Potent mix of art NFTs, cryptocurrencies and central bank digital currencies promises to be a regulator’s nightmare

The explosion of the art NFT market and growing popularity of digital currencies have raised concerns that they could become tools for money laundering

But, rather than banning such emerging technologies, regulators must fine-tune legislation and policies to counter the threat

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A representation of the cryptocurrency monero is seen on August 6. Privacy-oriented tokens such as monero and Zcash have already been co-opted by threat actors including hackers and ransomware groups. Photo illustration: Reuters

Hugh Harsono

Hugh Harsono writes regularly for multiple publications about cyberspace, economics, foreign affairs and technology.

Published: 6:45am, 19 Aug 2021Updated: 6:45am, 19 Aug 2021

Non-fungible tokens (NFTs) have exploded in popularity in recent years, being used to represent unique objects such as the iconic Doge meme, exclusive releases of Kings of Leon music, and items from popular games like CryptoKitties.

Additionally, NFTs provide authentication for a variety of other assets by offering a blockchain-based certificate of authenticity for such items.

The digital artwork craze tied to NFTs has created a significant market, worth over US$250 million last year. This dramatic increase in the NFT-related market has raised significant concern about these tools being used to support money-laundering operations.

Anti-money-laundering regulations have greatly restricted the flow of funds for threat actors through traditional banking mechanisms. However, the rise of the art NFT market, along with the growth of central bank digital currencies (CBDCs) in parallel with cryptocurrencies, should greatly concern anti-money-laundering specialists and the financial industry at large.