NFTS became a $41bn market in 2021[1] driving many enthusiasts in the digital artwork and collectibles, seeing art, sports and music corporate players minting NFTs as digital ownership certificates registered on the blockchain.
What Is a Non-Fungible Token (NFT)?
Non-fungible tokens or NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.[2]
NFT Characteristics
NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
NFTs can be used to represent real-world items like artwork and real-estate.
"Tokenizing" these real-world tangible assets allows them to be bought, sold, and traded more efficiently while reducing the probability of fraud.
NFTs can also be used to represent individuals' identities, property rights, and more.
NFTs can also be used to remove intermediaries and connect artists with audiences or for identity management. NFTs can remove intermediaries, simplify transactions, and create new markets.[3]
NFTs and Compliance
NFTs are exploding with huge opportunities for creators, brands and institutions but it might be time to look at NFTs from a compliance and regulatory perspective. The art industry has been historically linked to high profile cases of money laundering with lax Know -Your- Customer (KYC) and Anti-Money Laundering (AML) compliance requirements. At the end of the last year, The U.S. government made it illegal to buy a handful of NFTs after putting 57 cryptocurrency addresses and one exchange on the Treasury Department Office of Foreign Assets Control (OFAC) sanctions list as addresses identified were facilitating ransomware and money laundering.
Elliptic, the blockchain analytics company reported that the total amount of crypto in the sanctioned wallet addresses surpassed $300 million.
Read More at Cointelegraph
2022 Be the Year of NFT Regulation ?
The FATF updated guidelines highlights that NFTS are distinct from cryptocurrency and are generally not considered Virtual assets under the FATF definition. “Digital assets that are unique, rather than interchangeable, and that are in practice used as collectibles rather than as payment or investment instruments, can be referred to as a non-fungible tokens (NFT) or crypto-collectibles”[4]
Read More on how AML best practices can be proactively implemented at Ospree
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