In recent years there has been a file Wonderful technological developmentwith many ethical and practical implications, which It has touched countless spheres of existence, social life, and social and business interactions: In the last sector, the so-called has already gained great importance and seems to be able to take on more and more in the future NFTs, that is, non-fungible tokens (Non-fungible and non-repeatable digital code).
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What are NFTs?
These tokens for Uniquely and securely identify a digital productuse the blockchain and can consist of any digital object.
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They are often considered and used as vectors for the buying and selling of virtual artwork. The work is produced using a hash, and then stored in the blockchain, with an associated timestamp.
NFT keeps track of retail sales internally, from the first change of ownership. Anyone who wants to create an NFT must use the blockchain and have a digital wallet (wallet), inside which is cryptocurrency to finance minting (the costs associated with creating an NFT are gas taxes, commissions for opening the wallet. Account and sales commissions) and choose a platform on which to sell your work .
NFT Market: Opportunities and Risks
There are several sites on the market that allow you to exchange artwork: NiftyGateway, MarkersPlace, Rarible, SuperRare, and OpenSea. The latter, in particular, is based on the Ethereum blockchain and therefore requires possession of an Ethereum wallet to create or purchase tokens. However, this platform often does not guarantee strict controls, which puts itself at risk of being used to exploit NFTs for illegal purposes. The latter, in fact, because of its potential, They can become a target or a tool for committing crimes.
Under the first aspect, it is now proven that non-fungible tokens can be forged. Moreover, it is possible, though not easy, to attack illegally and forcibly gain access to the personal area of users in NFT markets, and then transfer them to their accounts.
After doing so, the cybercriminal can sell the stolen tokens on other markets and attempt to launder the proceeds. However, given that transactions take place on the blockchain, it will be necessary to use systems, such as mixers, to obfuscate the tracks.
Under the second profile, that is, NFT as a tool for committing crimes, the US Treasury, which warned of the dangers of unjustified use of tokens, would have identified a greater use of them in money laundering and terrorism crimes. financing.
In fact, the investigation conducted by the experts revealed that high-value virtual art can be an excellent opportunity for money laundering through blockchain technology or a source of funding for terrorist groups.
A tool for transferring value, in the absence of controls
In Guidance on Crypto Assets of the Financial Action Task Force (FATF), the definition of NFT, even if it appears to significantly reduce the risk of money laundering, does not completely rule it out. In fact, the document states that these tools, depending on their characteristics, are not generally considered virtual assets (VA); However, it is important to consider the nature of NFTs and the function they actually perform, without attributing decisive effectiveness to the terms used (including marketing). However, some NFTs, ostensibly non-VA, may be such if, in practice, they are intended for payment or investment purposes, also in light of the rapid development of the virtual currency space. For these reasons, the functional approach is particularly relevant in the context of NFTs and other similar digital assets.
However, there are non-fungible token markets, such as the aforementioned OpenSea, where it is possible to create and buy NFTs from all over the world, which are made on different blockchains, such as Ethereum or Polygon.
These activities can also take place outside the borders of the market where the token was created: this makes it possible to significantly expand the potential of the NFT as a tool for transferring value, moreover in the absence of particularly strict controls.
For example, OpenSea supports several wallets, one of which, Metamask, allows you to buy and sell crypto assets without any initial due diligence. Therefore, in this context, digital assets that have a freely transferable cryptocurrency value can be exchanged on cryptocurrency exchanges.
If the exchange does not conduct proper anti-money laundering checks, go ahead – straight Recycling – value with NFTs is possible and certainly easier than the corresponding trade in physical artwork. Indeed, in the face of the well-known requirement of anonymity for the purchase of highly valued works of art, transportation and preservation difficulties have greatly curtailed the illicit practice.
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The European Union’s regulatory framework on NFTs
The existence of intangible tokens capable of providing an effective ownership link to works of art and the lack of security controls in the various markets would resolve these critical issues and give new life to the illegal practice. At this point two examples have been given, one of a normative nature and the other of a practical nature.
In terms of regulatory statements, the European Union has ruled out the possibility of applying the European Commission’s proposed regulation on cryptocurrency markets to NFTs, effectively creating a regulatory vacuum.
This gap was only partially filled, in principle, by Italy. Our country, implementing EU Directive 843/2018 on measures related to anti-money laundering and know your customer, had included in the definition of “virtual currency” also digital representations of value that are not used as a medium of exchange, but are held for investment purposes, provided that they are also Transfer, store and trade NFTs electronically.
Thus running an extension also in relation to tokens of the obligations inherent in anti-money laundering.
NFTs and terrorist financing
From a practical point of view, the technique of creating two separate accounts, one to sell and one to buy, with the same theme is widely used: he would buy the NFT himself, which led to the practice identified as – called laundering – trading and useful for money and value laundering. However, laundering large sums of illicit money through high-value NFTs can arouse suspicion, compared to average values of a few hundred euros.
This shifts attention to the other type of crime mentioned above: the financing of terrorism, which can be easily practiced using some simple means. Suppose, for example, that a terrorist group mints NFTs under OpenSea and offers them for sale at 0.5 ether, which is about €500 each in current value.
The lender, after hearing the news, will load its MetaMask wallet with a reloadable card and some checks. With limits of €1,000 per day, the lender can buy multiple NFTs with a single deck of cards; Therefore, even if the terrorist group had a few supporters, it would still be able to quickly accumulate several thousand euros in cryptocurrencies, mostly in ether.
Ether will then be converted into untraceable cryptocurrencies, such as Monero, to buy weapons on the dark web next. This hypothesis is not entirely abstract, to the point where news reports assert that Nazi fascist groups fund themselves by selling the tools, and this is in the context that, as mentioned, neither OpenSea nor MetaMask currently have customer due diligence processes in place.
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