Money Laundering Made Easy?

NFT’s or non fungible tokens are basically digital assets that can be sold across the internet to any desired buyer. These assets mostly come in the form of artwork such as cryptopunks as I talked about in one of my blogs before. These NFT’s are primarily bought with the cryptocurrency Ethereum, and can range from prices such as 0.1 ethereum all the way up to around 20,000 ethereum. 

This is where the conspiracy starts, are there people out there genuinely rich enough to spend millions on this new and volatile concept of digital art, or do these purchases signify something else. By “something else”, I am referring to money laundering. This definition of money laundering provided by Cornell’s Law school will hopefully provide you as the reader with more insight regarding the topic. “Money laundering refers to a financial transaction scheme that aims to conceal the identity, source, and destination of illicitly-obtained money.” A question that I had after finding out about this possible money laundering was how? How can money laundering occur online, through digital artwork, with cryptocurrency? The answer proves to be shockingly simple, which proves how widespread this practice could already be. One example of how these NFT’s can be used to conceal the identity and destination of money, is with the made up characters named Joe and Alex. Suppose that Joe and Alex were just involved in some type of business that they both would not want tax collectors to know about. In order to avoid this, Joe could put up random artwork on some NFT website, and make the price for this artwork exactly what Aex needs to pay him. When Alex pays back Joe, no one will know that this was money from an illegal deal, due to how normalized the buying of this artwork is. 

Also, even if law enforcement started to suspect this illegal activity, the amount of time it would take to track down these buyers and sellers is immense. The reason for this is because NFTs are generally bought with the cryptocurrency ethereum, and even though ethereum purchases are somewhat anonymous, they can still be tracked down with a lot of work. The term for this is pseudo-anonymous. The reason that these transactions are so hard to track down is because the addresses that are unique to every transaction, do not give the exact information of the buyer/seller. Since it is not possible to track the buyer/seller down solely with the ethereum address, data analysis must be used in order to possibly find the identity of these individuals. However, considering that this analysis is not at all easy, law enforcement are sometimes given no other option but to only use the ethereum address. Clearly, because of how broad the term “money laundering” is, and because of the limited information ethereum addresses provide for law enforcement, there is undoubtedly money laundering that occurs with the purchase of NFT’s. Whether this money laundering occurs on a large scale because of how discrete one can possibly make it, is something that the us as the general public would not be able to find out. 

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