The US Department of the Treasury, in its first analysis report on the risks of illicit finance and non-fungible tokens (NFTs), stated that while NFTs are rarely used to finance terrorist activities, they are easily used for fraud, with criminals utilizing NFTs for money laundering. The institution believes that relevant entities should consider developing rules or guidelines for NFTs.
In a statement, the US Department of the Treasury pointed out that most money laundering and terrorist financing activities are conducted through fiat currency, but also emphasized the fraud and money laundering activities happening in the NFT space. The agency stated that the NFT market is also “particularly susceptible to fraud and scams,” citing incidents of “rug pulls” and false sales cases in recent years.
Copyright and trademark issues with NFTs were also highlighted in the report by the US Department of the Treasury, noting that criminals may distort the actual rights conveyed by NFTs, especially in relation to the assets or access referenced by NFTs. “Bad actors 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 developing rules or guidance for NFTs, striving to “provide further clarity on existing obligations for NFT platforms.” The agency stated:
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