U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce warns that sales involving a specific type of crypto asset may be considered unlawful under some circumstances.
During the 3rd Security Token Summit on Thursday, Peirce sheds light on whether non-fungible tokens (NFTs) could be considered securities.
“The whole concept of an NFT is [it’s] supposed to be non-fungible, so it’s supposed to be unlike anything else, which means that it’s, I think, in general, less likely to be a security, but people are being very creative in the types of NFTs they’re putting out there. It’s a wonder what some people will pay for. I think, given that creativity, as with anything else, you should be asking questions.”
NFTs have unique cryptographic attributes, which means that a blockchain can attest to the originality and ownership of such digital assets, including artworks, parcels of virtual lands, and collectibles. With graphic artist Beeple selling an NFT for more than $69 million, people are rushing in to join the booming market.
The crypto mom adds that some practices may deem an NFT as an unregistered security, making its sale illegal.
“If you’re doing something where you are saying, ‘I’m selling you this thing and I’m gonna build this, I’m gonna put a lot of effort into building something so that this thing that you are buying has a lot of value,’ that’s gonna raise the same kinds of questions that these ICOs have raised and so you’ve got to be very careful when you do something like that.
You also have to be careful if you decide [to] take a bunch of these NFTs and put them in a basket and then break them up and sell for a fraction of the interest…
If they’re selling for $69 million, you might want to break them up and sell fractional interest and then you better be careful that you are not creating something that is an investment product, that’s a security.”
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