NFTs
US Treasury Releases First Illicit Financial Risk Assessment of Non-Fungible Token
The US Treasury Department has published a 2024 Non-Fungible Token (NFT) Illicit Financial Risk Assessment. The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms can be exploited by illicit actors to launder money, finance terrorism 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 assessment concludes that inadequate cybersecurity protections, challenges related to copyright and trademark protections, and the exaggeration and fluctuation of NFT prices may allow criminals to commit fraud and theft related to NFTs and NFT platforms. Furthermore, some NFT companies and platforms lack adequate controls to mitigate risks to market integrity and to combat money laundering and terrorist financing, as well as 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 by the U.S. government, including:
- Raise industry awareness of existing obligations
- Continue to enforce existing laws and regulations relating to NFTs and NFT platforms; It is
- Considering additional application of regulations to NFTs and NFT platforms
The assessment of NFTs fulfills Treasury’s commitment to publish an NFT risk assessment in the 2022 Digital Asset Action Plan to Tackle Illicit Finance Risks and builds on recent National Risk Assessments and the Funding Risk Assessment 2023 Illegal Decentralized Finance, all published by the Treasury Department.
Click here to read the “Illicit Financial Risk Assessment of Non-Fungible Token”.