A report by the U.S. Treasury connects NFTs with high-value art money laundering

The United States Treasury Department recently released a report on the high-value art market, underlining the possibility for illicit money laundering and terror funding in the non-fungible tokens (NFT) arena.

The study regarding the money laundering and terror financing facilitation through the work of art trading suggested that the increased use of NFTs for investment could make the high-value art trades exposed to money laundering. It adds:

“The emerging online art market may present new risks, depending on the structure and incentives of certain activity in this sector of the market.”

The research by the U.S. Treasury further highlights the importance of NFTs in representing the value of the digital and physical property that is managed and controlled through digital wallets and smart contracts.

The NFT market, with its huge potential, saw a boom last year. The study reveals that in the first quarter of 2021, the NFT market generated a record $1.5 billion in trading and grew by 2,627% over the previous quarter. However, the NFT market in 2020 alone saw a valuation of over $20 billion. The U.S. treasury found a possibility where notorious elements can buy NFTs with illicit funds and resell to an unwary investor who could provide criminals with clean funds not connected to any prior crime.

U.S. Treasury finds the connection between NFT ecosystem and money laundering

Money laundering is an area that brings the most concerning voices. In October last year, FATF published anti-money laundering guidelines.

Peer-to-peer (P2P) sales allow NFTs to be sold without the requirement for an intermediary or for the transaction to be recorded on the public ledger. The Treasury concluded while highlighting the multiple money laundering risks made 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,” the study added.

The USAA mortgage underwriter Brenda Gentry, also known as MsCryptoMom recently turned crypto entrepreneur, shared how the crypto industry offers a chance to overcome generational poverty.

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

Retired my parents and now my goal is to retire my siblings and get them working for themselves!

NFTs and DeFi are breaking down generational curses of poverty.

— Cryptomom (@MsCryptomom1) October 9, 2021