NFTs Vulnerable To Frauds And Scams, Says US Treasury — Calls For Tighter Regulations

The U.S. Treasury Department sounded an alarm on non-fungible tokens, deeming the blockchain-based assets highly susceptible to use in fraud and scams. 

What Happened: In a new NFT Illicit Finance Risk Assessment report released on Wednesday, the Treasury noted that loopholes in the asset class could be exploited by bad actors to launder money from crimes, thereby concealing the illegal origins.

That said, the report found significantly less evidence of NFT misuse for terrorist and proliferation financing.

The Treasury detected several issues with the niche cryptocurrency vertical such as inadequate cybersecurity protections, challenges related to copyright and trademark protections, and fluctuating prices of NFTs. 

Additionally, some NFT platforms were found to lack “appropriate” controls to combat money laundering and terrorist financing.

To address these risks, the Treasury advocated for tighter enforcement of current laws in the sector, implementing additional regulations, and raising industry understanding of the associated dangers.

Why It Matters: Without clear laws governing the industry, NFTs remain on U.S. regulators’ radar. 

Earlier in the year, GameStop Corp. shut down its NFT marketplace citing regulatory uncertainty. 

The SEC charged Los Angeles-based media and entertainment firm, Impact Theory, LLC last year, on charges of conducting an unauthorized offering of cryptocurrency asset securities via NFTs.

Even star footballer Cristiano Ronaldo was slapped with a $1 billion class-action lawsuit for promoted investments in his NFTs on Binance (CRYTO: BNB)

In the last 24 hours, NFTs clocked a sales volume of nearly $17 million in more than 240,000 transactions, according to CryptoSlam. Bitcoin (CRYPTO: BTC) was the biggest chain for NFTs, with more than $5 million in volume, followed by Ethereum (CRYPTO: ETH) and Solana (CRYPTO: SOL)

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