The Treasury Department of the USA issued a report on NFTs, saying the assets include financial crime risks, and recommending possible solutions.
Based on a recent study by the Treasury, the high-value art market presents money laundering and terror finance risks. The report also looked into the ways of mitigating risks by US regulators, agencies, and market participants.
The Treasury wrote that some entities that provide financial services don’t undergo AML process, which may attract illicit actors. Among the factors that make the art trade vulnerable are high values of single transactions, ease of transfers, their privacy, growing use of art as an investment, and financial assets.
The study noted that institutional market participants, like auction houses, galleries, art fairs, and others can be vulnerable to illicit actions. It was mentioned in the report that in Q1 2021, the NFT market generated $1.5 bln in trading and increased around 2.627% over the previous quarter. The total US share of market art reached $20 bln in 2020.
According to a study by the blockchain data platform Chainanalysis, from early 2021 till mid December, the amount of NFT trades surpassed $41 bln.
As possible solutions, the institution suggests encouraging educational programs, fostering transparency, and updating guidance for legal infrastructure, and regulation by Financial Crimes Enforcement Network authorities.