US Treasury warns against financial risks of NFTs

ISTANBUL

The US Treasury Department warned against the financial risks of non-fungible tokens, widely known as NFTs, in an assessment report released late Wednesday.

The agency's risk assessment explores how vulnerabilities associated with NFTs and NFT platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.

The assessment found that NFTs are "highly susceptible" to use in fraud and scams, while they are subject to theft, and illicit actors can use NFTs to launder proceeds from crimes.

"This risk assessment demonstrates Treasury’s commitment to analyze illicit finance risks of newer technologies and communicating them to industry and law enforcement," Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in a statement.

"I encourage the private sector to use the findings of this assessment to inform their own risk mitigation strategies to prevent illicit actors from abusing NFTs and NFT platforms," he added.

Inadequate cybersecurity protections, challenges related to copyright and trademark protections, and the fluctuating pricing of NFTs can enable criminals to perpetrate fraud and theft related to NFTs and NFT platforms, according to the assessment.

The Treasury Department recommended raising awareness within the NFT industry, enforcing existing laws and regulations related to NFT platforms, and considering further regulations to NFTs and their platforms.