US Treasury Sees NFTs As Potential Risk For Art Money Laundering

The US Treasury sees NFTs as a potential risk for high-value art money laundering after it released a study that we read more about in today’s latest cryptocurrency news today.

The Department of the Treasury suggested that the increased use of art in NFTs and other financial assets could make the high-value art traders quite vulnerable to money laundering. The US treasury sees NFTs as a potential risk gateway for art money laundering according to the recently released study highlighting the potential of NFTs to conduct illicit money laundering or terror financing operations.

My biggest flex this year was walking away from my banking career of 16yrs to go into crypto full time!

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The study of the facilitation of money laundering through the trade in works of art, suggests that the increasing use of art as an investment or financial assets could make the art traders quite vulnerable to money laundering:

“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).”

The study underlying the importance of NFTs in ownership representation of digital and physical property which is managed and controlled via smart contracts and digital assets with the treasury also points out that the price of NFTs is determined by the buyers and sellers and not the market:

“According to U.S. authorities, in the first three months of 2021, the market for NFTs generated a record $1.5 billion in trading and grew 2,627 percent over the previous quarter.”

The NFT market in 2020 alone was valued at $20 billion and the US Treasury suggested there’s a chance that criminals can purchase NFTs with illicit funds and resold to an unwary collector that will compensate the criminal with clean funds not tied to the previous crimes. NFTs can be sold via peer to peer sales that bypass the need for an intermediary or recording the transaction on the public ledger while underscoring the various money laundering vulnerabilities that could be possible by the NFT ecosystem:

“Moreover, traditional industry participants, such 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.”