How can NFTs be used to launder money? Experts explain – Tecnoblog

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You NFTs In 2021, the news really prevailed. Earlier this year, this market moved millions in sales of memes, collectors and digital art. Now, the announcement of the metaverse brings more and more types of non-fungible tokens to the markets. In practice, they are high value digital assets. Therefore, the authorities are already concerned about the possible use money laundering.

Fungic tokens or NFTs (Image: Marco Verch / Flickr)

A new report by British experts at the Royal United Services Institute (RUSI) not only addresses this concern, but also details how this technology can be used by criminals. The use of these tokens by the independent research body is particularly noteworthy digital art, it must be strictly controlled.

NFTs offer an immutable record of ownership, as the world moves rapidly toward the digitization of things (such as verses), it attracts more and more people and businesses. This creates a token, a digital asset, to perpetuate files and represent ownership.

The authors of the article, Allison Owen and Isabella Chase, point out that these NFTs can not only be marketed, but also sold later. In addition, a percentage of the rights to each transaction that is returned to the original owner of the token can be tied.

It should be remembered that NFT transactions are mostly done in cryptocurrencies in online markets. Although digital currencies operate in a chain of locks and are inherently traceable, experts point out that criminals, using a variety of tools and techniques, make tracking this very difficultdelaying investigations.

“Both features make NFTs particularly appealing to digital artists who want to prove the authenticity of their work and, in the physical world, would only receive it for the initial sale of their work. These characteristics can also encourage more artists to move online, as well as criminals who abuse the traditional art market and money launderers.

Allison Owen and Isabella Chase, researchers at the Royal United Services Institute

According to the report, criminals can exploit this market to launder money, as is already the case in the physical art market. That is, money from illegal acts can be “legitimized” and hidden by buying works of art. This logic also applies to the digital version of this market, which is supported by NFT. In addition, it is the sector that escapes the application of most taxes around the world.

Beeple's NFT work:
Beepler’s NFT work: “Everydays: The first 5000 days” sold for $ 69 million (Image: Reproduction)

However, the practicality and dynamism of the digital art market NFT makes this process even easier. Along with this comes another factor that also contributes to the criminal pseudo-anonymity cryptocurrency transactions and accounts in non-fungible token markets.

Why the “fake” negotiations are really traceable in blockchain networks. Paying for both cryptocurrency and NFT from one digital wallet to another is public information. However, the address of the digital wallet does not have to be associated with any name or identity.

In addition, most NFT trading platforms, such as OpenSea, It requires almost no account verification. In fact, all you need is a digital MetaMask wallet to buy and sell NFTs through the market.

How to mitigate these risks?

Therefore, researchers suggest “a system”get to know your customer’and ongoing monitoring policies, similar to those used in the traditional art market and regulated cryptocurrency exchange, should also be implemented in the NFT market.

That is, these risks can be alleviated by starting trading platforms ask the user to verify their identity to access it. Of course, this can be quite difficult, if not impossible, to apply. The authorities have little or no control over the markets and it is not in the interest of any platform to make it difficult for users to access them.

The researchers ’arguments are compelling, but there are some things that have been left out of the report. It’s money laundering with NFT it is much more feasible if the illegal money is already in cryptocurrencyfrom ransomware payments, theft of digital assets, online scams, etc.

Otherwise, criminals will have to turn traditional money into digital currency, aside in the hands of responsible exchanges, not in NFT markets. Of course, these tokens can still be used in another phase of fiat money laundering, if the criminals manage to convert the amount into cryptocurrency first.

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