“Good people do not need laws to force them to act responsibly, while bad people will find a way to get around the laws.” – Plato

The above quote has stood the test of time. In all industries, markets, societies, and ideas, people will eventually find a way to do well or, at worst, make a mistake. Non-fungible tokens (NFTs) and cryptocurrencies are no exception to the rule. The industry is thriving – crowded, even with endless crashes, falling price floors, and infiltrating the corners of an ever-growing culture.

NFTs are developing at breakneck speed and the money is there. According to market tracker DappRadar, NFT sales rose to $10.7 billion in the third quarter of 2021, more than 8 times more than the previous quarter. Lots of monkeys and penguins.

Creators, brands, institutions – everyone is now immersed in this world recklessly. It’s time to take a look. Late last year, we saw a disturbing address in the NFT space: The US government declared it illegal to buy multiple NFTs after listing 57 crypto addresses and one exchange with the US Treasury’s Office of Foreign Assets Control (OFAC). Sanctions list. According to OFAC, these addresses were for ransomware for merchandise and money laundering. Blockchain data firm Elliptic reports that the total amount of cryptocurrency held at sanctioned wallet addresses has exceeded $300 million.

Darknet Markets and Spooky Transactions
Latvia-based Chatex has been tasked by the Ministry of Finance with facilitating these nefarious transactions, which they say include “illegal or risky activities such as darknet marketplaces, high-risk exchanges and ransomware.” Elliptic noted that this was not the first, but rather the second time that the US government had sanctioned the exchange — and the eighth time that crypto addresses had been penalized. Although this was one of the first cases in which the government specifically (and officially) flagged a malicious cryptographic address, such incidents have undoubtedly occurred many times before. Before NFT, the art industry was a haven for money laundering. This problem has existed for centuries as the traditional art world has remained largely unregulated and conflicts with requirements such as Know Your Customer (KYC) and Anti-Money Laundering (AML).

Related: From NFTs to CBDCs, Cryptocurrencies Must Compliance Before Regulators Do so

NFTs and cryptocurrencies, in this respect, have fought an uphill historical battle to be seen by the world as legitimate industries and not just dark webs of illegal activities. In addition to my work building the Shyft Network, where we help crypto companies comply with AML, travel regulations, and implement blockchain data compliance, I have written some of the first cryptocurrencies working to keep the sector secure. We’ve come a long way since 2010. And I mean, a long way.

What we saw earlier this month with Chatex probably goes along with dirty wallets taking their crypto, going to a marketplace like OpenSea, buying and exchanging NFTs to use the process as a mixer to launder their money. This is similar to the incident when hackers steal ether (ETH) and send it to a smart contract that hides the identity of the output to hide the source.

Match code
Just as we don’t want cryptographic vulnerabilities that require government intervention, we don’t want to see security flaws in NFTs. We want to move forward. To do this, we need a compliance infrastructure not only in the crypto space, but also in the NFT industry – and the technology itself. We need battle-coded regulatory procedures and compliance protocols such as KYC rules for any first customer transaction in the NFT space to be encrypted into the transaction.

It stands to reason that NFT developments, which are already developing at a rapid pace, will include technologies that create regulatory solutions. The same has happened with cryptocurrencies in general and with most industries growing from something small to something big, especially when institutional investors step in. Be it investors, brands or consumers, the list of scams and outright illegal activities is growing.

Related Topics: FATF Guide to Virtual Assets: Winning NFTs, Losing DeFi, And Staying Unchanged

As NFT assistive applications grow and evolve beyond mere collectibles (see: real estate, publishing, and ticketing), they also present a unique opportunity for matching technology. It may not be as exciting as you hear about other elements of NFT, but it is important nonetheless.

Source: CoinTelegraph