Wikipedia may not view NFTs as art, but apparently the US Treasury does and observes altcoin projects’ roles in art-related crimes. “NFT-based art” will now be accepted, according to a press release released by the US Treasury during the day. cryptocoin.com We provide details as…
US Treasury warns of money laundering
The U.S. Treasury adopted NFT-based art today, with a focus on money laundering and possible regulation of the industry. The Treasury Department has released a press release and report on illicit financing in the high-value art market, with particular attention to the burgeoning NFT sector and money laundering capacity. He specifically warned that NFTs could be used in self-laundering, a practice where users spend money on an NFT they already own. This type of money laundering was a disclosure presented when a CryptoPunk NFT was sold for more than $500 million in October 2021.
The Treasury also warns that the NFT market currently lacks standard and due diligence and lacks a central body. He argues that since automated and rapid NFT sales can encourage money laundering, it can “create deviant incentives.” In contrast, he noted, experts in the traditional art and auction industries tended to conduct their business much more carefully with a variety of institutional measures. Additionally, the Treasury expressed concern that “the incentive to transact could potentially be higher than the incentive to verify the identity of the buyer of the business.” The growing problem of plagiarism media-based NFTs was not directly addressed. Phishing scams, another common problem for NFT owners, were also not addressed.
NFT-focused altcoin projects may fall under VASP rules
The Treasury says NFTs reached $1.5 billion in trade volume in the first quarter of 2021. It was also stated that NFTs used for payments and investments can be defined as virtual assets. Therefore, companies that create or process NFTs can be considered Virtual Asset Service Providers (VASPs) and are subject to regulation under the Financial Action Task Force (FATF) rules. It was also mentioned that NFT platforms such as Dapper Labs, SuperRare, OpenSea and art houses may fall within these rules “depending on the nature and characteristics of the NFTs offered”. The Treasury also acknowledges that NFTs that primarily serve as collectibles are “not generally considered virtual assets.” Guidelines published by the FATF last October similarly suggested that NFTs may be considered virtual assets if they are used for payments, but fall outside this definition otherwise.
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