The Office of Government Ethics (OGE) of the United States has issued fresh guidelines regarding non-fungible tokens (NFTs). In legal guidelines provided earlier this week, the OGE widened its effort to prevent conflicts of interest at the highest levels of the US government. What is the new necessity? Senior officials must disclose any NFTs they may possess.
Lastly, the new advise raises critical questions about whether the US government considers NFTs to be art or investments.
Web3 has implemented new rules
Each year, US senators are compelled to disclose their personal financial information. These documents are made accessible to the public and may be seen by anybody. The recent legislative suggestion from the OGE identifies NFTs as a new “asset class” that US politicians must address in their yearly statements.
According to the new guidance, individuals will also be obliged to register their ownership of fractionalized NFTs (F-NFTs). In other words, if a government employee owns even a fraction of Bored Ape or CryptoPunk NFTs that exceeds the OGE’s threshold, they are required to disclose it on their yearly financial statement.
The legal advice said that “public financial disclosure filers are required to disclose ownership of collectible NFTs and F-NFTs held for investment or revenue generation.”
However, as stated earlier, there is a limitation. Not all non-financial assets must be mentioned.
According to the OGE’s legal guidance, any NFT held as an investment valued more over $1,000 must be disclosed publicly as part of a politician’s portfolio of assets. In addition, any NFT that has generated more than $200 must be included in the annual report, regardless of the NFT’s genuine value.
In the statement, the OGE also said that they would not provide government authorities a great deal of discretion in assessing whether an NFT was obtained as art or as an investment. The advice concludes that there is a “factual concern.” What is their response to this factual inquiry?
The notice specifies that virtual art does not need to be disclosed if an NFT is obtained for its aesthetic worth and exhibited in a government official’s “home, office, or virtual property.”
These are the instructions:
“An employee purchases a limited edition NFT of Paper Moon by Leandra Garcia.” The original Paper Moon by Garcia is a pastel painting. The original artwork, limited edition lithograph prints, and limited run NFTs are available for purchase on Garcia’s website. Employee paid Garcia $1,100 for the NFT. The employee wants to use an NFT digital display frame to show the drawing at home and at the office. Employee purchased the NFT partly due to her appreciation for Garcia’s artwork. The employee has no plans to sell the NFT. As the employee is not holding the NFT for investment or income production, they are not obliged to disclose ownership on their annual financial disclosure form.”
If the NFT is ever sold, though, everything changes. According to the warning, “for instance, an employee who obtained an NFT artwork for personal use but subsequently decided to sell it would be obliged to report the NFT as a source of income if the sale generated more than $200 in revenue.” In other words, anything sold for above $200 is no longer considered art.
The OGE also asks ethical authorities evaluating these data to do their own due diligence, urging them to research a politician’s history of NFT transactions if conflicts arise about the nature of their transactions.
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