The US Treasury is investigating NFTs for possible money laundering of high-value artworks
According to the Department of the Treasury, the growing use of art as an investment or financial asset may make high-value art exchanges more susceptible to money laundering.
The US Department of the Treasury has issued research on the high-value art market, emphasising the potential for criminal money laundering or terrorist funding activities in the nonfungible tokens (NFT) arena.
According to the Treasury’s “Study on the Facilitation of Money Laundering and Terrorist Financing Through the Trade in Works of Art,” the growing usage of art as an investment or financial instrument may render high-value art exchanges susceptible to money laundering:
“The burgeoning online art market may introduce additional hazards, depending on the structure and incentives of specific market activity (e.g., the purchase of NFTs, digital units on an underlying blockchain that might represent ownership of a digital piece of art).”
The paper emphasises the critical role of NFTs in establishing ownership of digital and physical property that is maintained and controlled through smart contracts and digital wallets. Additionally, the Treasury notes that the price of NFTs is established by the buyer and seller, not by the market:
“According to US officials, the market for NFTs produced a record $1.5 billion in trade in the first three months of 2021, up 2,627 percent over the previous quarter.”
However, the NFT industry alone was worth more than $20 billion in 2020. The United States Treasury indicated that criminals may acquire NFTs using illegal cash and resell them to an unsuspecting collector “who would reward the offender with clean monies unrelated to a past crime.”
Additionally, NFTs may be sold through peer-to-peer (P2P) transactions, which eliminate the requirement for an intermediary and the necessity for the transaction to be recorded on the public ledger. While highlighting the many money laundering risks enabled by the NFT ecosystem, the Treasury concluded as follows:
“Additionally, typical industry players, such as art auction houses or galleries, may lack the technological expertise necessary to conduct successful client identification and verification in this arena.”
Brenda Gentry, a former USAA mortgage underwriter who became a crypto entrepreneur, recently discussed how the cryptocurrency ecosystem provided her with a fighting chance to transcend generational poverty curses.
Gentry, a.k.a. MsCryptoMom, resigned a decade-long profession in banking to pursue a full-time crypto business after her early 2020 investments proved the “unique prospects afforded by crypto.”
Recognizing the steep learning curve associated with cryptocurrency, Gentry offers instructional resources on her website:
“I’m also conducting seminars to teach the general public on how to navigate this sector and what to look for while looking for quality NFT projects or DeFi tokens, as well as how to swiftly identify scams or rug pulls.”