The US Department of the Treasury in its first report analyzing the risks of illegal finance and non-fungible tokens (NFTs) expressed that while NFTs are rarely used to fund terrorist activities, they can easily be used for fraud, with criminals using NFTs for money laundering. The institution believes that relevant authorities should consider establishing rules or guidelines for NFTs.
The US Department of the Treasury stated in a release that most money laundering and terrorist financing activities are conducted through fiat currency, but also emphasized the fraud and money laundering activities occurring in the NFT space. The institution stated that the NFT market is also “particularly susceptible to fraud and scams,” citing “rug pulls” scams and fake sales cases that have occurred in recent years.
Copyright and trademark issues with NFTs
The US Department of the Treasury also pointed out in the report that criminals may distort the actual rights that NFTs may convey, especially in terms of the assets or access rights referenced by the NFTs. “Criminals may also violate copyright and trademark protections to promote NFTs, which could inflate the price of NFTs.”
The Treasury Department recommended that “relevant authorities” consider establishing rules or guidance for NFTs, aiming to “provide further clarity on existing obligations for platforms offering NFTs.” The institution stated:
Source: