HM Revenue and Customs (HMRC) recently seized non-fungible tokens (NFTs) for the first time amid fears that the digital art is increasingly attracting criminals.
The UK tax authority said it had seized three NFTs as part of an investigation into an attempt to defraud the taxman of £1.4mln.
The three people arrested were said to be using methods such as stolen identities, pre-paid phones, false addresses, invoices and pretending to be a legitimate business.
Around £5,000 in cryptocurrencies was seized alongside the NFTs as HMRC continues the investigation which involves 250 alleged fake companies.
“We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets,” said Nick Sharp, HMRC’s deputy director for economic crime, told The Telegraph.
Last month, the Financial Conduct Authority announced plans to strengthen the rules on cryptocurrency advertising, holding them to the same standards as other financial products, with estimates suggesting nearly 2.5mln people own a crypto asset in the UK.