Treasury Warns of Sanctions Risks From NFTs
The Treasury Department this week released its 2024 risk assessment for the non-fungible token industry, outlining how NFTs and their platforms can be used to evade sanctions, fund terrorism, finance weapons proliferation and more.
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The agency said some NFT firms and platforms “lack appropriate controls” to prevent sanctions risks, including risks involving Russia. It said sanctioned Russian entities use NFT platforms to raise money for Russian soldiers, and the Russian private military group, the Wagner Group, has “encouraged the purchase of NFTs for investment purposes.”
Treasury stressed that NFT platforms that process transactions involving U.S. persons are “generally required to comply with sanctions regulations.” Relying on a third-party company for sanctions screening “would neither obviate sanctions compliance requirements nor preclude liability with respect to potential violations of sanctions regulations.”
Treasury said the government should craft more regulations or guidance “to provide additional clarity” about how NFT platforms can lead to sanctions risks. “If regulators identify any regulatory gaps in their framework applicable to NFTs,” the agency said, “they should identify ways to address those gaps.” It also urged U.S. agencies to “take enforcement actions” against people and companies in the NFT sector that don’t comply with sanctions, and it should convince other governments to also develop “policy approaches to addressing illicit finance risks” of NFTs.