Some owners of NFTs are taking advantage of the lack of regulation of these non-fungible tokens to obtain more profit based on commonly illegal practices, such as money laundering, according to a report published by Chainalysis. The blockchain data company highlights two widely used techniques to increase the value of these digital assets, such as buying and selling by the same owner.
One of these practices is called “wash trading” and consists of carrying out transactions where the owner is both the seller and the buyer of that NFT. The objective? increase their value to attract the attention of buyers looking to invest in these assets. It is a simple technique, since the owner only needs to register in a digital wallet and connect it to a platform for buying and selling NFTs that does not require personal identification. Chainalysis, after previous research, found that more than 260 users performed this technique more than 25 times. Specifically, a group of 110 owners of NFTs stands out, who managed to obtain some 8.9 million dollars in profit by “wash trading”.
“That $8.9 million most likely stems from sales to unsuspecting buyers who believe the NFT they are buying has been growing in value from a different collector's sale. to another,” Chainalysis mentions in the report.
Is “wash trading” in NFTs legal?
The problem with this technique, as Chainalysis points out, is that it is currently in a legal vacuum. That is, it is clearly illicit, given that it deceives buyers. However, and at least for the moment, there is no regulation that punishes this type of practice. This can make many users lose confidence in this type of market, since it is difficult to know if an NFT increases in value due to its popularity or due to “wash trading”.
In parallel, the blockchain data company highlights that there are also money laundering practices through the purchase of NFTs with illegally obtained funds . They are, specifically, transactions associated with cybercriminals who obtain income based on scams or malware and buy digital assets using that money. Chainalysis research mentions that the benefits associated with this type of transaction were 1 million dollars during the third quarter of 2021, and reached 1.4 million in the fourth quarter of the year.
