The SEC Paves The Way For Crypto Startups To Raise Funds Through NFTs

Commissioner Hester Peirce, now at the head of the SEC’s crypto working group, announced that projects using NFTs as a financing mechanism could soon be exempt from securities regulation.

Crypto startups could soon raise funds via NFT

Hester Peirce, recently appointed head of the crypto working group of the Securities and Exchange Commission (SEC) following Gary Gensler’s resignation, made a significant announcement last Friday.

During the first crypto roundtable organized by the SEC, she indicated to Decrypt that projects using NFTs as a fundraising mechanism could soon be exempt from securities regulation.

This announcement follows a statement published the day before by the agency, clarifying that cryptocurrency mining through proof-of-work was not included in its definition of securities.

According to Peirce, who now leads the SEC’s efforts alongside acting chairman Mark Uyeda, NFTs could be the next category of assets to benefit from a similar exemption.

We could also do this for NFTs. If we could provide a framework or benchmarks for NFT issuers, I think that could be very helpful.

NFTs peaked in late 2021, generating a market of nearly 25 billion dollars. Many entrepreneurs used them as an innovative mechanism to finance their projects, opening an alternative path to traditional fundraising methods.

Clear limits to this exemption

Despite this openness, Peirce emphasized that not all NFTs would automatically be exempt from securities regulation. She highlighted:

We could have an NFT that would be a tokenized security, and it could be structured like an NFT. Obviously, that would not be excluded.

This distinction is essential to understand the scope of the future exemption, which would primarily target art NFTs and those offering benefits such as memberships, exclusive access to content, or merchandise.

A similar initiative is also moving forward in Congress, where some lawmakers are advocating for the inclusion of a provision legalizing the sale of NFTs for profit in the cryptocurrency bills currently under discussion in the House of Representatives and the Senate.

In summary, if the SEC soon issues a statement on NFTs, similar to those recently made regarding proof-of-work mining and meme coins, it could mark the beginning of a new era for financing blockchain projects through non-fungible tokens.