The UK’s tax watchdog has confiscated three non-fungible tokens (NFTs) linked to a suspected tax evasion scheme which is claimed to be the first operation of its sort by a UK law enforcement body.
The NFTs were confiscated by officials from Her Majesty’s Revenue and Customs (HMRC) during an investigation into a suspected VAT (value-added tax) fraud case worth £1.4 million (€1.6 million), according to HMRC. Three people have been apprehended as suspects. They reportedly formed 250 purported bogus firms under false names in order to collect back more VAT than they were due.
HMRC claims to be the first law enforcement agency in the UK to seize NFTs. “Our first seizure of a non-fungible token serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC. We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.” Nick Sharp, HMRC’s deputy director of economic crime, said in a statement Monday.
Digital art is claimed to be represented by the three NFTs in question. Other crypto assets worth £5,000 (almost €6,000) were recovered from the accused. Because they employ blockchain to record the ownership status of digital data such as photos, NFTs have exploded in popularity, particularly in the art industry. They are fungible intangible assets that may be issued and distributed.
NFT sales exceeded $40 billion (€35 billion) in 2021, however, the digital assets are vulnerable to fraud. Regulators are also debating whether or not NFTs should be classified as digital assets. Legislative views have been a prominent regulatory concern as the technology has grown in popularity and use cases. These regulatory debates are rather typical, and they are in line with the traditional financial sector.
“While NFTs do challenge traditional concepts of possession and ownership, HMRC’s actions demonstrate that our present legal structure is capable of facilitating and supporting the continuous growth of digital ownership rights. Another alternative for HMRC may have been to confiscate the electronic equipment on which the NFTs were stored locally.”Collyer Bristow LLP partner Robin Henry stated.