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U.S. Treasury: NFTs Prone to Fraud and Theft


Washington, D.C. May 31, 2024 –  In a recent risk assessment focused on illicit financing, the U.S. Treasury Department classified non-fungible tokens (NFTs) as highly prone to fraud and theft. The Treasury’s findings underline the potential misuse of NFTs as a method of performing criminal operations, including money laundering and sanctions evasion.

The Treasury’s study, released on Wednesday, emphasizes that NFTs can be leveraged by criminal actors to launder money from various crimes. “The report determines that illicit actors can use NFTs to launder proceeds from predicated crimes, often in combination with other methods to obfuscate the illicit source of proceeds from crime,” the Treasury added.

Vulnerabilities in NFT Platforms

One of the primary concerns noted in the research is the lack of effective controls inside NFT platforms to address sanctions avoidance and money laundering. The Treasury stated that many platforms “lack appropriate controls” to properly address these concerns, putting them open to abuse by criminals.

The paper advises that further regulatory measures should be implemented for both NFTs and the platforms on which they are traded. This advice intends to increase the control and security of NFT transactions, thereby minimizing the danger of criminal activity.

The results of the Treasury most certainly have major ramifications for the sector. Stiffer rules could affect how these digital assets are sold if NFTs keep becoming more and more popular and draw significant investments. To follow the suggested rules, platforms could have to improve their monitoring systems and use stronger verification procedures.

Finally, the latest evaluation by the U.S. Treasury Department emphasizes the urgent necessity of strengthened rules to handle the hazards of illegal behavior in the sector. Stiffer rules and monitoring will help to guard the market from criminal exploitation and guarantee its sustained expansion.

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