thecoinrepublic.com
- The nonfungible token space has been buzzing for the past month or two, but there may be more to it than meets the eye, as suspicions about the sector’s role in money laundering and tax evasion emerge
- Behind the appearance of a bunch of bored rich dudes buying digital artwork at exorbitant prices lurks a nefarious and twisted money laundering strategy for crypto’s ultra-wealthy elites to make their unlawful earnings appear legal
- Former USA Today journalist Isaiah McCall provided an example on his blog earlier this year, explaining the process, one would spend $1 million on your own NFT if you had $1 million in unlawful money
The nonfungible token space has been buzzing for the past month or two, but there may be more to it than meets the eye, as suspicions about the sector’s role in money laundering and tax evasion emerge. Mr. Whale, a crypto investor, and uber-bearish crypto critic has highlighted the ugly side of the booming NFT market. The Bitcoin early adopter linked the popularity and reputation of NFTs to their capacity to allow money laundering and tax evasion for the wealthy in a blog post earlier this week.
Behind the appearance of a bunch of bored rich dudes buying digital artwork at exorbitant prices lurks a nefarious and twisted money laundering strategy for crypto’s ultra-wealthy elites to make their unlawful earnings appear legal. He claims that because art is so subjective and in the eye of the beholder, politicians and regulators rarely scrutinize NFTs. He went on to say that this element of art is one of the main reasons why it has been utilized as a conduit for illicit financial flows for ages. According to Mr. Whale, the actual money laundering part is pretty straightforward. Using illicit cash to acquire an NFT from oneself is a simple technique to shift money while claiming the funds were used for a legitimate art purchase and avoiding taxes.
Former USA Today journalist Isaiah McCall provided an example on his blog earlier this year, explaining the process, one would spend $1 million on your own NFT if you had $1 million in unlawful money. One can do this on your own or with the help of a reputable third-party account. Then one resells the trash for pennies on the dollar and profit. Mr. Whale was told by Cat Graffam, an adjunct professor in the Art & Design department at Lasell University in Massachusetts, that NFTs are already being used to launder money in the same manner that physical art is. She went on to say that they had some benefits, elaborating: Because it is related to a decentralized currency and there are no actual artworks to transport or store in off-shore tax haven warehouses, it may be even easier to move dirty funds around.
According to both regulators and tax authorities, the NFT scene is likely to attract their attention for these reasons. Mr. Whale believes that governments will eventually crackdown on this trend and that while there are a lot of NFT exchanges that do not have KYC/AML laws, this will likely change in the future. Investors who use the proceeds from their crypto holdings to buy NFTs would almost certainly have to pay capital gains tax when filing their taxes in the United States, as Cointelegraph revealed earlier this year.