The crypto analytics firm found that more than half of identified laundering traders lost money due to Ethereum’s high commission fees.
The research firm blockchain, chain analysishas published a new study that identifies the main criminal activities present in the sphere of tokens non-expendable (NFT).
In a report published this Wednesday, the firm analyzes two types of crimes related to the burgeoning NFT space: the money launderingan activity to make capital “dirty” appears legitimate; and the wash tradea practice of buying and selling the same asset to create artificially high trading volume and manipulate prices.
The bustling NFT market might seem at first glance to be an attractive place where crypto criminals could take advantage of to make a quick buck. However, the investigation of chain analysis suggests that illicit activities in this sector do not always pay; in fact, they can be less lucrative and more difficult to carry out than other crypto crimes.
Money laundering and wash trading in NFTs
The digital collectibles space became very popular and grew explosively during 2021, going from the $30 million range to more than $13 billion. This growth seems to have brought with it an increase in illicit activities carried out in this sector.
In his report, chain analysis said has found evidence”significant” of money laundering and wash trading in the NFT market. When it comes to the second type of trade, the firm found 262 NFT traders who had sold an NFT to a self-funded address more than 25 times. The illicit practice is a way of manipulating the market by making investors believe that an asset is more in demand than it really is, which increases its value.
While the analytics company admits it can’t be “100% safe” that all instances of NFT sales to self-funded wallets are intended for wash trading, indicated that the “threshold of 25 transactions gives us a high degree of confidence that these users are regular wash traders”.
As for money laundering, the report found that the value sent to the markets by illicit addresses “increased significantly” in 2021, growing to nearly $1.4 million in the last quarter of the year. chain analysis He added that approximately $284,000 worth of cryptocurrency was sent to NFT markets from addresses at risk of sanctions in that time.
“Money laundering, and in particular transfers from sanctioned cryptocurrency companies, poses a huge risk to building trust in NFTs“, said the firm making a call to closely monitor the sector. He also highlighted:
CAs is the case with any new technology, NFTs offer potential for abuse. It is important that as our industry considers all the ways this new asset class can change the way we link blockchain to the physical world, we also build products that make investing in NFTs as safe as possible. .
NFT crime can be expensive
This is not the first investigation to associate the emerging collectibles market with illicit activities.
as you pointed out Decryptreports have pointed out that LooksRarean NFT platform based on ethereum, has become a wash trading space. At the beginning of the month, the trading volume of the site even surpassed Open Sea, the most popular NFT market; but on closer inspection, many of the NFT transactions go in and out of the same two addresses.
The rise in criminal activity is not unique to NFTs. In general, the digital currency space has seen an increase in criminal activities as more users enter the sector. In 2021, crypto crime reached an all-time high of USD $14 billionand criminals increasingly turned to new areas decentralized finance (DeFi) to earn money.
However, among all the types of cryptocrime, those related to NFTs do not seem to be the most lucrative. In his most recent report, chain analysis he discovered that more than half of identified laundering traders actually lost moneyas network commission fees piled up and his wash trade failed to generate interest among real buyers.
“It is not a very good idea to get into crime in NFT because it is expensive”, said Kim Grauer, research director of the firm, in this line. “It is difficult to guarantee that wash trading will be profitable, and if you want to use [NFT] to launder money, we can trace it and you will be able to see who is in possession of the NFT. There are things that make the NFT space unattractive for crime”.
It should be noted that the most recent study of chain analysis analyzes only the transactions carried out in Y Wrapped Ethereum (an ERC-20 token reflecting the price of ethereum). “There is likely to be laundering commercial activity that we are not considering“, warned the firm.
Article by Hannah Estefanía Pérez / DailyBitcoin
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