For the first time, we’re seeing an individual US state (in this case, New Jersey) pursue NFT-specific regulation of adverse conditions.
The state bill, titled the ‘Digital Asset and Blockchain Technology Act,’ has passed assembly and is headed to the Senate – where speculators generally believe it will pass.
Let’s take a look at everything you need to know about this bill and its potential implications on NFTs and crypto.
New Jersey: No Stranger To Crypto Enforcement
New Jersey is no stranger to the concept of ‘cracking down on crypto.’ There are many examples of this, but one recent memory revolves around the now-defunct CeFi platform, Celsius. Celsius is based in New Jersey, and that state was one of the first to put clamps on the Celsius operation. Several other states, such as Alabama and Texas, followed suit, and less than a year later, Celsius operations were shut down and the company is said to be another 2022 bear market domino that will fall.
Now, state regulators are back at it again, this time to create a “Nationwide Multistate Licensing System” for NFT issuers. On the face of it, if this bill is passed, it appears to be little more than an unnecessary, unenforceable piece of legislation that will serve little good for independent creators and collectors in the country.
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What It Means For Crypto Users
Crypto users based in the state of New Jersey, according to language in the proposed bill, will not be able to “engage in digital asset business activities” as businesses or individuals in the state without registering for a license. The license covers everything from custodial services to “issuing digital assets” – that is, something as simple as printing and selling NFTs.
Crypto and NFTs are filled with nuances, making regulation a necessity but at the same time, a daunting task. While the custodial service that manages the process regarding tokens on behalf of customers is certainly an area that needs to be regulated, the regulations do not include the work of independent visual designers who want to create a collection of NFTs. Unfortunately, New Jersey legislators were unable to come up with terms that distinguished these two worlds.
In addition, there is much to be said for enforcing these regulations. While enforceability against major companies, like Celsius mentioned above, is more manageable, the feasibility of enforcing this bill is unclear – and the legislation raises more questions than answers.
The Crypto community is a well-known fan of anonymity and lives in an ‘internet-first,’ where geographical boundaries are far from fundamental and less defining of identity than before. It leaves us convinced that for the general public, it will be difficult – if not impossible – to manage the regulator.
At best, perhaps it could set up guardrails for corporate entities involved in the space.