The Office of Government Ethics, which supervises the executive branch, has issued new guidance for public financial disclosure filers who possess NFTs.
Us Ethics Agency Issues New Guidance
Employees of the US executive branch who possess NFTs must now disclose assets held for investment income that are valued at more than $1,000 at the end of the reporting period or generate more than $200 in investment income during the reporting period.
According to the new legal guidance issued by Emory A. Rounds III, Director of the Office of Government Ethics, NFT holders who work at the office must reveal their asset holdings for ethical grounds. It states:
“Public financial disclosure filers must report the purchase, sale, or exchange of collectible NFTs or F-NFTs that are securities when the value of the transaction is over $1,000.”
Notably, the new advisory is focused on NFTs and fractional NFTs in the form of “virtual artwork, music, video files, trading cards, digital real estate or items in a virtual world.”
The document specifies that assets held “solely for personal, family, or household use” are not held for investment or income generation. According to earlier statements from the office, other domestic products such as furniture, clothing, and perishables purchased for family use are not reportable.
Furthermore, according to the new rules, filers must disclose NFTs even if they are not “held for investment or the production of income” and made more than $200 in investment income during the reporting period. It implies that if an employee purchases an NFT for display but later sells it for more than $200, the NFT must be reported as a source of income.
The office outlined a seven-part test in the guidance to determine whether an NFT is held for personal use or investment purposes. For example, the test asks if the NFT was purchased primarily for its potential value or for personal or aesthetic reasons.
Interestingly, the United States Office of Government Ethics decided in July to ban employees who invest in cryptocurrencies from working on crypto-related laws and regulations.
NFT Market Boom Prompts Staff Guidance
The Office of Government Ethics supervises more than 130 government agencies and the White House’s executive branch employees. The guidance for staff members who submit public financial reports comes after the NFT market reached its peak at the beginning of 2022.
Following the explosion of NFTs over the last year, the US Patent and Trademark Office and the US Copyright Office are undertaking a joint study to evaluate the impact of digital assets on intellectual property rights.
According to reports, the study would likely take into account potential intellectual property issues with NFTs, rights connected with transferring ownership of an NFT, licensing rights and infringements, and potential IP rights granted to NFT creators.
The study’s findings come amid a wave of lawsuits filed by well-known brands seeking legal redress against NFT marketplaces and NFT merchants who may have infringed on their intellectual property rights.