SEC Investigates NFTs Market over Concerns of Illegal Offerings

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The United States’ Securities and Exchange Commission (SEC) is investigating the non-fungible tokens (NFTs) market to determine if some of these NFTs can be categorized as securities, according to a report by Bloomberg.


Q4 2021 volumes have gone up or down and how much?

The regulator is particularly focused on fractional NFTs, pieces of which can be sold separately to multiple investors. These units can be easily bought and sold in the secondary markets for earning profits.

The report further outlined that the SEC attorneys have been sending subpoenas to NFT creators and various crypto exchanges requesting more information for months now. However, the regulator did not confirm anything officially.

NFTs give ownership of the piece of art to the buyer. It is often touted as the digital certification of authenticity that is stamped on a  blockchain  cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.

Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
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and cannot be altered, well ideally.

An Exploding Market

Demand in the NFTs market exploded over the past couple of years. According to Chainalysis, around $44 billion worth of cryptocurrencies were sent to  Ethereum  smart contracts linked to NFTs in 2021, compared with $106 million in the previous year.

Now, artists, athletes and celebrities from almost each and every field are now launching NFTs, taking the demand in the market even higher.

The SEC jurisdiction is only limited to the securities market in the United States. To take any action against the NFTs, it first needs to establish that NFTs, or at least a particular category of it, are securities. It usually uses the Howey test, from a 1946 U.S. Supreme Court decision, to decide if an asset qualifies as securities.

Hester Peirce, SEC’s crypto-friendly commissioner, also raised concerns over the booming NFTs market, saying: “Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction… People need to be thinking about potential places where NFTs might run into the securities regulatory regime.”

The United States’ Securities and Exchange Commission (SEC) is investigating the non-fungible tokens (NFTs) market to determine if some of these NFTs can be categorized as securities, according to a report by Bloomberg.

The regulator is particularly focused on fractional NFTs, pieces of which can be sold separately to multiple investors. These units can be easily bought and sold in the secondary markets for earning profits.


Q4 2021 volumes have gone up or down and how much?

The report further outlined that the SEC attorneys have been sending subpoenas to NFT creators and various crypto exchanges requesting more information for months now. However, the regulator did not confirm anything officially.

NFTs give ownership of the piece of art to the buyer. It is often touted as the digital certification of authenticity that is stamped on a  blockchain  and cannot be altered, well ideally.

An Exploding Market

Demand in the NFTs market exploded over the past couple of years. According to Chainalysis, around $44 billion worth of cryptocurrencies were sent to  Ethereum  smart contracts linked to NFTs in 2021, compared with $106 million in the previous year.

Now, artists, athletes and celebrities from almost each and every field are now launching NFTs, taking the demand in the market even higher.

The SEC jurisdiction is only limited to the securities market in the United States. To take any action against the NFTs, it first needs to establish that NFTs, or at least a particular category of it, are securities. It usually uses the Howey test, from a 1946 U.S. Supreme Court decision, to decide if an asset qualifies as securities.

Hester Peirce, SEC’s crypto-friendly commissioner, also raised concerns over the booming NFTs market, saying: “Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction… People need to be thinking about potential places where NFTs might run into the securities regulatory regime.”



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