Non-fungible tokens are vulnerable to fraud and fraud, the U.S. Treasury Department said in its first risk assessment analyzing illicit finance and NFTs.
Malicious actors can use NFTs to launder funds, but these tokens are rarely used to finance terrorism, the Treasury Department said on page 29. report It was released on Wednesday. Authorities should consider any rules or guidelines related to NFTs added to the report.
“The assessment found that NFTs are highly vulnerable to fraud and fraud, and are at risk of theft,” the report said. The report found that illicit actors could use NFTs to launder proceeds from predicate crimes, often using other methods to obfuscate illicit revenue streams. “We have determined that it can be used in combination with a crime,” the Treasury Department said in a statement. “Additionally, to date we have found little evidence of misuse of NFTs by terrorists or proliferators, as opposed to fraudsters.”
The Treasury Department has been investigating money laundering and terrorist financing in the cryptocurrency sector and announced the following: report Over the past few years. Anti-money laundering and illicit finance concerns have also emerged as top priorities for U.S. lawmakers. Democrats and Republicans in the House and Senate have been intensely scrutinizing illicit finance provisions and bills over the past year, although their approaches are different.
Fraud and Money Laundering
The Treasury said Wednesday that while most money laundering and terrorist financing occurs through fiat currencies, it highlighted fraud and money laundering occurring in the NFT space.
“Criminals may steal or illegally obtain NFTs to evade discovery, obfuscate the NFT’s provenance, or complicate the ability of NFT platforms, blockchain analytics companies, and law enforcement agencies to track the NFT’s location. “Often, attempts to quickly sell or trade NFTs result in any profits from illegal sales,” the Treasury said. “Law enforcement has also observed that illegal actors often take advantage of the fact that many NFT platforms do not require customer information.”
The NFT market is also “particularly vulnerable to scams and scams,” he said, citing “pulling out of the rug” and fake sales over the past few years.
The department also highlighted copyright and trademark issues in its report.
“Criminals may be able to misrepresent the actual rights that the NFT may actually convey, such as the NFT reference asset or access rights,” according to the report. “Criminals may also violate copyright and trademark protections to market NFTs. These tactics may inflate NFT prices.”
As for next steps, the Treasury recommended that “relevant authorities” consider rules or guidance for NFTs in an effort to “provide further clarity on existing obligations for such NFT platforms.”
“For example, guidance, warnings, advisories and other materials related to digital assets may identify how existing regulations and guidance apply to NFTs and NFT platforms,” Treasury said. “Support from the private sector can help raise awareness of relevant regulatory obligations and increase the number of compliant NFT platforms.”
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