In the wake of serious concerns raised about cryptocurrencies and the misuse of them for money laundering and hawala transactions by terrorists and criminals, a new report indicates that money laundering via non-fungible tokens (NFTs) is becoming a growing sector.

A&nbsp;report by Blockchain data platform Chainalysis indicates that money laundering is a small, but growing, part of the activity on NFT marketplaces.

Also read |&nbsp;<a href="https://www.wionews.com/world/explainer-what-is-the-hype-behind-pricey-pixels-why-people-spend-fortunes-on-nfts-or-digital-art-450100">Explainer: What is the hype behind pricey pixels, why people spend fortunes on NFTs or digital art?</a>

"While money laundering in physical art is difficult to quantify, we can make more reliable estimates of NFT-based money laundering thanks to the inherent transparency of the Blockchain," the report said late on Wednesday.

During the third quarter of 2021, illicit addresses sent over $1 million worth of cryptocurrency to NFT marketplaces.

Again, the figure grew in the fourth quarter, capped at just under $1.4 million.

"In both quarters, the vast majority of this activity came from scam-associated addresses sending funds to NFT marketplaces to make purchases," the report informed.

Also read |&nbsp;<a href="https://www.wionews.com/photos/in-pics-in-seattle-a-nft-museum-opens-its-door-to-public-450047">In Pics: In Seattle, a NFT museum opens its door to public</a>

Additionally, both quarters saw a significant amount of stolen funds being transferred to marketplaces.

"Perhaps most concerningly, in the fourth quarter, we saw roughly $284,000 worth of cryptocurrency sent to NFT marketplaces from addresses with sanctions risk," said the researchers.

With NFTs, data can be stored on blockchains and those data can be paired with images, videos, audio, physical objects, memberships, etc.

The popularity of NFTs skyrocketed in 2021. According to Chainalysis, at least $44.2 billion worth of cryptocurrency is now being sent to ERC-721 and ERC-1155 smart contracts associated with NFT marketplaces and collections, up from just $106 million in 2020.

"Wash trading" is another way some NFT sellers make money.

Another area of concern for NFTs, Wash trading has a single person/party on both sides of the transaction, i.e. the same person acts as&nbsp;both the seller and the buyer, creating&nbsp;a false impression about an asset's value and liquidity.

Based on Blockchain analysis, the researchers identified 262 users who sold NFTs to self-financed addresses more than 25 times.

Watch |&nbsp;Non-Fungible token sales hit $25 Billion dollars in 2021

<iframe allowfullscreen="" autoplay="1" frameborder="0" height="350" src="https://www.wionews.com/videos/non-fungible-token-sales-hit-25-billion-dollars-in-2021-443780/embed" width="560"></iframe>

A total of nearly $8.9 million in profit was made by the 110 profitable wash traders, dwarfing the $416,984 lost by the 152 unprofitable traders.

"Even worse, that $8.9 million is most likely derived from sales to unsuspecting buyers who believe the NFT they're purchasing has been growing in value, sold from one distinct collector to another," said Chainalysis.

"NFTs offer potential for abuse. It's important that as our industry considers all the ways this new asset class can change how we link the blockchain to the physical world," said the report.

(With inputs from agencies)

In the wake of serious concerns raised about cryptocurrencies and the misuse of them for money laundering and hawala transactions by terrorists and criminals, a new report indicates that money laundering via non-fungible tokens (NFTs) is becoming a growing sector.

In the wake of serious concerns raised about cryptocurrencies and the misuse of them for money laundering and hawala transactions by terrorists and criminals, a new report indicates that money laundering via non-fungible tokens (NFTs) is becoming a growing sector. A report by Blockchain data platform Chainalysis indicates that money laundering is a small, but growing, part of the activity on NFT marketplaces. Also read | Explainer: What is the hype behind pricey pixels, why people spend fortunes on NFTs or digital art? "While money laundering in physical art is difficult to quantify, we can make more reliable estimates of NFT-based money laundering thanks to the inherent transparency of the Blockchain," the report said late on Wednesday. During the third quarter of 2021, illicit addresses sent over $1 million worth of cryptocurrency to NFT marketplaces. Again, the figure grew in the fourth quarter, capped at just under $1.4 million. "In both quarters, the vast majority of this activity came from scam-associated addresses sending funds to NFT marketplaces to make purchases," the report informed. Also read | In Pics: In Seattle, a NFT museum opens its door to public Additionally, both quarters saw a significant amount of stolen funds being transferred to marketplaces. "Perhaps most concerningly, in the fourth quarter, we saw roughly $284,000 worth of cryptocurrency sent to NFT marketplaces from addresses with sanctions risk," said the researchers. With NFTs, data can be stored on blockchains and those data can be paired with images, videos, audio, physical objects, memberships, etc. The popularity of NFTs skyrocketed in 2021. According to Chainalysis, at least $44.2 billion worth of cryptocurrency is now being sent to ERC-721 and ERC-1155 smart contracts associated with NFT marketplaces and collections, up from just $106 million in 2020. "Wash trading" is another way some NFT sellers make money. Another area of concern for NFTs, Wash trading has a single person/party on both sides of the transaction, i.e. the same person acts as both the seller and the buyer, creating a false impression about an asset's value and liquidity. Based on Blockchain analysis, the researchers identified 262 users who sold NFTs to self-financed addresses more than 25 times. Watch | Non-Fungible token sales hit $25 Billion dollars in 2021 A total of nearly $8.9 million in profit was made by the 110 profitable wash traders, dwarfing the $416,984 lost by the 152 unprofitable traders. "Even worse, that $8.9 million is most likely derived from sales to unsuspecting buyers who believe the NFT they're purchasing has been growing in value, sold from one distinct collector to another," said Chainalysis. "NFTs offer potential for abuse. It's important that as our industry considers all the ways this new asset class can change how we link the blockchain to the physical world," said the report. (With inputs from agencies)

After cryptocurrencies, money laundering via NFTs is next big worry

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After cryptocurrencies, money laundering via NFTs is next big worry