NFT Study Data Reports Wash Trading and Money Laundering

Ricardo Rivas
Updated: Feb 4, 2022, 15:11 GMT+00:00

According to the Chainalysis report, some users sold NFTs to self-financed addresses over 25 times when it comes to wash trading.

NFT Study Data Reports Wash Trading and Money Laundering

2021 was a positive year in crypto, especially in NFTs that gained in popularity. The regulation usually comes after the technology has evolved, and before that time, some users can benefit from the regulatory uncertainty.

In 2021, the Ethereum NFT market had a volume of over $44.2 billion, while in 2020 it had only a volume of about $106 million, having an increase of over 40,500%, according to a report published last month by Chainalysis.

Recently, the blockchain research firm Chainalysis published a preview of the “The Chainalysis 2022 Crypto Crime Report” where they take a deep dive into NFTs illicit activities such as wash trading and money laundering.

Wash Trading in the NFT World

When investors sell and buy their own assets at the same time, they are creating a kind of market manipulation by inflating trading volume, and this is called wash trading.

The report analyzed NFT wash trading in addresses that were self-financed. The report revealed that over 262 addresses gained over $8.4 million making wash trading. 

But, more than half of the addresses (152) were unprofitable, as you can see below:

Wash Trading Table – Source: Chainalysis.

The report showed that these addresses sold their NFTs to self-financed addresses more than 25 times. 

Over the past month, since the launch of LooksRare marketplace, it has shown impressive volume numbers, and data showed that part of the volume looks like wash trading. 

The NFT Industry Has a Low Level of Money Laundering

Over $3 million of crypto in NFTs were sent over illicit addresses in 2021, the report revealed. The last quarter of 2021 was the highest, with $1.4 million in trading volume, as you can see below: 

NFT Illicit Funds Chart 2020-2021. Source: Chainalysis.

The NFT related money laundering represents less than 1% of the total money laundering on the whole crypto market that Chainalysis reported in 2021, which was $8.6 billion.

Money laundering has been raising concerns in many countries when it comes to crypto. For example, China in November of 2021 presented strict regulations to NFTs and Metaverse related projects. The IRS has recently noticed some manipulation and fraud cases involving cryptocurrencies in the U.S.

Regulation of crypto could be the next step countries need to take. This could tackle illicit activities such as wash trading and money laundering.

About the Author

Ricardo is a Venezuelan engineer and technology enthusiast, who discovered the world of blockchain and cryptocurrencies in 2016. Since that time onwards, he has been working as a blockchain and crypto freelancer consultant, he also worked in the crypto mining industry, and acquired knowledge in different blockchains.

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