Nfts
US Treasury Releases First-Ever Risk Assessment of Illicit Financing of Non-Fungible Tokens
The U.S. Department of the Treasury has released an illicit financing risk assessment of non-fungible tokens (NFTs) for 2024. The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms can be exploited by illicit actors for money laundering, terrorism financing and proliferation financing.
The assessment reveals that NFTs are highly susceptible to use for fraud and scams and are prone to theft. The report determines that illicit actors may use NFTs to launder the underlying proceeds of crime, often in combination with other methods to mask the illicit source of the proceeds of crime. To date, it has also found little evidence of misuse of NFTs by terrorists or proliferators, unlike fraudsters.
“This risk assessment demonstrates Treasury’s commitment to analyzing the illicit financing risks of new technologies and communicating them to industry and law enforcement,” said Treasury Under Secretary for Terrorism and of Financial Intelligence, Brian E. Nelson. “I encourage the private sector to use the results of this assessment to inform their own risk mitigation strategies to prevent illicit actors from abusing NFTs and NFT platforms.”
Assessment finds that inadequate cybersecurity protections, challenges with copyright and trademark protection, and the hype and fluctuating prices of NFTs may allow criminals to commit fraud and theft related to NFTs and NFT platforms. Additionally, some NFT companies and platforms do not have appropriate controls in place to mitigate risks to market integrity and combat money laundering, terrorist financing, and sanctions evasion. The assessment recognizes that mitigation measures, such as industry tools, law enforcement authorities, and analysis of public blockchain data, can partially mitigate these risks.
To address outstanding risks, the risk assessment recommends several actions to the U.S. government, including:
- Raise industry awareness of existing obligations
- Continue to enforce existing laws and regulations related to NFTs and NFT platforms; And
- Consider further regulatory application to NFTs and NFT platforms
The NFT assessment meets Treasury’s commitment to publish an NFT risk assessment in the 2022 Digital Asset Action Plan to combat illicit financing risks and builds on recent national risk assessments and the 2023 Illicit Finance Risk Assessment on Decentralized Finance, all published by the Treasury. Department.
Click here to read the “Illicit Financing Risk Assessment of Non-Fungible Tokens”.