Environmental impact, assessment and regulation of NFTs
NFTs are digital assets that are built on a blockchain platform and can be traded as if they were digital letters in exchange for cryptocurrencies or even fiat currency. They generally act as proof of ownership of digital assets, but the specific rights that NFTs carry vary. Some NFTs incorporate “smart contracts” as part of the token that executes itself when defined events occur.
The computer scientist Antsstyle has criticized NFTs development company : “In short, NFTs are bad for two reasons: 1. They are bad for the environment, since they depend on cryptocurrencies that cause huge amounts of carbon emissions. [.. .] 2. They are only valuable as tools for money laundering, tax evasion and further investment fraud. “
The long version of the Antsstyle review provides a comprehensive overview of the NFT proof-of-stake (low power) and proof-of-work (high power) platforms. You are not finding a problem with uploading the image to your computer, what you’re looking at is a plain gray box, an NFT known as The Pixel, produced by an artist going by the name [Pak] and sold for approximately 1.3 million dollars at a Sotheby’s auction in April 2021 “. Other major art auction houses such as Christie’s , Phillips and Portion They also began auctioning off NFTs minted on various non-fungible token platforms this year, Cointelegraph noted.
According to Crypto Art , Pak is the second best-selling crypto artist of all time, with a market capitalization of around $ 65 million for his art pieces. Non Fungible ranks Bored Ape Yacht Club at number one, with the NFT “Bored Ape # 9449” last sold for over $ 1 million.
Although NonFungible development does not classify them, the 24x24 computer generated CryptoPunks images from Larva Labs were the first major NFTs. In March, CryptoPunk # 3100 was sold for 4,200 Ether (ETH), or $ 7.6 million at the time. This sale was surpassed by “Every days: The First 5000 Days”, an NFT by graphic designer Mike Winkelmann, aka “Beeple”, which raised $ 69.3 million that same day, which is $ 13,800 for each digital artwork included in the collage. According DappRadar, CryptoKitties of Dapper Labs -the first major project of NFT based on ethereum using the ERC-721 standard — also saw a 22.106% increase in trading volume in one day amid the recent resurgence of the NFT market.
NFTs are not widely regulated. For example, earlier this year in NFT’s main marketplace, OpenSea, an executive was scrambling non-fungible tokens that he bought after featuring them on the site’s home page, a move that presumably allowed him to sell them for a quick profit. as NFT’s insider trading on the markets is not explicitly illegal. In another case, 265 ETH ($ 1.1 million) of fraudulent NFTs claiming to be issued by Hong Kong-based gaming and venture capital company Animoca Brands and its subsidiary were minted and sold via Discord. Blowfish studios. In the NFT heist of the century, a hacker uploaded 20 terabytes of NFT originally minted on the Ethereum and Solana blockchains.
Blockchain forensics company Chainalysis estimated that around 0.34% of the transaction volume in the $ 2.5 trillion cryptocurrency market, or about $ 8.5 billion, is related to illicit activities. According to NonFungible, 265,927 active wallets traded NFT on the Ethereum blockchain during the third quarter. To investigate cross-border tax crimes with the rapid rise of cryptocurrencies and NFTs and their use in money laundering, hacking, cyberattacks, and other illicit transactions, governments around the world — especially Joint Heads of Enforcement Global Tax — have been sharing information and resources.
Earlier this year, the Internal Revenue Service launched “Operation Hidden Treasure” in collaboration with staff from its civil fraud enforcement office and its criminal investigation unit to examine tax evasion among cryptocurrency users and the NFTs. The latest IRS Criminal Investigation report states that 93% of all seizures during fiscal year 2021, valued at $ 3.5 billion, involved cryptocurrencies. The United States Department of the Treasury also put 57 crypto addresses on its sanctions list, along with one exchange, Chatex., based in Latvia, which the Treasury Department said facilitated transactions related to “illicit or high-risk activities, such as darknet markets, high-risk exchanges and ransomware.”
Continuing the United States President Joe Biden’s entire administration effort to counter ransomware and the illicit use of cryptocurrencies and NFTs, more tax regulations have been put in place. Law HR 3684, Law of Investment in Infrastructure and Employment, requires cryptocurrency “intermediaries”, which includes “any person who, in exchange for a consideration, is in charge of regularly providing any service that carries out transfers of digital assets in someone else’s name “- reporting cryptocurrency and NFT purchases over $ 10,000 on Form 8300, including names and Social Security numbers, to the IRS, or facing possible felony charges.
In October, the Financial Action Task Force (FATF) issued new guidance on NFTs, stating that they are excluded in its definition of virtual assets. But the FATF standards could continue to apply to NFTs on a case-by-case basis.
