The US Securities and Exchange Commission is probing whether some non-fungible tokens are functioning as securities and escaping its eyes illegally.
- The regulator is said to have sent enforcement officials consisting of lawyers to conduct the probe which touches NFT creators and crypto exchanges where they trade.
- SEC focus will be on whether certain NFTs used to denote ownership of things such as painting and sports memorabilia can be used for financing like traditional assets.
- The regulator will seek more disclosure on the so-called fractional NFTs, which can be split into smaller units for easy buying and selling.
- The SEC inquiry happens even as some NFT marketplaces defend the sector saying they should not be subjected to the same rules as equities.
- The move by SEC seeks to further ensure that the crypto market follows the regulations. In February, BlockFi was fined a record $100 million fine for failing to register products that pay its clients high interest fees for lending digital tokens.
NFTs grew in popularity last year, with up to $44 billion worth of crypto tied to the asset class exchanged on the Ethereum smart contracts, an increase from $106 million the previous year.
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