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NFT industry is under scrutiny from the SEC: Here's what you should know

Updated: Jul 25, 2024
Published: Mar 3, 2022
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The NFT industry is under scrutiny from the United States SEC as per a recent report from Bloomberg. It is important to note that the SEC is eyeing creators, the marketplaces, and the tokens and their utility as well. People familiar with the matter claimed that the authorities are looking into the exchanges that support the trading of these assets to check if "assets run afoul of the agency's rules." 

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NFT and fundraising 

The NFT industry gained popularity in the recent period as the music and entertainment industry took part in the industry as well. We witnessed some major partnerships in 2021 between artists and blockchain enthusiasts who worked towards the creation of these nonfungible tokens. These tokens can also be used to represent ownership of digital content on a digital ledger. 

However, the SEC is looking into the fact if nonfungible tokens are being used to raise money just like traditional assets. As a result, in the past few months, the SEC has sent several subpoenas if the NFT industry is actually a front for fundraising for various sources. 

SEC raining down regulations

As per the report from Bloomberg, this new turn of events comes at a time when SEC Chair Gary Geslar is looking to regulate the crypto space and bring the entire industry under the jurisdiction of its laws. Furthermore, the SEC is also looking into something called a fractional NFT that involves breaking down digital tokens into several units, making them available to people who can buy and sell them. 

The SEC's attempts of raining down regulations on the crypto and NFT industry are not new. Recently, Cryptonary reported that the SEC had fined BlockFi, a place to buy, sell and earn cryptocurrency, regarding BlockFi Yield as it was worried about investor protection and systemic risk. BlockFi agreed to pay around $100 million. 

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