The U.S. Treasury has launched its first NFT risk assessment, a major bold step. This detailed report uncovers the lurking risks and security threats in the volatile as-hell NFT sector.
Interestingly, the Treasury found that fraud in the digital art space often mirrors age-old financial schemes like Ponzi schemes and insider trading.
However, there are also unique threats like smart contract manipulation. Here’s what else they found in this new report:
US Treasury Shines Spotlight on Potential Risks of NFTs
The report calls for swift intervention and stricter oversight in the chaotic NFT space.
It spots several red flags, some of them solely based on conjecture:
Terrorist Financing: NFTs could bankroll terrorism.
Nuclear Proliferation: State actors might channel NFT profits to fund nukes.
Money Laundering: A shiny new tool for washing dirty money.
Investor Fraud: The usual suspects—scams, thefts, and rug-pulls
The report emphasizes that these risks are not unique to digital assets.
“This risk assessment recognizes that most money laundering, terrorist financing, and proliferation financing by volume and value of transactions occurs in fiat currency or otherwise outside the digital asset ecosystem via more traditional methods,” the report stressed.
This comes at a time when Solana meme coins have completely dethroned digital art.
I told you NFTs were dead………… https://t.co/oqdpTY5PqE
— MOON KING B-ROOTS (@iambroots) May 30, 2024
Recommendations for Regulating Digital Art
Despite fears, the Treasury admits that actual cases of NFTs funding terrorism, enabling the nuclear arms trade, or, drug rings are rare.
A standout is North Korean hackers stealing digital assets to bypass U.S. sanctions for their military, with NFTs being a small part of the loot.
With that said, they concluded the report with key recommendations for regulation:
Regulation: Crafting specific NFT rules to cut risks.
Industry Collaboration: Teaming up with insiders to fight fraud.
Consumer Education: Informing the…