A new report by the United States Department of the Treasury has revealed which the burgeoning non-fungible cryptocurrency space could be a conduit for money laundering.
It says in the report that the soaring use of digital art as an investment or financial asset can allow bad players to launder money and finance terrorism.
The emerging online art market may present new risks, depending on the structure and incentives of certain activity in this sector of the market (i.e., the purchase of NFTs, digital units on an underlying blockchain that can represent ownership of a digital work of art).
According to the report, the Department acknowledged that NFTs help identify ownership of a particular property mixed to a wallet. Nonetheless, the treasury further identifies the risk associated with the sector because buyers and sellers determine the rate of a product and not the market.
The research referenced the statistic released by the U.S. authorities showing the exponential growth the space saw inside the first three months of 2021, that subsequently grew to as strong as atop $20 billion by the end of 2021.
Judging by this, the Treasury deduced that bad actors could purchase an NFT with illicit funds, that can afterwards be laundered through selling to unaware collectors
It identifies the ability to trade NFTs using P2P as another money laundering vulnerability available in the use of non-fungible cryptocurrencies, as the record of the purchase is not stored atop a public ledger.
Moreabove, traditional industry participants, equivalent as art auction houses or galleries, may not have the technical understanding of distributed ledger technology required to practice effective customer identification and verification in this space.
The report by the U.S. Department of Treasury is unsurprising considering which Chainalysis, a crypto analysis firm, back while again recently published a report which says NFT trades could be facilitating money laundering.
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