The NFTs allow money laundering, warns the US Treasury Department

The US Treasury Department believes that the huge boom over NFTs (nonfungible tokens) could potentially be driven by money laundering efforts.

US Treasury Department published a study claiming that the high value art market could potentially be abused to conduct illegal money laundering operations or even terrorist financing.

The study, entitled ‘Study of the facilitation of money laundering and terror finance through the trade in works of art’, suggested that the increasing use of art as an investment or financial asset could make high-value art shops more vulnerable to money laundering:

“The emerging online art market may present new risks, depending on the structure and incentives of certain activity in this sector of the market (i.e., the purchase of NFTs, digital units on an underlying blockchain that can represent ownership of a digital work of art).”

The ministry also points out that the buyers and sellers determines the price of NFT, not the market, which may facilitate money laundering efforts. It also states that NFT tokens can be sold peer-to-peer, which circumvents the need for an intermediary or transaction logging via a ledger. The Ministry of Finance also added:

“Moreover, traditional industry participants, such as art auction houses or galleries, may not have the technical understanding of distributed ledger technology required to practice effective customer identification and verification in this space.”