MiCA vs NFT – New regulatory pirouette to assimilate NFTs to financial securities

MiCA vs NFT – New regulatory pirouette to assimilate NFTs to financial securities

It definitely seems easier to hunt bears than bulls. Because the period of shooting on sight is very clearly launched, in the midst of a period of decline in the cryptocurrency market. With, on the “right” side of the viewfinder, regulators practicing digital scorched earth policy. And a European territory in the starting blocks to become, once again, the worst area in the world where to settle to take part in this innovation in progress. Latest example, the processing of collections of NFTslike the Bored Ape Yacht Clubwhose “non-fungibility” is questioned.

The multiple attempts to regulate the cryptocurrency sector often come up against the ignorance (or ill will) of those responsible for these texts. It is enough to see how the latter try to block the road to the Bitcoin, attacking its Proof of Work (PoW) system. This for ecological reasons that are barely quantified and documented. And while this industry is already made up of more than 60% renewable energies. But it doesn’t matter, because the obvious goal is to preventnot to understand…

An aggressive move which the NFT tokens seemed to manage to escape. Because their non-fungible nature makes them separate cryptocurrencies, with a unique aspect that is very different from simple financial tools. In any case, this was the trend until now, embellished with a good dose of legal vacuum. But the European MiCA bill has been there. And according to its official definition, “the sole assignment of a unique identifier to a crypto-asset is not sufficient to qualify it as unique or non-fungible“. That’s to say ?

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MiCA vs NFT – Non-non-fungible tokens?

Before going further, it seems important to clarify a specific point. Because, despite appearances, the question is not whether NFTs are financial securities. But much more to seek the means to allow the authorities of regulation to integrate them into their current field of competence. Even if it means twisting reality to their advantage, without worrying about the ridicule or inconsistencies that this inevitably generates.

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And that is exactly what is happening in the present case. With a mica bill which asserts that the non-fungibility of collections of NFTs, such as the iconic Bored Ape Yacht Club, is not as obvious as it seems. And this even if the latter include many thousands of copies with random rarities. A principle giving each of them an undeniably unique character. But it doesn’t matter, because “the issuance of crypto-assets as non-fungible tokens in a large series or collection should be considered an indicator of their fungibility. »

The mere attribution of a unique identifier to a crypto-asset is not sufficient to qualify it as unique or non-fungible. The assets or rights represented must also be unique and non-fungible for the crypto-asset to be considered unique and non-fungible. »

Mica

NFT – A “fungible part of a whole project”

The non-fungibility of collections of NFTs would therefore only bea simple masquerade to try to hide financial securities. Or more surely a specificity of the cryptocurrency sector for the moment excluded from the regulatory scope of the European Union. Reason why the makers of the MiCa bill seem – voluntarily? – to forget “unique” and “utility” characters which allowed them until then to pass under their radars. But with a floor price just under 77 ETH (about $100,000), it couldn’t last!

A finding made by Brian Fyre, professor of law at the University of Kentucky. And the latter does not mince his words, vis-à-vis the will of the MiCA bill in (dis)favor of NFT tokens. Because, according to him, the aim of the European authorities is to encourage its counterparts, such as the Securities and Exchange Commission (SEC) of the United States, to “consider the major PFP projects (Profile Picture Projects) like securities, for regulatory purposes. »

What they’re saying is that when you sell a collection of 10,000 NFTs, what you’re actually selling are shares of the project as a whole. In other words, each NFT is functionally only a fungible part of the value of the whole project.. »

Brian Fyre

Members of the MiCA bill have therefore officially just invented the “non-non-fungible tokens“. And, as if by magic, the latter seem to fit perfectly into the regulation clown costume sewn to their attention. A semantic pirouette that makes you smile. But the consequences of which could well be problematic in the event of effective implementation of this text of law. Because that would make their holders not collectors of BAYC, but simple investors in the project initiated by the Yuga Labs structure. And their NFT tokens would therefore only be financial securities issued by the latter…

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