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The space of NFTs is flooded with news of jaw-dropping sales that many find bizarre. Of course, art is subjective and what might be questionable to many, might be exquisite to some. But there might be something more to this burgeoning market for artistic freedom, according to crypto analyst Mr. Whale. In a recent post, the early Bitcoin adopter attributed the recent spike in NFT sales to a “twisted scheme” of money laundering and tax evasions.
Mr. Whale Explains How NFTs Are Used to Evade Taxes and Launder Money
Mr. Whale pointed out that NFTs usually escape scrutiny because every artwork is subjective. In this way, they are no different from traditional art which has been used for centuries for illegal financial flows, he added.
Laundering money via NFTs is not very difficult, as Mr. Whale Explains. Individuals attempting illicit transfers can easily buy tokens from themselves or claim that a certain amount of money was used to purchase a legitimate artwork and receive tax exemptions. In April, USA Today journalist, Isaiah McCall, had demonstrated an instance of money laundering through this approach.
To further elaborate the use of NFTs in money laundering, Mr.Whale quoted Cat Graham, an adjunct faculty member in the Art & Design department at Lasell University. Graham proposed that moving assets around in the blockchain is a better alternative for tax thieves and money launderers:
Regulations Could be Coming for NFTs as Well
In his post, Mr. Whale was confident that a few years from now the NFT craze would fade and the market would be heavily regulated. He added that many digital asset marketplaces could also be forced to comply with KYC/AML regulations, unlike now.
NFT purchases could also be subjected to stricter tax laws, although, that might already be underway. In April, CNBC Squawk Box had reported that the NFT buyers in the US will have to pay a capital gains tax of up to 20% while filing their returns.