WASHINGTON–Non-fungible tokens (NFTs) are highly susceptible to use in fraud and scams and are subject to theft, according to a report from the Treasury Department.
Treasury has issued its first-ever report on NFT illicit finance risk, which found “illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime.”
Despite that potential, Treasury said it found little evidence to date of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters.
Instead, Treasury said its risk assessment was designed to discover how vulnerabilities associated with NFTs and their platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.
The Contributors
Treasury said the contributors to the risk of fraud and theft related to NFTs and platforms include:
- Cybersecurity protections
- Challenges related to copyright and trademark protections
- “The hype and fluctuating pricing of NFTs
“Moreover, some NFT firms and platforms lack appropriate controls to mitigate risks to market integrity and to combat money laundering and terrorist financing, and sanctions evasion,” the Treasury report says. “The assessment recognizes that mitigation measures, such as industry tools, law enforcement authorities, and analysis of public blockchain data, can partially mitigate such risks.”
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