Are NFTs being used for money laundering? Yes they are, claims Mr. Whale

The non-fungible tokens space has been very active for the last month or so, but more could happen than you think as concerns arise about the sector’s involvement in money laundering and tax evasion.

Crypto investor and strong crypto commentator Mr. Whale has drawn attention to the darker side of the burgeoning NFT space. In a blog post earlier this week, the Bitcoin early adopter attributed the popularity and notoriety of NFTs to their ability to facilitate money laundering and tax evasion for the rich.

“Behind the facade of a bunch of bored rich people buying digital works of art at insanely high prices, there is a sinister and twisted money-laundering plan for the ultra-rich elites of crypto to make their illegal profits appear legal.”

Because art is so subjective and in the eye of the beholder, he argues that NFTs are often not scrutinized by lawmakers and regulators. This aspect of the art is one of the main reasons it has been used as a vehicle for illicit financial flows for centuries, he added.

The real aspect of money laundering is quite simple, according to Mr. Whale. Buying an NFT through illegal funds is an easy way to move money while claiming the funds were used to make a legitimate art purchase while avoiding taxes. An example was shown by former USA Today journalist Isaiah McCall on his blog earlier this year, explaining the process:

“If you had $ 1 million in illegal money, you’d be spending $ 1 million on your own NFT. You can do this yourself or you can use a trusted third-party account. Then you sell the rubbish for free and take the profits. “

Cat Graffam, an associate faculty member in the Department of Art and Design at Lasell University, Massachusetts, told Mr. Whale that NFTs are already being used to launder money in ways similar to physical art. She added that they have a number of benefits, and stated:

“Moving dirty money could possibly be even easier because it is pegged to a decentralized currency and no physical works of art need to be transported or stored in offshore tax havens.”

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For these reasons, both believe the NFT scene is likely to attract the attention of regulators and tax authorities. Mr Whale said he had no doubt that governments will end up going against this trend, adding, “Although there are a number of NFT exchanges without KYC / AML regulations, this will definitely change in the future. “

As Cointelegraph reported earlier this year, investors who use the profits from their crypto holdings to purchase NFTs will likely still have to pay capital gains tax when filing their taxes in the United States.