US Federal agency issues legal advisory on NFTs

• Director Emory Rounds III mentioned that all NFT investments worth $1,000 must be disclosed as long as they are “held for investment or production of income” during the reporting period.
• In addition, officials who make more than $200 in the reporting period on their NFT investments are also required to declare their assets according to the federal Agency.

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The United States Office of Government Ethics (OGE) has in a written statement advised senior government officials on the legal ways to handle their investment in Non Fungible Tokens (NFTs). According to the legal advisory presented to the designated agency ethics officials, government officials need to disclose their investments. Director Emory Rounds III mentioned that all NFT investments worth $1,000 must be disclosed as long as they are “held for investment or production of income” during the reporting period. This applies to both fractionalized (F-NFTs) and collectibles.

In addition, officials who make more than $200 in the reporting period on their NFT investments are also required to declare their assets according to the federal Agency.

Public financial disclosure filers must also disclose purchases, sales, and exchanges of collectible NFTs and F-NFTs that qualify as securities.

Previously, OGE declared in a ruling that personal assets such as clothing, family photos, and electronics are not reportable. The same ruling also applies to their NFT representations. However, the advisory targets the reporting of NFT investments that represent properties such as real estate.

Investors must indicate the amount of all eligible NFTs

The report also mentions that filers may be required to disclose collectibles as financial assets depending on their circumstances. For filers to self-determine their reporting requirements, Director Rounds listed seven questions to assist them. Also, they have been asked to use OGE Form 278e for this process. For investors, they are required to state the value, income type, and the amount of all eligible NFTs in their entries. With the evolving nature of the crypto market, OGE has assured that they will continuously monitor the industry and make changes in the future if necessary.

The crypto industry in the US has been in the news lately as the US Securities and Exchange Commissions’ (SEC) regulation of the sector has attracted criticism. Congressman Brad Sherman recently urged them to pursue cases against exchanges with courage. According to him, the “big fish” exchanges like Binance and Coinbase are usually left off the hook.

The big fish operating the major exchanges did many, many tens of thousands of transactions with XRP. You know it’s security — that means they were illegally operating a securities exchange. They know it’s illegal because they stopped doing it, even though it was profitable. […] I hope you focus on that.

Sherman in his statement questioned why the crypto exchanges are not investigated if Ripple executives have been dragged to court for offering unregistered securities (XRP). 

SEC enforcement director Gurbir Grewal in response stated that the Commission investigated Poloniex in 2021 for trading cryptos deemed securities for investors in the US.