For the first time, we are seeing a single US state (in this case New Jersey) pursue NFT-specific regulation in what is sure to be a tumultuous situation.
A state billtitled the ‘Digital Assets and Blockchain Technology Act,’ has already passed the assembly and is on its way to the Senate – where pundits have largely indicated they believe it will pass .
Let’s dive into everything you need to know about this bill and its potential implications for NFTs and crypto.
New Jersey: No stranger to Encryption Enforcement
New Jersey is no stranger to the concept of “cracking down on crypto.” There are a variety of examples of this, but one recent memory revolves around the now defunct CeFi platform, Celsius. Celsius was based in New Jersey, and the state was one of the first to put the clamps on Celsius operations. Several other states, such as Alabama and Texas, followed suit, and less than a year later, Celsius operations were shut down and the company set up as another 2022 clutch market domino to fall.
Now, state regulators are back again, this time looking to establish a “Multistate National Licensing System” for NFT issuers. Furthermore, if this bill passes, it looks like little more than an unnecessary, unenforceable piece of regulation that will do little good for independent creators and collectors in the state.
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What it means for Crypto users
Crypto users based in the state of New Jersey, according to the language in the proposed bill, will not be able to engage in “digital asset business activity” as a business or individual in the state without registering for a license. The license oversees anything from custodial services to “issuing a digital asset” – ie. something as simple as hitting and selling an NFT.
Crypto and NFTs are nuanced, making regulation almost necessary but at the same time, a hugely difficult task. While custodial services that manage token-related processes on behalf of customers are undoubtedly an area worthy of regulation, that regulation should not include the work of an independent visual designer trying to plot a collection of NFTs. It is unfortunate that New Jersey legislators are not working to establish terms that will distinguish between these two worlds.
Furthermore, there is much to be said for the implementation of this type of regulation. Although the enforceability against large firms, like the aforementioned Celsius, is much more manageable, the possibility of enforcing this bill is not clear – and the legislation leaves us with more questions than answers.
Crypto communities are notorious fans of nomenclature and are living ‘internet first’, where geographical boundaries are less fundamentally defining identity than ever before. It leads us to believe that it will be difficult – if not impossible – for the general public to manage your regulators.
At best, it may be able to provide guardrails for corporate entities engaged in space.
