The growing utilization of Non-Fungible Tokens as a form of digital legal tender has led to an increased outcry for regulating transactions within the space. This is considering that most transactions are largely conducted without any regulatory framework. This has led to different incidents of thefts, impersonations, fraud, and other clandestine activities within the space since most people who take part in such activities suffer no consequences for their actions. There have been cases, like the case of Mr. Todd Kramer, an owner of an art gallery in New York, where a fraudster who stole NFT artworks proceeded to resell them on the NFT marketplace. All these highlight the need for a regulatory framework for trading digital assets. This is why the recent regulatory plans of the Securities and Exchange Commission, requiring participants on NFT marketplaces to be licensed before taking part in trading activities, have been largely welcomed.
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The rationale for the new rule, according to the SEC, is that while NFTs are not expressly defined under the Digital Assets Business Act, their function as a legal tender in the digital sphere representing an owner’s ownership or right in certain distinct digital assets such as arts, images, music, or collectibles resembling investment tokens, makes them subject to the supervision of the SEC under the law. Therefore, the new rule provides that all NFTs will be examined on a case-by-case basis to determine which law they fall under, going by their nature and conditions. For example, if the NFT is for fundraising, the exchange or marketplace where it is listed must apply for a permit to offer token trading services.
According to Akalarp Yimwilai, the co-founder and chief executive officer of Zipmex Thailand, an NFT trading platform, the recent plans of the SEC were a welcome development that will boost the confidence of investors within the NFT industry if properly supervised by regulators. He, however, noted that such plans would be met with skepticism by some in the industry who may see the new rule as an encroachment on their freedom.
Generally, there are four national NFT marketplaces: Coral, NFT1, Bitkub NFT, and JNFT. Globally, the major international NFT markets include Axie Marketplace, OpenSea, Larva Labs/CryptoPunks, Rarible, and NBA Shot Marketplace.