Non-fungible tokens (NFTs) sold as components of large collections with little to no distinctively unique qualities would be subject to the same regulatory scrutiny as cryptocurrencies, says MiCA’s leaked draft legislation.
This means that the EU through the markets in Crypto Assets (MiCA) is labeling major blue-chip NFT collections like Bored Ape Yacht Club (BAYC), Cryptopunks, Doodles, and many others as securities. Brian Fyre, a law professor – who specializes in NFTs and securities law – at the University of Kentucky, said this sounds like Europe is saying that securities regulators should be looking at big profile picture projects as securities for regulatory purposes.
This draft legislation is expected to be MiCA’s final version, hashed out after months of negotiation between the European Parliament, the European Commission, and the European Council. It exempts digital assets that are unique and not fungible, including digital art and collectibles that possess unique characteristics and grant utility to the token holder. However, the bill specifies that the issuance of crypto assets as NFTs in a large series or collection should be considered an indicator of their fungibility. It states that the sole attribution of a unique identifier to a crypto asset is not sufficient to classify it as unique or not fungible. The assets or rights should also be unique and not fungible for the crypto asset to be considered unique and not fungible.
Fyre says language takes a direct shot at dominant NFT collections like BAYC, which consists of 10,000 visually similar NFTs, but is distinguished by numbering mechanisms such as Bored Ape #6443 that grant each NFT holder full-throated intellectual property rights.