The US Department of the Treasury, in its first risk assessment report on illicit finance and non-fungible tokens (NFTs), stated that although NFTs are rarely used to finance terrorist activities, they can easily facilitate fraud and money laundering. The agency believes that relevant entities should consider developing regulations or guidelines for NFTs.
In its statement, the Department of the Treasury pointed out that most money laundering and terrorist financing activities occur through fiat currencies, but also highlighted the fraud and money laundering activities taking place in the NFT space. The agency stated that the NFT market is particularly susceptible to fraud and scams, and cited examples of “rug pulls” and fraudulent sales cases that have occurred in recent years.
The report also highlighted copyright and trademark issues related to NFTs. The Department of the Treasury noted that criminals may distort the actual rights that NFTs may convey, especially in relation to the assets or access referenced by the NFTs. “Criminals may also violate copyright and trademark protections to promote NFTs, which can drive up the prices of NFTs,” the agency stated.
The Department of the Treasury recommended that “relevant authorities” consider developing rules or guidance for NFTs and strive to provide further clarity on existing obligations applicable to NFT platforms. The agency stated that:
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