The US Department of the Treasury, in its first report analyzing the risks of illegal finance and non-fungible tokens (NFTs), stated that while NFTs are rarely used to finance terrorist activities, they can easily lead to fraud, with criminals using NFTs for money laundering. The agency believes that relevant authorities should consider establishing 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 using fiat currency, but also emphasized the fraud and money laundering activities that occur in the NFT space. The agency stated that the NFT market is also “particularly vulnerable to fraud and scams,” citing instances of “rug pulls” and false sales cases that have occurred in recent years.
Copyright and trademark issues with NFTs were also highlighted by the US Department of the Treasury in the report, noting 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 could artificially inflate the price of NFTs.”
The Department of the Treasury recommended that “relevant authorities” consider establishing rules or guidance for NFTs, and strive to provide further clarity on existing obligations for NFT platforms. The agency stated:
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