- Buyers and sellers set the price of a product, not the market.
- Lack of expertise in consumer identification and verification in this arena.
U.S. Treasury Department’s latest research has shown that non-fungible tokens (NFTs) might be used to facilitate money laundering. According to a study, digital art may launder money and fund terrorists. In the report, the Department stated that high-value art might be used to verify the ownership of a wallet’s associated property. Although the government considers the sector’s risk, buyers and sellers set the price of a product, not the market.
In accordance with the Anti-Money Laundering Act of 2020, a 40-page analysis discovered indications of money laundering, but not of terrorist funding, in high-value art. However, the study did warn that NFTs may be used to promote further illegal transactions in the art market.
According to the research, the first three months of 2021 saw exponential growth in the space, which later grew to more than $20 billion by the end of the year.
Chainalysis Research Reveals Similar Case
The Treasury concluded that criminals might acquire an NFT with unlawful cash, which could then be sold to collectors who were ignorant of the illicit nature of the transaction. This is a problem for conventional art auction companies and galleries, who may not have the technical expertise necessary to perform successful consumer identification and verification in this arena.
Another money laundering risk in using non-fungible tokens is identified as the capacity to trade NFTs via P2P since the purchase record is not maintained on a public ledger. The research and facts are not shocking as Chainalysis, a crypto research business, previously reported NFT transactions might be used to facilitate money laundering
