Is there a dark side to the current craze for non-fungible tokens (NFTs)? More and more reports would indicate that they can be used to launder money, just like physical coins. Here is an update on the subject.
NFT and money laundering: an emerging use?
Using physical art coins to discreetly move illicit funds has been going on for centuries. It is therefore logical that the trend is going digital, along with the art industry. At least, that’s the assumption made by more and more crypto-community players, including renowned investor Mr. Whale.
In an analysis published a few days ago, he explains that since art is subjective, it is particularly suited to move large sums of money without knowing whether the purchase is legitimate or not. After all, if buyers choose to shell out $17 million for 9 images of Cryptopunks stored on the blockchain, they may be quite sincere in their admiration of these clusters of pixels. By nature, a person’s interest in a piece of art is therefore not quantifiable.
This is why the large sums of money generated by the NFT sector are widely interpreted as a buying frenzy on the part of collectors, and as proof that as long as a piece is rare, it can increase in value. But might some uses be less innocent than that?
Laundering capital through NFTs
According to Mr. Whale’s analysis, laundering money through an NFT is very simple. For the holder of the illicitly obtained funds, it is enough to make an initial purchase of non-fungible token, with “clean” money. Then to buy back this same NFT with illicit cryptocurrencies, in order to launder them.
The maneuver is facilitated by two things: the status of cryptocurrencies, which are not subject to the same rigor as transfers of fiat currencies. On the other hand, the relative anonymity of the buyers: among the largest sales of NFTs of all time, some were made by people whose pseudonyms are known only.
A trend that will attract the attention of regulators
Already, some sales are raising a few eyebrows among members of the crypto-community. This week, we learned that an image of a pebble had been exchanged for $135,240. This had raised questions about the motivations of the buyer, even if it is of course difficult to determine his real intention.
In any case, it is a safe bet that if this possible trend of laundering continues, we will see regulators monitoring the NFT sector with more insistence. We also note that if this usage is proven, it shows one thing: digital art has reached a similar status to physical art, since it generates the same mechanisms – illicit or not…
