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- The SEC has barely wrapped its head around crypto in general, but Commissioner Hester Peirce is already calling for guidance on NFTs.
- She says that if there’s potential for securities laws to apply to NFTs, then the SEC must be quick to act before NFTs become too big to regulate.
The U.S Securities and Exchange Commission is failing the cryptocurrency industry by not issuing guidelines for non-fungible tokens (NFTs), one of its commissioners says. Hester Peirce, known fondly as Crypto Mom, believes that the agency must quickly apply securities laws to NFTs if it believes they qualify as securities.
The SEC has struggled to regulate the crypto industry as a whole. It has already taken dozens of crypto startups to court for allegedly violating securities laws and obtained about $1.7 billion in fines and penalties according to data from blockchain analytics firm Elliptic. However, even then, it still has yet to come up with definitive rules for the sector.
Peirce believes that it’s about time the agency took greater notice of NFTs. In an interview with CQ Roll Call, Crypto Mom stated:
As a regulator, I mean it’s something that I’m watching because the growth has been pretty astounding. I’m sure people are thinking about ways that they can use the idea of an NFT in the financial space.
Do we need separate regulations for NFTs?
NFTs have become one of the most exciting sectors in crypto. In the third quarter of 2021, NFT trading shot up 700 percent and more than 38,000 percent from the same period a year prior. Every other celebrity has minted an NFT on Ethereum, Solana, Avalanche, Terra and more.
Data from nonfungible.com show that Axie Infinity has sold $3.4 billion in NFTs to lead the charts. Bored Ape Yacht Club comes in second with $2.1 billion, with CryptoPunks and ArtBlocks following suit at $1.9 billion and $1.3 billion respectively.
This is a sector that the SEC must look to regulate, Crypto Mom told Roll Call.
It does make sense, in any of these emerging areas where there’s a potential for securities laws to apply, for us to say here are some of the things people ought to be thinking about.
In cases where NFTs are used to represent shares in companies, the SEC will likely have jurisdiction, she added.
As the SEC grapples with NFTs, regulators can’t seem to find a middle ground on the direction that new regulations should take. Some are big fans, such as Wyoming Senator Cynthia Lummis whose upcoming digital asset bill doesn’t include NFTs.
She commented:
NFTs are an exciting new way for artists, creators and others to certify the authenticity of a unique object. NFTs are relatively new, and I think we still have a lot to learn about how they are evolving.
Not everyone agrees on the need for regulations, however. Cleve Mesidor, the public policy adviser at the Blockchain Association believes that there are already enough rules to guide NFT owners.
So the notion that this should be further regulated is crazy. There are tons of intellectual property laws already in place that can deal with the issues that come about in terms of protections around this space.
