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The SEC to Dawn On NFTs Sector

News
The SEC to Dawn On NFTs Sector

The SEC is scrutinizing NFT traders, marketplaces, and individual projects for violations. The US financial watchdog is inspecting whether some NFTs qualify as securities and should bow to its rules or not. It is also trying to determine possible foul play by NFT stakeholders.

The SEC to Examine Whether NFTS Qualify as Securities

According to Bloomberg, the US apex regulator, the SEC, is looking into the NFT sector to determine whether some of its projects are securities. In its list, the agency is looking closely at NFT marketplaces, individual projects, and traders to see if they have violated any securities laws. 

The commission is said to have already sent out subpoenas related to the investigation even though more details are confidential. Bloomberg’s inside source also explained that the commission is keen on fractional NFTs. 

Fractional NFTs have been on the rise as they help people own a full NFT jointly, with every holder having full rights to a small segment of the whole asset.

Are NFTs Subject to SEC’s Regulation?

The  SEC has been scrutinizing different crypto projects to find out whether they are securities or not. It already has an ongoing case with Ripple over the XRP token where the SEC claims that it is a security. 

Now, reports are out that the commission has officially started dawning on the NFT sector. However, it is still too early to classify the move as binding since not all information requests lead to enforcement actions from the SEC. The commission might even be doing a regular check-up to ensure no one is meddling where they shouldn’t.

Even though the commission works that way, the current developments should not be ignored as it tends to dawn on sectors where it has some hints. In the 2017 ICO era, the commission went hard on the ICOs and caught up with several poor projects. It went ahead to issue enforcement actions to the unlawful projects with big companies like Telegram being forced to ditch their crypto projects.

The commission believes that as the NFT market grows, it is finding variations in securities. In March 2021, Hester Pierce, also known as ‘Crypto Mom’ pointed out that NFTs may raise the same alarm as ICOs. She even added that fractional NFTs might be considered unregistered securities.

Crypto Regulation-Authorities to Make Digital Assets ‘Safer’

Globally, regulators are wary of digital assets as risky for investors. They are not wrong, as many scammers and hackers have taken advantage of the crypto space for years now. Financial foul players have also abused the freedom that comes with blockchain technology. 

Most of the regulators have taken this angle in regulating cryptocurrencies. For instance, China imposed a blanket ban to mitigate all risks involved with the crypto space. India also heavily taxed the digital assets at a 30% capital gains tax to discourage using the assets. It also released guidelines to govern crypto advertisements not long ago.

The US has also been scrutinizing crypto projects like Bitfinex, BitMEX, Tether, Ripple, and ICOs, to mention a few. Its authorities have repeatedly said that the assets offered to US citizens should follow KYC-AML and other categorical rules to safeguard the investors.

Yesterday, crypto.news also reported that the UK had banned Floki Inu Ads as part of a wider regulatory crackdown.

These are some developments in crypto regulation and should also urge individual investors to research the projects before investing to make the crypto space safer.