NFTs
Treasury Department publishes risk assessment on NFT vulnerabilities
The US Treasury Department has published a risk assessment that examines vulnerabilities associated with Non-Fungible Tokens (NFTs) and NFT platforms.
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Treasury’s 2024 Non-Fungible Token (NFT) Illicit Financial Risk Assessment explores how these vulnerabilities could be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.
The assessment concludes that NFTs are highly susceptible to use in fraud and scams and are subject to theft. The report determines that illicit actors can use NFTs to launder proceeds from underlying crimes, often in combination with other methods to obfuscate the illicit source of the proceeds of crime. It also found little evidence of the misuse of NFTs by terrorists or proliferators, as opposed to fraudsters, to date.
“This risk assessment demonstrates Treasury’s commitment to analyzing the illicit financial risks of the latest technologies and communicating them to industry and law enforcement,” said Treasury Under Secretary for Terrorism and Financial Intelligence Brian E. Nelson. “I encourage the private sector to use the findings from this assessment to inform their own risk mitigation strategies to prevent illicit actors from abusing NFTs and NFT platforms.”
The evaluation had several important findings. Among them, it stated that inadequate cybersecurity protections, challenges related to copyright and trademark protections, and inflated and fluctuating prices of NFTs could allow criminals to commit fraud and theft related to NFTs and NFT platforms. .
Furthermore, it found that some companies and NFT platforms lack adequate controls to mitigate risks and combat money laundering and terrorist financing. Furthermore, it recognizes that mitigation measures, such as industry tools, law enforcement authorities and analysis of public blockchain data, can partially mitigate such risks.
To address the risks, the assessment recommends the following actions by the U.S. government:
• Raise industry awareness of existing obligations;
• Continue to enforce existing laws and regulations relating to NFTs and NFT platforms; It is
• Considering further application of regulations to NFTs and NFT platforms.
The assessment of NFTs is based on the recent National Risk Assessments and the 2023 Illicit Financial Risk Assessment on Decentralized Finance, all published by the Treasury Department.