The U.S. treasury department has warned that non-fungible tokens (NFTs) may present new illicit finance risks. According to industry estimates, the NFT market could reach $35 billion in 2022 and more than $80 billion by 2025.
NFTs can present illicit finance risks
The US Department of the Treasury announced on Friday the release of a “study on illicit financing in the high-value art market”. The study was mandated by Congress in the Anti-Money Laundering Act of 2020.
“This study examined art market participants and sectors of the high-value art market that may present money laundering and terrorist financing risks to the U.S. financial system,” the Treasury wrote, adding:
The emerging market for digital art, such as the use of non-fungible tokens (NFTs), may present new risks, depending on market structure and incentives.
In order to combat the risks, the study recommends several options, including updating training for law and customs enforcement, enhancing private sector information sharing, and applying anti-money laundering and countering terrorism financing requirements to certain participants in the art market.
According to Dappradar, NFT’s sales volume totaled $24.9 billion in 2021, up from $94.9 million the previous year. Jefferies analysts have estimated that the NFT market could reach $35 billion in 2022 and over $80 billion by 2025.
The rising popularity of NFTs has attracted scammers and caused concerns among regulators.
“Scams promising big returns on cryptocurrencies and NFTs are flooding the internet,” TK Keen, administrator of the Division of Financial Regulation for the US state of Oregon, warned in January. “Investors wishing to buy cryptocurrencies and NFTs should do their homework to ensure they fully understand these investments and their risks before getting involved.”
