Non-fungible tokens (NFTs) are unique assets in the digital world that can be bought and sold like any other piece of property, but which have no physical form of their own. The market for NFTs surged to new highs in the second quarter, with $2.5 billion in sales in 2021, up from just $13.7 million in the first half of 2020.
As NFTs continue to gain traction at an exponential rate from buyers and sellers, regulators and authorities are developing regulations to form guidance on the NFT market.
Current State of Regulation
The NFT market currently has no specific AML compliance regulations required in the industry. In addition to this, AML regulations for money laundering in the art world are insufficient, and currently is a vulnerability that criminals exploit. Due to the nature of the art transactions, art sellers have never been required to report large art transactions or suspicious activity to regulators, while art buyers are able to remain completely anonymous.
Considering the ease of transfer and how NFTs have useful applications in the art and music industry, the combination of both NFTs and art poses a major area of concern as the industry is already widely considered an avenue for money laundering.
On January 1, 2021, US lawmakers passed the Anti-Money Laundering (AML) Act of 2020, requiring antiquities dealers to comply with the requirements of the Bank Secrecy Act. It also maintains that virtual currency businesses or VASPs are money services businesses, and extends the scope of the BSA to crypto exchanges. As the technology develops, regulators
What Can be Done Now?
Firms can take preemptive measures by acting ahead of the regulatory curve, such as implementing a robust and efficient AML compliance solution, or utilising an automated Know Your Customer (KYC) onboarding feature.
Features such as the KYC Screening feature offered by Regtank can help verify the identity of your customers, as well as highlight and stop any high risk/suspicious transactions before it occurs.
By instituting a robust AML protocol that includes effective KYC, NFT marketplaces can reduce the risk of money laundering activities and allow the sector to grow in a safe and healthy manner. This will also help establish trust with users and build credibility of the industry. NFT marketplaces that are able to show they take compliance and AML seriously can expedite the acceptance process from accredited investors around the world.
Learn how the Regtank Compliance Solution can help you and your business take preemptive measures to build a robust AML protocol and reduce the risk of money laundering activities.
Contact us at firstname.lastname@example.org for a demo!