After Ripple (XRP), NFTs Are Now on the Radar of the SEC!


Known as non-tradable tokens, NFTs became hugely popular in 2021 and their adoption increased. Despite having a lot of supporters in the crypto world and even in traditional markets, NFT is going through the same paths as Bitcoin (BTC) and other cryptocurrencies faced trust and adoption problems when they first came out. However, there are also those who directly oppose the NFTs that have this tremendous rise. The SEC is voicing its concerns about NFTs and is launching an investigation.

Is NFT a Security?

The U.S. Securities and Exchange Commission (SEC) is voicing its concerns about NFT creators and regulators that they are engaging in marketplace infringement. In addition, the SEC is discussing and launching an investigation into whether NFTs have value like securities and whether they are used to raise money from people.

In addition, the SEC has reportedly been collecting information about NFTs, investigating copyrights of NFTs, and subpoenaing them over the past few months. In other words, the SEC focuses on whether copyright infringement has occurred for NFTs that may be owned by more than one person.

On the other hand, the SEC also wants to use the Howey Test for NFTs, which is used to determine whether the assets are an investment contract, and if the NFTs pass this test, it is planned to be considered a security.

In December 2021, SEC member Hester Pierce, known as the Crypto Mom for her sincere stance on the crypto industry, predicted this would happen and said:

“When we examine the NFT world, we see that it can fall under our jurisdiction. NFTs can be a security and be subject to a regulatory regime.”

SEC Increases Reviews

Additionally, the SEC fined cryptocurrency exchange BlockFi a record $100 million in February. With increased scrutiny, the SEC may impose more fines and add many cryptocurrencies and exchanges to its radar.

The most important issue at this point is whether NFTs and other digital assets are securities. If these digital assets are subject to securities rules, then stocks can follow the same path. Even if the opening of such a lawsuit is not known whether it will be positive or negative, it can damage the NFT ecosystem and take time to recover, as in the example of Ripple (XRP).