In a blow to industry confidence, the U.S. Treasury Department has identified the NFT industry as “highly susceptible to fraud and scams” in its most recent risk assessment on illicit finance.
Published May 29, the report outlines how NFTs have be used by criminals to launder money from illegal activities. As a new, volatile asset class, criminals have used NFTs to obfuscate the origin and wash the proceeds of ill-gotten revenue.
This report marks the U.S. Treasury’s first detailed examination of NFTs and their relationship with financial crime.
U.S. Treasury Recommends Stricter Regulations
In contrast with a U.S. government study conducted in March 2024, which concluded that no new legislation was required to address copyright and trademark concerns in the NFT industry, the U.S. Treasury noted that many NFT platforms do not have adequate controls to prevent money laundering and tax evasion, and to enforce legal and financial sanctions.
Now, the U.S. Treasury has recommended that stricter regulations be applied to NFTs and the platforms that facilitate their mint, use and trade to mitigate these risks.
In a statement, the U.S. Treasury said; “The report determines that illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime.”
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