market has been growing for the past 1 year and it seems that this tred will continue throughout 2022. With the growing interest in this business, however, criminal activities such as money laundering through tokens are also growing. According to Chainalysis, there is a portion of activity in the NFT markets attributable to money laundering. One of the most popular practices is wash trading, the sale of NFT by sending money to oneself from a secondary cryptocurrency wallet in their control. Specifically, Chainalysis noted a few thousand similar cases where a common third address had sent funds to both the buyer and the seller. One of the most prolific players would have made as many as 830 such sales.
Certainly a problematic aspect concerning the standard regulation is that concerning the tracking of users and their movements with crypto, as each of us can move millions in crypto and not declare anything and not even make a fiat exit, called cashout. , therefore, leaving all the operations in the crypto sphere, it is possible to completely escape the taxman, with all that that entails.
How is it possible to fool the controls and the taxman with the NFT, cleaning up dirty money? If someone runs an exit scam (rug pull) you will find a lot of money but also the impossibility of making cashout because checks would be triggered on the origin of that money. At this point, the criminal creates (or buys) an NFT with clean money and a new address. After he puts it up for sale. With the account with the "dirty" money he buys that NFT back by paying it the necessary sum of the stolen proceeds. So, the criminal with the clean address and that contains the NFT lists it on a marketplace platform dedicated to NFT and then with the second account buys the related NFT, so in fact he has moved the funds from one address to another but has it done with a digital intermediary who is represented by the NFT itself.
Among other things, this can also be transformed into a rare piece of inestimable value: he lists it little by little, buys it back for hundreds of thousands of dollars, then puts it back on sale after some time and the starting price will always be higher. The money is clean. Also not subject to taxation because it is an impromptu sale.
Is it possible to limit this phenomenon?
Perhaps but this implies that all platforms trading with NFT should make mandatory.
In this case, both the seller and the buyer, to access, must identify themselves and leave the related documents on the platform, so in a possible control by the administrative, tax authorities and so on, they will be able to verify and cross-reference the data and determine in a manner the provenance of suspicious funds is certain.
The biggest problem, however, will remain the NFT markets on DeFi. It is absolutely unlikely that KYC will be adopted. It would no longer be decentralized finance.
This article is not a tutorial on how to launder money using NFT, but rather aims to be an educational post explaining how NFT works.
