How to Launder Money With NFTs
Some call it God. Others call it Bitcoin.
Cryptocurrency has replaced religion. There will be no turning back in a few years. Actually there’s no turning back now. Not when people are selling virtual land for millions or Nyan Cat for half-a-mil.
Unfortunately, the space of non-fungible tokens (or unique digital art and collectibles) is tainted. NFTs are being used for sleeeezery.
Hundreds, if not thousands of collectors are utilizing the anonymousness and decentralization of NFTs — more commonly known as the blockchain — to store their illegal money. Some even describe NFTs as the “best money laundering method in the cryptocurrency world.”
You’ll frequently see someone buy an NFT for $100,000 and a few days later sell it for $600. It’s shady. And it’s not going to stop.
So, how does it work?
How to Launder Money W/ Nyan Cat
Death and taxes. Who needs them?
While we still can’t fix the first problem, criminals have taken care of the second.
All you need to do is place money from your illegal side-hustle into a delegitimate business, counterfeit art collection, or more recently, ludicrously overpriced digital art.
The price of NFTs is determined by the buyer. You might think Nyan Cat is worth pennies but Harry Cox over here is willing to pay millions. So why stop him? Art is subjective. Didn’t some New York City hipster ever tell you that?
So instead of paying the taxman you pounce on the latest and greatest NFT craze. You buy an NFT from yourself — if you can believe that — for whatever price you set.
If you have $1 million in illegal money, you would spend $1 million on your own NFT. You can do this yourself or use a trusted third-party account. Then you resell the trash for nothing and bank the profits.
And if the IRS asks where you got all that dough... “What are you talking about? I made that money selling precious digital art. It’s clean yo.”
This Spells Danger For NFTs
NFTs are doomed. They’re doomed for regulation.
When Bitcoin first launched it was also used primarily for illicit activities. Sleeeezery. NFTs are having their day in the sun, but there will be a major crackdown soon backed by KYC/AML regulations (know your customer / anti-money laundering).
“I can only speculate how large it is today and how large it could become. Right now none of the major trading venues (such as OpenSea) seem to have KYC gathering or AML/CFT [Combating the Financing of Terrorism] screening for users so that could be exploited,” said Tim Swanson, the head of market intelligence for Clearmatics, a London based blockchain company.
NFTs will fall in line with the same sort of regulation we see around Bitcoin. For now, however, this makes dealing with this space all the more dangerous.
Excuse me while I load up on more CryptoKitties trading cards.
This is not financial advice. All investment strategies and investments involve risk of loss. Nothing contained in this publication should be construed as investment advice.
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