Traditional art has long been in the sights of seasoned cybercriminals hunting for acceptable assets to launder their filthy wealth. With the rapid rise of digital art tokens in recent years and front-running collections like Bored Ape Yacht Club fetching more than $100,000 per token on average, it is easy to see why prolific gangsters of all kinds, not just cybercriminals, might find them just as appealing a money-laundering option.
In terms of money laundering, NFTs are not always a ‘giveaway,’ as the fundamental openness of the blockchain technology that supports transactions can make them simpler to trace back to the original purchaser than, say, a Picasso purchased anonymously from a genuine art dealer.+
Despite these flaws, cybercrime analyst Chainalysis believes it is a legitimate trend worth monitoring. In its annual report issued in 2022, it reported a continuous increase in the use of NFTs in money laundering over the preceding year. The value of bitcoin transmitted to NFT markets by illegitimate addresses increased dramatically in the third quarter of 2021, reaching $1 million,” the business stated in its report. In the fourth quarter, the sum grew again, reaching a little more than $1.4 million. Most of this activity came from scam-related addresses moving money to NFT marketplaces to buy products in both quarters.
All of this activity constitutes a drop in the bucket compared to the $8.6 billion in cryptocurrency-based money laundering we identified in 2021, the report’s authors noted. Nonetheless, tax evasion, particularly transactions from sanctioned cryptocurrency enterprises, poses a significant risk to the development of confidence in NFTs and should be closely monitored by markets, authorities, and enforcement agencies. In the end, it is perhaps too early to judge if NFTs will truly compete with traditional physical art as a conduit for money laundering. Both appear to have distinctive advantages and drawbacks for someone looking to clean up inadequate assets.
– Aarav Gupta
Edited By: Sabrina Bath