It’s the first time a single U.S. state (New Jersey in this case) is pursuing NFT-specific regulation, and it’s sure to be a messy affair.
Most observers predict that the state bill titled the “Digital Asset and Blockchain Technology Act,” which has passed the assembly, will also pass the Senate.
Let’s explore everything you should know about this bill and how it might affect cryptocurrencies and NFTs.
New Jersey: Crypto Enforcement Is Nothing New
“cracking down on crypto” is not new to New Jersey. There are many instances of this, but one that comes to mind right now is the Celsius platform, which no longer operates at CeFi. New Jersey, the headquarters of Celsius, was one of the first states to impose restrictions on its operations. Subsequently, several other states, including Texas and Alabama, followed suit. Less than a year later, Celsius shut down its operations, attributing it to the bear market in 2022.
State authorities are resurfacing with the intention of creating a “Nationwide multistate licensing system” for NFT issuers. This bill is more than an unneeded, unenforceable legislation that won’t do anything for the state’s independent creators and collectors.
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Significance For Cryptocurrency Users
The language in the proposed bill states that cryptocurrency users based in New Jersey will not be permitted to “engage in a digital asset business activity” in the state as an individual or as a business without first registering for a license. The license covers everything, including the simple act of minting and selling an NFT, custodial services and “issuing a digital asset.”
Due to the complexity of cryptocurrency and NFTs, regulation is complicated and practically necessary. Although there is a need for regulation of custodial services that handle token-related procedures on behalf of clients, this regulation should not extend to independent visual designers who wish to mint NFT collections. Regretfully, lawmakers in New Jersey aren’t attempting to define words that set these two worlds apart.
Moreover, there are compelling arguments in favour of implementing this kind of policy. Although the bill’s enforceability against large corporations, such as Celsius, is considerably more manageable, its practicality could be better and leaves more questions than it answers.
Geographical boundaries are less and less important in defining an individual’s identity, and crypto community members are well-known for their love of anonymity and living “online first.” It leaves us with the impression that regulators will have a difficult, if not impossible, time controlling the general public.
In the worst-case scenario, it might establish guidelines for businesses operating in the area.
