Monday, September 26, 2022
HomeTop NFT CollectionDraft EU Law Could See NFTs Regulated as Securities: Law Prof

Draft EU Law Could See NFTs Regulated as Securities: Law Prof

The European Union’s landmark and currently finalized Crypto Asset Market (MiCA) bill is marketed as a component of a large collection of NFTs with little or no distinguishing and unique quality or usefulness. Because it has none, it claims to be subject to the same regulatory scrutiny as cryptocurrencies. According to a leaked draft of the law obtained by Decryption.

According to Brian Fire, a University of Kentucky law professor, the text of the law amounts to the EU labeling key blue-chip companies. NFTs collections like Boad Ape Yacht Club (BAYC), Cryptopunksand Doodles etc. as securities.

“This sounds like Europe is saying it thinks securities regulators should look to big PFPs. [profile picture] For regulatory purposes, the project as a security,” said Fyre, who specializes in NFTs and securities law. Decryption.

MiCA — EU answer Comprehensive Crypto Regulatory Framework— has been anticipated for years and is expected to come into force in 2024. Decryptiondated September 21.

First and foremost, the law, which deals with the issue of regulating cryptocurrency activity in Europe, has a “unique character” and “contains unique and irreplaceable digital art and collectibles” that endow it with “utility”. It excludes digital assets from its scope. token holder.

However, the bill stipulates that “the issuance of cryptoassets as non-fungible tokens in large series or collections should be considered an indicator of fungibility.”

The law continues: For a crypto asset to be considered unique and non-fungible, the asset or right represented must also be unique and non-fungible. ”

According to Fyre, the language directly attacks dominant NFT collections like the Bored Ape Yacht Club. It consists of 10,000 visually similar NFTs of hers, but differentiated by a numbering mechanism (such as Bored Ape #6443) that supposedly gives each NFT owner full authority. Faux Intellectual Property Rights.

“What they’re saying is that if you sell the 10,000 NFT collection, you’re really selling a share of the overall project,” said Fyre. “In other words, each NFT is functionally just a fungible share of the overall project value.”

Essentially, in Fyre’s interpretation, MiCA’s words mean that, in the eyes of the EU, each Bored Ape NFT owner does not own a unique work of art, but instead shares and shares the collective value of the Bored Ape brand. Claims to be the owner of the collection. , Yuga Lab.

This distinction may seem semantic, but if enacted in law and interpreted as such, it can have great implications. Effectively treat and regulate popular NFT collections such as BAYC, CryptoPunks and Doodles as securities.

This could establish a much more practical relationship between such NFT collections and European governments than currently exists.

SEC may similarly regulate NFTs

The question of which components of the cryptocurrency industry should be considered securities by government regulators has long been a matter of debate, but has recently escalated.Earlier this week, the US SEC announced implied in federal litigation The entire Ethereum network should be considered a stock exchange under the jurisdiction of American regulators.

If the EU begins classifying high-quality NFT collections as securities, Fyre believes there will be an inevitable impact on US regulators.

For years, Fyre has reached out to the SEC Clarify your position on whether NFTs should be classified as securities.

“I think the SEC will notice this,” said Fyre. “They ignored me when I said that. But they don’t ignore this.”

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