SEC Set to Crackdown on Crypto Regulations: What Does It Mean for the NFT Markets in 2022?

Chairman Gensler of the SEC announced last year plans for a complete overhaul of crypto regulations, making it a central focus in 2022. The change began on the 20th of January, targeted primarily at digital trading platforms. 

After an unbelievably lucrative year for NFTs, it is no wonder that many people are questioning how these potential changes could impact buyers. To better understand what could lie ahead, let’s take a closer look at what all the fuss is about. 

SEC Crypto Goals for 2022

In short, the SEC warned the crypto community that digital coins and tokens could be considered securities and are therefore subject to the same strict laws. Regardless of how much crypto changes over the years, the SEC security laws stay the same. 

Changes have already begun, with multiple trading platforms already having come to arrangements with the government agency. One example is the platform DeFi Money Market. It was found to have made more than 12 million dollars in illegal gains according to SEC rules, and the project’s founders each had to pay $125,000 in fines- a modest fee, all things considered. 

The goal is to regulate trading platforms across the board, forcing them to register as security trading entities and come into line with the laws imposed on the rest of the industry. 

Additionally, crypto exchange platforms should register as broker-dealers, and comply with all that goes with the title. Coinbase was the first to accept the new rules. As North America’s largest platform of its kind, the insinuation of insider trading was enough to spur on the acceptance of SEC progression. 

Why the Change?

Over the years, cryptocurrencies have grown exponentially. Because of the interest, many new enterprises have launched their own coins and tokens, most of which answer to nobody. Although that was part of the whole idea of crypto in the first place, it does leave investors open to an immeasurable level of risk. 

The SEC claims these coins are securities and must answer to someone to protect the market and the people who invest in it. Having the watchful eyes of the SEC ever-looming is certainly one way to ensure platforms and exchanges are treating their client how they should be. 

Arguments Against Stricter Regulations

Of course, not everybody agrees. The fundamental basis of crypto is that the government does not control it. People are free to take part in it how they wish. By introducing strict laws and regulations, it detracts from what the market is all about. 

Some people believe that a decentralized asset cannot be considered a security, but the SEC says it does.

What Would the Changes Mean for the NFT Market?

You may be wondering how all this could affect NFTs? At first, there was no mention of the SEC tackling this market, but now the idea has been put out there. It is hard to justify calling NFTs securities since each one is unique, but fractionalization is blurring those lines.

Because some NFTs are sold in fractions to multiple buyers, it qualifies as a shared investment and could potentially come under SEC scrutiny. Hester Pierce of the SEC made this very clear last year with her warning at the Draper Goren Holms Security Token Summit. 

Even if NFTs are put on the SEC’s backburners, for now, the changing realities of how cryptocurrency works could still have a knock-on effect since a large portion of NFT marketplaces rely heavily on digital money to function. It could also mean that anyone who buys fractionalized shares in a blue-chip NFT may face penalization in the future.

Final Thoughts

NFTs are cryptocurrency: all be it a unique strand. Any major changes to how the industry works are likely to ripple through to every sector. Those of us with money in the game who are avidly involved with crypto and NFTs are part of our futures and investment portfolios should be actively listening out for news regarding this topic. 

Cryptocurrency is a free and fluid market full of bright minds and forward-thinking entrepreneurs, but the SEC is a big old force to go against. There are two sides to this story, but only one with legal precedent on its team. 

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