It was claimed by the Treasury Department that the high-value art trades could become vulnerable to money laundering as art is increasingly used as an investment or financial asset.
According to a report from the U.S. Department of the Treasury, the high-value art market is vulnerable to money laundering and terrorist funding because of the use of NFTs.
High-value art trading is vulnerable to money laundering since it is increasingly being used as an investment or financial asset, according to Treasury’s “Study on the Facilitation of Money Laundering and Terror Finance via the Trade of Works of Art.”
“The emerging online art market may present new risks, depending on the structure and incentives of certain activity in this sector of the market (i.e., the purchase of NFTs, digital units on an underlying blockchain that can represent ownership of a digital work of art).”
Smart contracts and digital wallets manage and regulate digital and physical property, which is represented by NFTs, as the study shows. The buyer and seller, not the market, determine the price of NFTs, according to the Treasury:
“According to U.S. authorities, in the first three months of 2021, the market for NFTs generated a record $1.5 billion in trading and grew 2,627 percent over the previous quarter.”
However, the NFT business alone is expected to be worth over $20 billion by 2020. According to the US Treasury, criminals might buy NFTs using illicit cash and resell them to an unwitting collector “who would compensate the criminal with clean funds not linked to a prior crime.”
It is also possible to sell NFTs directly to each other via peer-to-peer (P2P) transactions, avoiding the requirement for an intermediary or a public ledger record. The Treasury concluded that the NFT ecosystem’s many money laundering vulnerabilities allow for the following:
“Moreover, traditional industry participants, such as art auction houses or galleries, may not have the technical understanding of distributed ledger technology required to practice effective customer identification and verification in this space.”
Cryptocurrency has given Brenda Gentry, a former USAA mortgage underwriter turned crypto entrepreneur, an opportunity to break the generational curses of poverty.
When Gentry, a.k.a. MsCryptoMom’s investments from early 2020 verified the “extraordinary prospects afforded by crypto,” she resigned her decade-long job as a banker to pursue a full-time crypto career.
My biggest flex this year was walking away from my banking career of 16yrs to go into crypto full time!
Retired my parents and now my goal is to retire my siblings and get them working for themselves!
NFTs and DeFi are breaking down generational curses of poverty.
— Cryptomom (@MsCryptomom1) October 9, 2021
Aware of the steep learning curve in cryptography, Gentry provides educational material on her website:
“I’m also hosting seminars to educate the general public about navigating in this space and things to look out for when searching for good NFT projects or DeFi tokens, and also how to quickly detect scams or rug pulls.”
