Despite all the opportunities that NFT presents, its rapid growth has brought a list of issues and intricacies relevant to law enforcement and compliance officers.
The current NFT market environment is especially conducive for money laundering as nobody would question why someone is buying a JPEG file for millions of dollars. In their recent draft guidance on virtual assets and virtual asset service providers, the global anti-money laundering watchdog FATF classified NFTs that facilitate money laundering and terrorist financing as virtual assets. The fact that NFTs are already on the regulators’ radar has vast implications for the space. If NFT marketplaces wish to reduce the imminent risk of a crackdown, they need to adopt at least some form of due diligence.
Intellectual property theft has been rampant in the NFT space. NFTs current boom is attracting bad actors who tokenize artwork they don’t own to profit from them. Some of these bad actors have deployed bots to create NFTs. An example of this is the @tokenizedtweets bot which tokenizes a tweet without alerting its owner.
Hacks and thefts in cryptocurrency are notorious. NFTs are no different. Recently, Users of Nifty Gateway fell victim to a hack. Albeit only affecting users who didn’t activate two-factor authentication, the hack came as a reminder that this space is not free from the dangers of such malicious attacks.
Recent NFT highlights:
- Beeple selling his “EVERYDAYS: THE FIRST 5000 DAYS” piece for $69 million.
- YouTube star, Logan Paul, selling collectible pokemon styled cards featuring himself for as high as $38,500 and Cryptopunk #7804 selling for $7.5 million.
- NBA top shots and Sorare selling collectible player cards as NFTs.
- Celebrities like Lindsay Lohan got on board to sell their own tokenized artwork.
- The highest recorded NFT domain name as of the time of writing, win.crypto, sold for $100,000.
- Decentraland emerged as a prime example of what a blockchain-based virtual world can look like. In the game, players can purchase virtual land in the form of LAND, which is an NFT. Other notable virtual worlds are Sandbox and Axie infinity.
- Rapper Mike Shinoda released a single as an NFT, and rock band Kings of Leon sold an entire tokenized album.
- Nike patented NFT sneakers which they called Cryptokicks. Among other names, Tacobell, Pizzahut and Pringles also joined in by selling their own NFT collectibles.
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Beeple’s collage, “Everydays: The First 5000 Days” sold at Christie’s.
