Charlie Delingpole Blog

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Anti-Money Laundering Crypto

What are the money-laundering risks with non-fungible tokens (“NFT’s”) and Decentralized Finance (“DeFI”)?

Non-fungible tokens (“NFT’s) were born with the advent of Crypto-Kitties in 2017, operating on Ethereum. The point about NFT’s is that they are both scarce and more importantly can be unique, unlike a fungible commodity such as Bitcoin. Buyers can thus purchase individual NFT’s, and then resell them, much like pieces of art. 

They have had a resurgence in the past few weeks. Since then, social media stars such as Logan Paul have been able to raise $3.5m in one day from NFT sales. 

Like Ethereum or Bitcoin, NFT’s are a store of value. Much like specific pieces of art, they can be used as a high value good that be used to exchange physical value. Unlike art, the data on the ownership is stored on the NFT ledger, and thus is public and verifiable. Unfortunately, it is also anonymous.

Therefore NFT’s represent another vehicle for both speculation and money-laundering. 

Decentralized Finance (“DeFi”) is another important dimension of maturation of the cryptocurrency ecosystem. Decentralized exchanges such as Uniswap and Venus allow for users with unhosted wallets to transact without a centralized party that is obliged to conduct KYC and AML, leading to a further loosening of standards. 

Reading

Logan Paul Raises $3.5 Million in One Day from NFT Sales

Terrorist Fundraising and Drug Money Laundering with DeFi and NFT