In an attempt to determine whether they are in violation of its rules and regulations, the SEC is now targeting NFT creators.
Bloomberg reports that the financial regulator is becoming more concerned about NFTs being used to unregistered securities token offerings. A fractional non-fungible tokens are also under review. These tokens can be broken down into smaller pieces so that unique artwork or items can be owned by multiple people.
According to the report, over the past months, the SEC sent subpoenas for NFT creators as well as various crypto firms and exchanges, requesting more information.
The Spotlight on NFTs
Hester Peirce (also known as Crypto Mom), was a SEC Commissioner who warned last year that the regulator would soon be focusing on non-fungibles. “Given how vast the NFT landscape is, some pieces might fall within our jurisdiction,” she stated at the time, before adding that “people need to think about potential places where NFTs could run into the securities regulatory system.”
The SEC’s primary concern is the classification and regulation of NFTs as securities, just like it did with crypto assets. These assets are a fungible, negotiable instrument that has some monetary value. To determine if something is a security, the SEC uses the Howey Test. This test was derived from a 1946 U.S. Supreme Court ruling.
Industry advocates argue that regulation of equity markets shouldn’t also apply to NFTs or cryptocurrencies.
Chainalysis, a blockchain analytics company, estimates that around $44 billion worth crypto assets was sent last year to NFT-based smart contract on Ethereum blockchain. This was more than 40.000% higher than the $106 million figure in 2020.
NFT Markets are Cooling
The number of buyers for NFT market products has fallen to a three-month low.
According to CryptoSlam, this figure had fallen to 50.827 on February 28. This represents a 47% decrease from the January high of 95.592.
A 40% drop in February sales volume has been caused by the “mini bear market”, which saw January’s record-breaking $4.4 trillion fall to $70 million. Current daily sales volume stands at $70 million. This is 83% less than the August 28 record of $427 millions.
Marla Brooks – Financial Analysis
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