The US Treasury Department has released its first risk assessment for NFTs, stating that they are highly likely to be linked to fraud and scams. The 29-page report also notes that while NFTs are not typically linked to terrorist financing, they are vulnerable to being used as money mules*.
The review found that illegal operators use NFTs to facilitate money laundering, although they sometimes integrate this technique with other techniques to conceal illicit sources of income. Additionally, the report also highlights that due to the anonymity of buyers and sellers, theft and abuse in the NFT market are high, making it difficult to track stolen or acquired NFTs from illegal sources.
The Treasury Department points out that most money laundering and financing of terrorist activities is done through fiat money. However, it raises various issues, including fraud and money laundering in the NFT market. Various criminals may quickly sell or trade stolen NFTs on the marketplace to avoid identification and hide the identity of the true owner. Another problem is that many NFT platforms don’t require customer information, which hinders tracing in case of money laundering.
The report also discusses the risk of fraud and scams in the NFT market, including cases such as “rug pulling” and selling counterfeit goods. Furthermore, there are questions of copyright infringement, especially in the case of a work of art where criminals impersonate the rights granted by the NFT and increase its value.
Proposed rules for the NFT market
The Treasury Department recommends that all authorities establish specific NFT rules to clarify compliance requirements for the NFT market. This could involve the release of circulars, notices and directives focused on digital assets, including details on how current laws govern NFTs and trading platforms for these assets. this product.
They also recommend reaching out to the private sector to inform stakeholders about regulatory requirements that could contribute to the development of compliant NFT platforms. The review looked at the financial aspect of the NFT market and highlighted the lack of measures to prevent money laundering and sanctions violations in the NFT market.
Furthermore, the US government has been studying money laundering and terrorist financing in the cryptocurrency market for several years. Combating money laundering and illicit financing is a constant concern for US lawmakers, with Democrats and Republicans in the House and Senate working on provisions and bills to this problem.
In March, another US government study on NFTs also stated that there is no need for separate laws on copyright and trademark infringement. On the other hand, the Treasury Department’s latest assessment is more directly related to the currency risks of the NFT market.
*Money mules is a term commonly used to describe people or entities that engage in money laundering or financial fraud by transferring money from one source to another. Specifically, they are often used to transfer money from criminal activities, such as online fraud, to other bank accounts to make the origin of the money difficult to determine.
