The US Securities and Exchange Commission (SEC) is mobilizing a probe that will evaluate the compliance of NFT creators and crypto exchanges. The agency plans to release a ruling on whether some of the digital assets are in violation of their mandate. Contrary to common belief, this can positively influence the industry because regulatory bodies are gatekeepers of adoption.
US SEC’s Probe on NFTs and Exchanges
Ultimately, the US SEC wants to determine if creators and exchanges are using digital assets like NFTs to raise funds like traditional securities. Securities are fungible and tradable financial instruments used to raise capital in public and private markets. Some of the most common examples include stocks, bonds, options, mutual funds, and ETF shares. These assets have certain tax implications in the United States and are under tight government regulation. Hence, the US SEC’s proactive stance on the matter.
The inquiry is the latest attempt by the SEC under Chair Gary Gensler to ensure strict compliance. Last February, the agency showed teeth when it cited BlockFi. It ordered the popular virtual-currency exchange a record $100 million fine for failing to register products that pay customers high-interest rates to lend out their digital tokens.
In addition, the SEC will evaluate the merits of fractional NFTs. Basically, this mechanism breaks down assets into units representing ownership. In the context of NFTs, this is one way for ordinary collectors to own blue-chip and valuable NFTs without breaking the bank.
The NFT market continues to heat up. In effect, more brands and companies across different industries are adopting the technology. So it’s not surprising that regulators will intervene. In fact, US President Joe Biden will soon release a wide-ranging executive order to provide ample support for the industry. The administration clearly understands crypto is here to stay and appears to be embracing that.