, the SEC is quite proactive in its stance.

Under Chair Gary Gensler, the latest inquiry ensures that the crypto market adheres to its regulations. In February, the SEC levied a record $100 million penalties on the crypto lending and borrowing platform BlockFi, for failing to register its high-yield products. In addition, the SEC is seeking information regarding fractional NFTs that can be broken down into tradable units. 

The SEC declined to comment on the NFT probe, as it hasn't yet been disclosed publicly. Nonetheless, information requests from regulators might not always lead to enforcement actions. 

As the NFT market continues to heat up, more brands, companies, and celebrities endorse the new technology. In fact, NFTs are actively being used for political campaigns in South Korea. It is not surprising for regulators to intervene. Even Joe Biden is soon releasing a list of executive orders to provide ample support for NFTs and cryptocurrencies. The administration has accepted that crypto is here to stay for good and is now embracing it.

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