Thais Zappelini: Do NFTs make money laundering possible?

Thais Zappelini: Do NFTs make money laundering possible?

NFTs are non-fungible token (in Portuguese, non-fungible token) refers to the conversion of virtual assets into blockchain, which characterizes a unique commodity. Therefore, you cannot change, delete or edit assets.

A token is a digital representation of value. Therefore, if someone owns a token, they have rights to it, such as a digital certificate of ownership, whose authenticity and uniqueness can be verified. The word “irreplaceable” refers to something that cannot be replaced by another.

While not reduced to artwork, NFTs can be images, videos, audios, concert tickets, music albums, and even digital game assets (such as skin characters).These assets are often advertised and sold market (picture open sea), which exposes the token like in show Sold to collectors or investors. According to Forbes magazine, about 128.1 billion reais (equivalent to $23 billion) will be transferred into NFTs in 2021.

The popularity of NFTs is so high that this year a museum was opened in Seattle (USA) to showcase original artworks. Several celebrities have made big investments, such as the player Neymar, who paid 6 million reais for an item in his collection. Boring Ape Yacht Club (Bayek). BAYC’s virtual land sale in the last weekend of April caused quite a stir, eventually raising around $285 million by the company in charge, YugaLabs. However, with this fame came a series of controversies, such as suspicions of fraud and allegations of potential environmental impacts involving the mining process, as NFTs rely on technology. blockchain.

Although the very high value negotiated by NFTs is often attributed to the scarcity of certifications working on the network blockchain and the valuation of the traditional art market, according to the report chain analysis (2021), Money laundering through the purchase and sale of NFTs will transfer approximately $1.4 million in the first half of 2021. The study is based on amounts previously transferred from addresses linked to theft, legally sanctioned accounts, and other illegal practices. The same report stated that $8.6 million was illegally transferred through cryptocurrencies in 2021.

Another document from British officials Royal United Service College Showing the same concern about the use of technology for criminal conduct, activity monitoring is recommended. In addition, the U.S. Department of the Treasury issued recommendations in April to combat illicit financing of the high-value art market, with a particular focus on digital art.

Contrary to what one might imagine, money laundering crimes don’t just use currency as an official course. Just as technology continues to evolve to keep up with society, new criminal tactics take advantage of them. In this sense, a parallel illicit market has been established in the field of virtual assets. Some peculiarities associated with non-fungible tokens open up new spaces for crimes such as money laundering and money laundering transactions (“Shuffle Trading”).

Even if the transactions made are recorded, the recipient and sender cannot be identified, so pseudo-anonymity eventually characterizes such assets. Therefore, money laundering exploits the possibility of market speculation and largely uses the purchase of tokens through crypto assets.

Criminals usually buy NFTs with “clean” money, sell the corresponding tokens as non-fungible tokens and use his name. The money is then declared as a sale profit. A common practice is tax evasion, selling assets to fictitious buyers for a set price.

When it comes to using decentralized virtual “currency”, money laundering is facilitated by finding the smallest barriers to the flow of illicit funds. What’s more, assuming that works and other articles are in digital format, there is no need for mobilization and physical storage.

In addition to the difficulty in tracking down who is responsible for transactions, we also lack a specific legal regime to regulate financial assets, and the legal and fiscal uncertainty this unprecedented situation creates for challenges related to combating money laundering. Authorities in some countries remain vigilant, concerned Best practices and assess possible solutions as digital crime evolves.


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