What are NFTs and how they have become controversial?
NFTs have a traceable and immutable history like most digital or cryptocurrencies. They are unique digital assets, unlike digital or cryptocurrencies that can be divided into smaller pieces. However, NFTs represent different digital objects, but these non-fungible tokens have become controversial. They are frequent fixtures in the headlines. One day, one makes millions with NFT, the next day, NFTs start-ups will rug-pulled their investors and steals all their money. The thing that is imposed on NFTs is their role in money laundering. Now, Money Laundering is easier than ever from criminal enterprises with NFTs. The estimated value in US dollars that is sent to NFT marketplaces by illicit addresses is 1,337,410 USD.
Crucial aspects of NFTs as being a vehicle for illicit financial flows
The darker side of the burgeoning NFT space has been revealed by a crypto-investor and uber-bearish crypto commentator, Mr.Whale. The notoriety and popularity of NFTs to the ability to facilitate tax evasion and money laundering are attributed to the bitcoin early adopter. NFTs don’t face scrutiny from regulators in the eyes of the beholders. This aspect has become the primary reason NFTs have been used as a vehicle for illicit financial flows for centuries.
In the same way, the aspect of actual laundering of money is quite simple. Buying NFTs using illicit funds is one of the ways to move money while a person claims that the funds were legitimate purchases. An example is demonstrated by Isaiah McCall, a former USA journalist. He said that an investor who has 1$ million in legal money would spend 1$ million on his own NFT. The investor can do this himself or by using a third-party account. The investor will resell the trash for nothing and bank the profit.
How are people using NFTs for money laundering?
Let’s discuss how NFTs are used for it. A criminal organization can create a unique NFT and then advertise on an NFT marketplace, or they purchase their NFT from NFTs’ marketplace using a fake identity. Criminal organizations often use stolen accounts and add further legitimacy to a trade, hacking the account, making the sales, and then disappearing.
NFTs have become a new frontier for money laundering. One can benefit a lot from cryptocurrency assets, but it does not mean that regular financial laws are not applied to NFTs and other digital assets. With a phenomenal number of NFTs transactions, a great risk is associated with people using NFTs for money laundering.