US Treasury Warns of Potential Financial Risk in NFT Space

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The US Department of the Treasury announced the release of a “study on illicit finance in the high-value art market” on Friday, in line with a mandate by Congress in the Anti-Money Laundering Act of 2020.

The Department detailed that: “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 US financial system,” elaborating:

“The emerging digital art market, such as the use of non-fungible tokens (NFTs), may present new risks, depending on the structure and market incentives.”

US Treasury Gives Recommendations to Curb Growing Financial Risk in NFT Space

That said, to tackle the growing financial risks posed by the NFT space, the document recommended several options, including modernizing training processes for law and customs enforcement, incentivizing information sharing in the private sector, and effecting anti-money laundering (AML)/countering terrorism financing requirements specific stakeholders in the art sector.

Dapprader recently revealed that NFT sales volume for 2021 came in at a whopping $24.9 billion, a significant leap from the previous year, which saw the industry facilitating a paltry $94.9 million. Meanwhile, analysts at Jefferies’ have forecasted that the NFT market could grow to $35 billion in 2022 and over $80 billion by 2025.

As with every other area where money is, the blistering market has attracted a worrisome amount of scammers, which has triggered concerns in regulators.

Commenting on scams on the NFT space, the administrator for the Division of Financial Regulation of the US state of Oregon, T.K. Keen cautioned in January: “Scams promising big returns on cryptocurrencies and NFTs are flooding the Internet,” adding “investors wanting to purchase cryptocurrencies and NFTs should do their homework to make sure they fully understand these investments and their risks before getting involved.”