As the first Department of Justice indictment comes down on an insider trading scheme for non-fungible tokens (NFTs), it remains to be seen how the DOJ will work with the wider NFT community, Bloomberg reported Wednesday (June 29).
According to Wilson Elser attorneys John Cahill, Jana Farmer and William Behr, this case could possibly provide information on whether NFTs will be classified as securities. The DOJ will also be looking to increase its enforcement efforts, per the report.
However, the DOJ may also have to rely on the NFT community to do this, meeting with market experts to continue its ongoing education about the sector. One such case from a May 31 indictment against Nathaniel Chastain, an ex-OpenSea employee, was brought to the government’s attention from members of the community.
The DOJ charged Chastain with money laundering and said he used anonymous accounts on the NFT marketplace to hide his identity. His alleged activities were detected first by the NFT community, who were able to trace his transfers and funds back to his public account.
The report noted how NFTs have evolved from mostly collectible digital images into blockchain representation of owner rights, with the NFTs now usually used as a fractional interest of a marketplace that could be tied to a collection of physical or digital things.
As NFTs are still growing, they could see markets established to accommodate various versions of the digital art collectibles.
PYMNTS recently wrote that members of the EU Parliament and the European Commission, along with member states, will continue looking into the scope of the Markets in Crypto Assets (MiCA) regulation and how it could apply to things like NFTs.
The meetings were set to focus on anti-money laundering provisions in the “travel rule” for crypto assets, with the Parliament approving a proposal earlier this year to increase the information requirements that crypto asset providers must collect and share for every transaction.
There might still be room for changes — the EU Parliament has approved a negotiating position with the other institutions, but the legal text might still be amended.