The US Treasury released its research on the increasing use of NFTs in illicit activities like money laundering or terrorist funding.
The entry of the NFTs concept in the Crypto industry resulted in a huge better rate of crypto adoption and also saw huge real case use of NFTs based on blockchain technology in real life to own physical world based items like houses or any other real-estate priorities. But few people (bad actors) are involved in illicit use cases to fund illegally.
The US Treasury department researched the growing industry of crypto with the use of NFTs. Through the latest published research on NFTs, the US treasury tried to focus all those facts which can be used by the bad actors.
According to the US Treasury, high amounts of money associated with single NFTs collectibles pose a huge risk, more likely to be money laundering. Under such situations, bad actors can trade huge amounts of funds based on NFTs to fund the terrorists easily.
“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).”
However, this research noted that verification of the ownership of digital collectibles with the use of Smart-contract-based blockchain coding systems have importance but problems exist with the value of NFTs, which are not based on the market demand, fully depend upon the owner.
“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.”
According to available data, the value of the Crypto NFTs market in 2020 was at $20 billion. US treasury’ research noted that criminals can buy NFTs collectibles with their illegal funds and after that, they can sell to get white money, out of the radar of government agencies.
Recently P2P buy-sell facilities were introduced in the crypto market. Such types of services are more harmful and it further supports more illegal funding activities, where two bad actors can facilitate huge amounts of transactions without knowing publicly.
“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.”
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