First Bitcoin “mixer” penalized for violating anti-money laundering laws(fincen.gov)
fincen.gov
First Bitcoin “mixer” penalized for violating anti-money laundering laws
https://www.fincen.gov/news/news-releases/first-bitcoin-mixer-penalized-fincen-violating-anti-money-laundering-laws
207 comments
I wonder what this means for mixers which themselves run on blockchains (specifically thinking of Ethereum's Tornado.cash). Would they go after the developers who wrote the code and published it on the blockchain? Or would they go after the miners who run the code (knowingly or not) and process the transactions involved in laundering?
Probably the miners. This is one of the unfortunate side effects of fully decentralized networks.
That sounds to me as if going after the maker of a knife that was used in a murder if they can't find the killer.
> That sounds to me as if going after the maker of a knife that was used in a murder if they can't find the killer.
...or the maker of a pipe bomb if they can't find the bomber (or even if they can, since there aren't a lot of legitimate uses for pipe bombs).
I can't really think of any use for for a cryptocurrency mixer than as part of a scheme for obscuring the true source of some funds.
I don't think it would make sense to go after individual miners for processing transaction initiated by a mixer, just like it wouldn't make sense to go after a bank for processing a legitimate-looking transaction that was part of some kind of fraud scheme that had no awareness of.
...or the maker of a pipe bomb if they can't find the bomber (or even if they can, since there aren't a lot of legitimate uses for pipe bombs).
I can't really think of any use for for a cryptocurrency mixer than as part of a scheme for obscuring the true source of some funds.
I don't think it would make sense to go after individual miners for processing transaction initiated by a mixer, just like it wouldn't make sense to go after a bank for processing a legitimate-looking transaction that was part of some kind of fraud scheme that had no awareness of.
I can’t think of any purpose of a VPN except to obfuscate your internet history. What are you trying to hide?
> I can’t think of any purpose of a VPN except to obfuscate your internet history. What are you trying to hide?
Money laundering (obfuscating the source of money) is actually a crime and for good reason. Obfuscating your internet history is not.
Money laundering (obfuscating the source of money) is actually a crime and for good reason. Obfuscating your internet history is not.
>>Money laundering (obfuscating the source of money)
No, that is not the definition of money laundering. It does not broadly criminalize efforts to maintain financial privacy.
Money laundering means hiding the source of illegally obtained money.
No, that is not the definition of money laundering. It does not broadly criminalize efforts to maintain financial privacy.
Money laundering means hiding the source of illegally obtained money.
Yes this is correct but you're only halfway through the complete definition of money laundering. Reading this thread was starting to fry my brain due to the amount of people that think money laundering is only about concealing the origin of illegally sourced funds. It's not just about hiding proceeds. You can also use money laundering to hide clean funds from uncle Sam. Take a look at Politicians,Billionaires,The orange president himself and ask yourself why do they all pay such low taxes? The panama papers were about rich people hiding their legally(keyword)sourced funds from say...assets,properties,other investments in offshore bank accounts located in places like Seychelles and panama while setting up shell companies to avoid the tax bracket. Doing all of this is by definition money laundering. Hope this provides clarity.
>>You can also use money laundering to hide clean funds from uncle Sam.
That is NOT defined as money laundering. That is tax evasion.
That is NOT defined as money laundering. That is tax evasion.
https://www.vernitaxlaw.com/money-laundering-is-tax-evasion/
I stand corrected.
I stand corrected.
isn't it only money laundering if the funds themselves were illegally obtained? if I buy crypto with my wages from a legal job, put them through a tumbler, and then buy a dildo, why is that a problem?
It's a problem if the source of funds are obtained illegally. Using tumblers is not illegal, but if using tumblers to make 'dirty' money appear clean then that's a problem.
I use a VPN to access my work's corporate services which are not available outside of the corporate network.
This is probably the single most common use of VPN software.
This is probably the single most common use of VPN software.
why do you close the door to the toilet when you do your business there?
I use a VPN to access my home network when I'm not at home. Most businesses use it similarly to let their employees access the work network remotely. This is a far more common use of VPNs than the "cover your tracks" use (for which VPNs are usually terrible anyway).
I also sometimes use a VPN when an Internet hotspot seems shady, or provides a crappy connection in some way (spoofing DNS replies to insert advertising on NXDOMAIN, for example).
I also sometimes use a VPN when an Internet hotspot seems shady, or provides a crappy connection in some way (spoofing DNS replies to insert advertising on NXDOMAIN, for example).
That sounds like a kind of "everybody is a criminal unless proved otherwise" argument? How about arguing, bitcoin makes simple privacy the default? You don't have to be a drug dealer, to want to keep everybody else's nose out of your business.
> That sounds like a kind of "everybody is a criminal unless proved otherwise" argument? How about arguing, bitcoin makes simple privacy the default? You don't have to be a drug dealer, to want to keep everybody else's nose out of your business.
IIRC, Bitcoin doesn't make privacy the default. It's easy to trace transaction on its blockchain, hence the need for mixers if you want to obscure the origin of some cryptocurrency.
IIRC, Bitcoin doesn't make privacy the default. It's easy to trace transaction on its blockchain, hence the need for mixers if you want to obscure the origin of some cryptocurrency.
But does that identify anybody? I'm a noob here; does every bitcoin ID come with a user identifying record?
No, taint analysis is done backwards from points of transaction (Coinbase, retailers, etc) and the US government clearly does a lot of it. If you run a Bitcoin casino, the DOJ will email you asking for info about a given Bitcoin address/txn from time to time, for example, as they track the exchange of hands.
When your only tool is a hammer, you aim for the nails.
More like going after the shop owner who intentionally turns a blind eye to ongoing illegal activity on their property.
In this case the maker of the knife is the person who wrote the code. The person who did the illegal action (processed the transaction) is the miner. Or miners for multiple confirmations?
Miners are unlikely to be money transmitters under current regulatory guidance since they never "accept" money for transmission. They only verify transactions that they never have custody over.
Current guidance is that non custodial protocols are not classified as money transmitters and so are exempt from KYC/AML regulations: https://www.coincenter.org/fincens-new-cryptocurrency-guidan...
I wonder if the interpretation could change for classifying it as a money transmitter if there is an identifiable "owner" or "administrator", e.g. an account that has power to stop/upgrade the contract, or extract fee revenue in a way unprivileged accounts can not.
Looking at how ICOs were treated, I don't find it that far-fetched.
This could also be relevant to decentralized exchanges like Uniswap.
Looking at how ICOs were treated, I don't find it that far-fetched.
This could also be relevant to decentralized exchanges like Uniswap.
This is a $60 million civil penalty and finding of fact from FinCEN, the money laundering & terrorist financing authority. Harmon appears to still be facing up to 17.5 years of prison on federal criminal charges as well.
https://www.cincinnati.com/story/news/2020/02/13/bitcoin-lar...
https://www.cincinnati.com/story/news/2020/02/13/bitcoin-lar...
If you want to launder money with impunity, don't do it in crypto. Just be a megabank.
See: https://www.icij.org/investigations/fincen-files/, or Matt Taibbi's writeup of it: https://taibbi.substack.com/p/revenge-of-the-money-launderer...
See: https://www.icij.org/investigations/fincen-files/, or Matt Taibbi's writeup of it: https://taibbi.substack.com/p/revenge-of-the-money-launderer...
Or just use slot machines like everyone else.
Is this effective anymore? AFAIK nowadays chips can be tracked on an individual basis, so it'd be very hard to pull off (assuming the casino isn't in on it).
random search: https://www.protiviti.com/US-en/insights/higher-stakes-casin...
>Examples of red flags include:
>• Customer transfers chips to other individuals to cash out
>• Customer redeems chips for casino checks that amount to significantly more than the amount of funds deposited with no apparent winnings to account for the additional amount
>• Customer departs casino without cashing out chips, an activity referred to as “chip walking.”
random search: https://www.protiviti.com/US-en/insights/higher-stakes-casin...
>Examples of red flags include:
>• Customer transfers chips to other individuals to cash out
>• Customer redeems chips for casino checks that amount to significantly more than the amount of funds deposited with no apparent winnings to account for the additional amount
>• Customer departs casino without cashing out chips, an activity referred to as “chip walking.”
I feel like similar to the bank case, the key is to be a big enough high-roller that the casino helps you skirt the regulations. Tough times for the small time, mom-and-pop money launderer these days I suppose.
Not really. It's not like gambling and friends in high places are the only options when it comes to laundering. All you need is something that allows you to funnel small and untraceable revenue streams, while spending as few money as possible, through a business that looks legitimate from the outside.
Now, obviously the tax authorities around the Globe are probably far more experienced than I am when it comes to things like this, and I don't think it's a coincidence that there's governmental resistance to cryptocurrencies; they authorities are busy trying to get rid of cash already, and cryptocurrencies are additional vectors allowing anonymous transactions.
Now, obviously the tax authorities around the Globe are probably far more experienced than I am when it comes to things like this, and I don't think it's a coincidence that there's governmental resistance to cryptocurrencies; they authorities are busy trying to get rid of cash already, and cryptocurrencies are additional vectors allowing anonymous transactions.
Why do chips come into it? Isn’t the process just:
1) Insert cash into slot machine. Play through the cash for a while, losing x%
2) Cash out (machine gives you a printed ticket to take to the casino desk). Now you have a paper trail showing that you won $ from a casino, giving the money a legitimate source.
1) Insert cash into slot machine. Play through the cash for a while, losing x%
2) Cash out (machine gives you a printed ticket to take to the casino desk). Now you have a paper trail showing that you won $ from a casino, giving the money a legitimate source.
Unless you hit jackpot/777/3lemons the question will be how did you come up with the initial amount to put into the machine.
The way to launder money is to have a casino, and then give the illicit cash to random folks and have them lose at the casino.
The way to launder money is to have a casino, and then give the illicit cash to random folks and have them lose at the casino.
Based on a recent trip to Vegas, machines that accept cash are now rare.
They don't really have to be common. All you need is a single machine and a disgruntled employee looking the other way.
The most blatantly example I've seen was in Copenhagen, where small gambling dens with slot machines are pretty common. The weed dealers from Pusher Street spent an awful lot of their cash on gambling for some reason. ;)
The most blatantly example I've seen was in Copenhagen, where small gambling dens with slot machines are pretty common. The weed dealers from Pusher Street spent an awful lot of their cash on gambling for some reason. ;)
The easiest way to be above the law is to have a lot of money and give some of it to the right people.
That would probably mean politicians that would push for laws making your life easier. Like lower taxation / easier avoidance, support for complex blurry ownership structures etc. Those on top are the best bet.
Its interesting that neither US nor Europe does see anything wrong with direct monetary sponsorship of politicians before elections (on top of lobbyists which are seem to be proper legal bribing middlemen)
Its interesting that neither US nor Europe does see anything wrong with direct monetary sponsorship of politicians before elections (on top of lobbyists which are seem to be proper legal bribing middlemen)
So Bitcoin is officially money now?
Pretty sure you could be "laundering money" with any sort of asset.
It's whatever they want it to be. To FinCEN it's money. To IRS it's property.
No, it's still money to the IRS as well, just like any currency that isn't USD.
However, the tax code treats all non-USD currencies as assets for the purposes of determining when taxable events occur (as a result of differences in the exchange rate between the time the currency was acquired and when it was transacted away).
For example, you acquire 100 GBP for $100 or 10 Bitcoin for $100. Then sometime later, you buy a car for $100 but pay for it with 90 GBP or 8 Bitcoin. There are two transactions: the non-taxable acquisition of the car, and the deemed exchange of the GBP or Bitcoin into USD. Because the GBP and Bitcoin are worth more now than when you first acquired them, you have foreign exchange income and get taxed on that.
However, the tax code treats all non-USD currencies as assets for the purposes of determining when taxable events occur (as a result of differences in the exchange rate between the time the currency was acquired and when it was transacted away).
For example, you acquire 100 GBP for $100 or 10 Bitcoin for $100. Then sometime later, you buy a car for $100 but pay for it with 90 GBP or 8 Bitcoin. There are two transactions: the non-taxable acquisition of the car, and the deemed exchange of the GBP or Bitcoin into USD. Because the GBP and Bitcoin are worth more now than when you first acquired them, you have foreign exchange income and get taxed on that.
> However, the tax code treats all non-USD currencies as assets for the purposes of determining when taxable events occur (as a result of differences in the exchange rate between the time the currency was acquired and when it was transacted away).
There actually is one key difference. For most currencies, you can basically use a single exchange rate for all transactions. For bitcoin, you can't do that. Although note that one of the criteria that kicks you out of this rule is that currencies with high inflation (defined as roughly 10% annual inflation)... which would include bitcoin anyways.
There actually is one key difference. For most currencies, you can basically use a single exchange rate for all transactions. For bitcoin, you can't do that. Although note that one of the criteria that kicks you out of this rule is that currencies with high inflation (defined as roughly 10% annual inflation)... which would include bitcoin anyways.
For most currencies, you can basically use a single exchange rate for all transactions.
No, in determining f/x gain loss, you must use the exchange rate at the time of each transaction, though you get to choose FIFO or LIFO for determining that the base exchange rate is for determining gain or loss.
Generally, most businesses deal with f/x issues in one of two ways: either they have a foreign office that uses a foreign currency as its functional currency (a QBU) and process the foreign currency transaction through that office; or they have a bank handle the USD-to-foreign conversion on the day of the transaction at whatever the appropriate rate, is so there is no f/x gain/loss.
No, in determining f/x gain loss, you must use the exchange rate at the time of each transaction, though you get to choose FIFO or LIFO for determining that the base exchange rate is for determining gain or loss.
Generally, most businesses deal with f/x issues in one of two ways: either they have a foreign office that uses a foreign currency as its functional currency (a QBU) and process the foreign currency transaction through that office; or they have a bank handle the USD-to-foreign conversion on the day of the transaction at whatever the appropriate rate, is so there is no f/x gain/loss.
IRS requires Congress to declare anything specific as a currency or not, thats all it comes down to.
Common methods of laundering money have included art and soap. Neither of those are money. Except insofar as many medium of exchange is.
It doesn't need to be money to be used for money laundering.
Has been since 2013 as far as FinCEN is concerned: https://www.fincen.gov/sites/default/files/shared/FIN-2013-G...
Then it should be treated by IRS as foreign currency (with transactions under $200 exempt from reporting). Now it's treated as property, where you have to report every transaction on sched D, even buying a coffee for $2.
No. Accepting US dollars, "converting" those dollars into bitcoin, performing a mixing operation for the express purpose to make it difficult to track where those dollars went, and then sending back something worth the U.S. dollars you accepted (minus a fee), is money laundering.
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This makes me very nervous about the Monero I own. It is understandable that the government would eventually use AML against Bitcoin mixing services. But how will the government go after cryptocurrencies that have mixing and transaction obfuscation built into their protocols?
I've heard the argument that it is impossible for the US Government to regulate decentralized cryptocurrencies. FinCEN cannot force a change in the Bitcoin or Monero protocols. However it is entirely within the government's authority to regulate the users of said currencies. So I imagine the government would add onerous reporting requirements for any citizen or corporation holding privacy based coins in order to circumvent their privacy features.
I've heard the argument that it is impossible for the US Government to regulate decentralized cryptocurrencies. FinCEN cannot force a change in the Bitcoin or Monero protocols. However it is entirely within the government's authority to regulate the users of said currencies. So I imagine the government would add onerous reporting requirements for any citizen or corporation holding privacy based coins in order to circumvent their privacy features.
If you report your earnings when you sell I don't know if there's an issue. I think the government is going to be losing if they want to go after people before they cash out. Technology will always be miles ahead of bureaucracy.
not sure what use your cashed out earnings will be once they confiscate them after they lock you up
governments have years to come after you (and in many countries: the rest of your life)
governments have years to come after you (and in many countries: the rest of your life)
Lock you up for what? Using Monero doesn't mean you're a criminal. Am I misunderstanding, or are you implying that caring about my privacy is a criminal act, and that paying taxes on perfectly legitimate income is (or would become) illegal?
engaging in money laundering? who knows
that's the point: even if you're not doing anything shady you don't really know what sort of long term risk you're taking on if you're using something that looks to governments as if it's tailor made for money laundering
that's the point: even if you're not doing anything shady you don't really know what sort of long term risk you're taking on if you're using something that looks to governments as if it's tailor made for money laundering
I guess I shouldn't use a VPN, because that might look like I have something to hide. Using cash? No way! If I use cash I might look like a criminal. Leave my cell phone at home? No way, I wouldn't want to be suspicious, would I? I need the government to surveil me every second of every day, because if they don't, maybe I'm a criminal.
At what point do you say enough is enough, and embrace the idea that you should minimize your digital footprint whenever possible?
At what point do you say enough is enough, and embrace the idea that you should minimize your digital footprint whenever possible?
all of your examples also have some level of risk, which is going to be essentially negligible
a technology specifically designed to allow untracable electronic monetary transactions is going to be many orders of magnitude riskier to use
a technology specifically designed to allow untracable electronic monetary transactions is going to be many orders of magnitude riskier to use
Actually, use it to reduce risk. If you have no visible wealth you are largely immune to extortion, kidnapping, fraud, and robbery.
The DOJ just released a report that explicitly says that use of privacy coins like Monero is a "high risk activity" and "indicative of possible criminal conduct".
https://cointelegraph.com/news/doj-says-use-of-privacy-coins...
https://cointelegraph.com/news/doj-says-use-of-privacy-coins...
So is using cash. Lots of things could be 'indicative of possible criminal conduct'. Thankfully, the US operates under presumed innocence until proven guilty. This attitude of people claiming you shouldn't seek privacy lest you 'look like a criminal' is disappointing. I expect better from HN.
> This attitude of people claiming you shouldn't seek privacy lest you 'look like a criminal' is disappointing. I expect better from HN.
"Indicative of possible criminal conduct" means more than just "looking like a criminal." That means, if you were to be arrested for something, your use of Monero might count as evidence that you were involved in criminal activity. Combined with enough other circumstantial evidence, it might even contribute to your conviction, even without a smoking gun. This would depend on the judge and jury, but it's worth noting.
I don't think it's "better" for people to ignore the risks of certain behaviors and pretend those risks don't exist. You apparently care a lot about optimizing a particular dimension: privacy. Recognize that other people have different mixes of priorities. Not everyone must agree with yours. Some people who disagree with you might even comment on this very site, as offensive as that is.
"Indicative of possible criminal conduct" means more than just "looking like a criminal." That means, if you were to be arrested for something, your use of Monero might count as evidence that you were involved in criminal activity. Combined with enough other circumstantial evidence, it might even contribute to your conviction, even without a smoking gun. This would depend on the judge and jury, but it's worth noting.
I don't think it's "better" for people to ignore the risks of certain behaviors and pretend those risks don't exist. You apparently care a lot about optimizing a particular dimension: privacy. Recognize that other people have different mixes of priorities. Not everyone must agree with yours. Some people who disagree with you might even comment on this very site, as offensive as that is.
If you're using monero correctly, no one should know you own any.
How can one buy Monero anonymously? Let's say I have 100 USD and a bank card, what's the step by step process? Does this also work with 1 000 000 USD?
Find someone to sell you Monero. Give them $1mm and your address. Receive Monero.
Alternatively, buy bitcoin through your bank. Use it to buy monero on an exchange.
Alternatively, wait 6-9 months and exchange your btc with xmr using an atomic swap, on-chain.
Alternatively, buy bitcoin through your bank. Use it to buy monero on an exchange.
Alternatively, wait 6-9 months and exchange your btc with xmr using an atomic swap, on-chain.
> Find someone to sell you Monero. Give them $1mm and your address. Receive Monero.
How do you ensure this person does not know who you are, whilst also ensuring they don't steal your $1m?
> Alternatively, buy bitcoin through your bank. Use it to buy monero on an exchange.
Difficult to do this anonymously.
How do you ensure this person does not know who you are, whilst also ensuring they don't steal your $1m?
> Alternatively, buy bitcoin through your bank. Use it to buy monero on an exchange.
Difficult to do this anonymously.
Maybe some sort of multisig with a trusted escrow service involved? But then at that point could the escrow be liable?
I'm not sure how you are going to stay anonymous buying anything with a bank card.
Using cash then localmoneros or bisq would be fine.
Using cash then localmoneros or bisq would be fine.
This answer is completely grounded in fact, so I vouched for it. Even without the bank card number itself, many places used tokenized versions of the card number for tracking purposes.
I think he was lamenting the loss of priority of privacy within the general hn makeup.
If everyone took your advice no one would protest, write a political comment against anyone in power, take any position that isn't accepted by all and be ready to drop that opinion when society shifts.
You live in a free society. Use your freedom or risk losing it.
If everyone took your advice no one would protest, write a political comment against anyone in power, take any position that isn't accepted by all and be ready to drop that opinion when society shifts.
You live in a free society. Use your freedom or risk losing it.
What is my advice that would lead to this tragic outcome? I'm rereading it and I don't see it. Do you mean my advice to be respectful of individual people who disagree with you?
Privacy has never been more important to the aggregate HN commenter than it is today. Moreover, nothing I said enjoins people from making political statements or protests.
Privacy has never been more important to the aggregate HN commenter than it is today. Moreover, nothing I said enjoins people from making political statements or protests.
Would you say same thing for using encrypted communication app like Telegram, PGP?
Perhaps not. Private communication is more central to our national values than customized money. That's why only one of those two things is protected by the constitution. That being said, I don't think they'd really get far with such a rule, since any prosecution based on it would be easily challenged on constitutional grounds. So we will probably never find out what in fact I would say about it.
If you're arrested for something, your possession of a pry bar might count as evidence you were involved in criminal activity
> "Indicative of possible criminal conduct" means more than just "looking like a criminal." That means, if you were to be arrested for something, your use of Monero might count as evidence that you were involved in criminal activity. Combined with enough other circumstantial evidence, it might even contribute to your conviction, even without a smoking gun. This would depend on the judge and jury, but it's worth noting.
A bigger issue might be if it counts as "probable cause" to get a warrant. Seizure of records and computers would put a crimp in anyone's day, even with no conviction or even an arrest.[0] Heck, even if all it does is in practical terms is to raise the odds of an IRS audit a bit, or raise the odds of an audit becoming a criminal investigation (by being considered a "badge of fraud"[1]), that would be enough to squelch adoption.
[0] Maybe Steve Jackson Games should start working on a "Cryptopunk" GURPS module and get raided[2] again: http://www.sjgames.com/SS/
[1] https://en.m.wikipedia.org/wiki/Fraudulent_conveyance
[2] Holy crapoly, that was 30 years ago. Damn, I feel old.
A bigger issue might be if it counts as "probable cause" to get a warrant. Seizure of records and computers would put a crimp in anyone's day, even with no conviction or even an arrest.[0] Heck, even if all it does is in practical terms is to raise the odds of an IRS audit a bit, or raise the odds of an audit becoming a criminal investigation (by being considered a "badge of fraud"[1]), that would be enough to squelch adoption.
[0] Maybe Steve Jackson Games should start working on a "Cryptopunk" GURPS module and get raided[2] again: http://www.sjgames.com/SS/
[1] https://en.m.wikipedia.org/wiki/Fraudulent_conveyance
[2] Holy crapoly, that was 30 years ago. Damn, I feel old.
> Lots of things could be 'indicative of possible criminal conduct'.
Deliberately hiding the origin of funds is itself criminal conduct, though. It's true that AML statutes tend to be hyperspecific, because it's a difficult area to regulate. So areas like crytocurrency mixing are gray and uncertain even among law enforcement lawyers. It's not true, however, that there is an inherent right to unrestricted private transfer of money.
Bascially, the statement you're reading is not saying "Mixing is probably illegal because the money must have been illegal to begin with". It's saying that "Mixing is probably money laundering on its face, no matter where the money came from."
At some point governments are going to need to step in and clarify this with laws. But don't fool yourself: Crypto mixers are going to end up being subject to effectively the same reporting requirements that banks are. What you want (perfect financial privacy) you can't have, sorry. That ship sailed decades ago.
Deliberately hiding the origin of funds is itself criminal conduct, though. It's true that AML statutes tend to be hyperspecific, because it's a difficult area to regulate. So areas like crytocurrency mixing are gray and uncertain even among law enforcement lawyers. It's not true, however, that there is an inherent right to unrestricted private transfer of money.
Bascially, the statement you're reading is not saying "Mixing is probably illegal because the money must have been illegal to begin with". It's saying that "Mixing is probably money laundering on its face, no matter where the money came from."
At some point governments are going to need to step in and clarify this with laws. But don't fool yourself: Crypto mixers are going to end up being subject to effectively the same reporting requirements that banks are. What you want (perfect financial privacy) you can't have, sorry. That ship sailed decades ago.
> But don't fool yourself: Crypto mixers are going to end up being subject to effectively the same reporting requirements that banks are.
I'm sort of amazed they didn't outlaw mixers ages ago, however
> What you want (perfect financial privacy) you can't have, sorry. That ship sailed decades ago.
Perhaps that's true in principle, just as it's true to say obtaining (insert illicit drug of choice here) in perfect safety from the law enforcement agencies is not possible. The USA can only shut down USA mixers. The only way to deal with mixers operating outside of USA law is to prosecute the USA citizen sending his money to a mixer. That is orders of magnitude harder because they can't know if a newly minted bitcoin address is owned by a mixer, or belongs to a USA citizen.
It may not be perfect, but given one of bitcoin's niche's is a payment system for illegal activities that are already very much imperfect, the protection offers is undoubtedly good enough.
I'm sort of amazed they didn't outlaw mixers ages ago, however
> What you want (perfect financial privacy) you can't have, sorry. That ship sailed decades ago.
Perhaps that's true in principle, just as it's true to say obtaining (insert illicit drug of choice here) in perfect safety from the law enforcement agencies is not possible. The USA can only shut down USA mixers. The only way to deal with mixers operating outside of USA law is to prosecute the USA citizen sending his money to a mixer. That is orders of magnitude harder because they can't know if a newly minted bitcoin address is owned by a mixer, or belongs to a USA citizen.
It may not be perfect, but given one of bitcoin's niche's is a payment system for illegal activities that are already very much imperfect, the protection offers is undoubtedly good enough.
EDIT: I'm wrong please disregard.
You can have it. You just need to do everything in cash and not use the banking system. Of course, there's a lot of advantages to the banking system... But you can still use things like safety deposit boxes for storage, gold to help protect against inflation, etc.
You can have it. You just need to do everything in cash and not use the banking system. Of course, there's a lot of advantages to the banking system... But you can still use things like safety deposit boxes for storage, gold to help protect against inflation, etc.
AML reporting requirements cover cash transfers too, though. Yes, there are more holes in the protocols because of the messiness of the medium (broadly it's the same thing crypto regulation would face), but in general MANY people who would have to touch that cash you're hoarding are required to report large transfers.
Money laundering is a crime, all by itself. It doesn't matter where the money comes from or what form it takes. The spirit behind AML legislation, long established, is that the government has the right to see where money is held and to whom it is transferred.
Minutiae about mechanism might appeal to software nerds, but it doesn't address the underlying issue. This fight was fought, and lost, more than half a century ago.
Money laundering is a crime, all by itself. It doesn't matter where the money comes from or what form it takes. The spirit behind AML legislation, long established, is that the government has the right to see where money is held and to whom it is transferred.
Minutiae about mechanism might appeal to software nerds, but it doesn't address the underlying issue. This fight was fought, and lost, more than half a century ago.
You can't do everything in cash anonymously, at least not legally, because large cash transactions are subject to similar laws and require the business receiving the cash to identify you and report the transaction - e.g. Form 8300 in USA.
Huh. I'm quite familiar with the banking side of AML having worked at one. But I was completely unaware of this.
>>Deliberately hiding the origin of funds is itself criminal conduct, though.
No, money laundering is deliberately hiding the origins of the proceeds of crime. Making an effort to maintain financial privacy is not in itself illegal.
>>It's saying that "Mixing is probably money laundering on its face, no matter where the money came from."
No, money laundering is by definition hiding the origins of illegally obtained money. If the money is not the proceeds of criminal enterprise, then hiding its origins is not, by definition, money laundering.
Exercising privacy-protection with respect to legally obtained money may be illegal, or with new laws be made illegal, but it does not and will not ever fall under the definition of money laundering, as that is not the definition of money laundering.
No, money laundering is deliberately hiding the origins of the proceeds of crime. Making an effort to maintain financial privacy is not in itself illegal.
>>It's saying that "Mixing is probably money laundering on its face, no matter where the money came from."
No, money laundering is by definition hiding the origins of illegally obtained money. If the money is not the proceeds of criminal enterprise, then hiding its origins is not, by definition, money laundering.
Exercising privacy-protection with respect to legally obtained money may be illegal, or with new laws be made illegal, but it does not and will not ever fall under the definition of money laundering, as that is not the definition of money laundering.
Ok, you aren't wrong, but let's try not to be too naive - unluckily what's good for you (privacy, flexibility, speed, ...) is good as well for the "bad" guys.
I guess that the final question will be if it's used more for "good" or for "bad" purposes (or maybe just if the amount of "bad" purposes surpasses a certain acceptable level).
(same thing about cash - I think that most governments keep introducing stricter rules about cash withdrawals/deposits/transfers)
I guess that the final question will be if it's used more for "good" or for "bad" purposes (or maybe just if the amount of "bad" purposes surpasses a certain acceptable level).
(same thing about cash - I think that most governments keep introducing stricter rules about cash withdrawals/deposits/transfers)
The bad guys can also be IN the government. When the government consistently omits threats from state bodies in its risk analyses, then the public tends to overlook that danger and heed, or at least not vigorously oppose, calls by the government to reduce privacy and increase surveillance.
> The bad guys can also be IN the government.
Yes, possible, focus on the "can/might". In general I would say that it's less likely (on the other hand there will always be 100% chances of the opposite, meaning that there will always be N bad citizens brainstorming about how to use "the system"/"any system" for their own advantage).
> When the government consistently omits threats from state bodies in its risk analyses, then the public tends to overlook that danger and ...
Well, it can be true (meaning that in general people are probably more prone to accept compromises when they feel threatened), but such a general discussion is in my opinion out of context here. Monero was designed to handle transactions in a way that pushes privacy to the extremes, unluckily at the same time the same mechanism can be used as well by criminals.
Personally I think that "currently" the ones benefiting of the features offered by a cryptocurrency like Monero are mostly criminals as I don't think that most people have a strong need for highly-private transactions (might change in the future). Monero's other features of flexibility/access/etc... (to e.g. be able to trade in 3rd world countries without the need to have a bank account) are already offered by other cryptocurrencies.
Yes, possible, focus on the "can/might". In general I would say that it's less likely (on the other hand there will always be 100% chances of the opposite, meaning that there will always be N bad citizens brainstorming about how to use "the system"/"any system" for their own advantage).
> When the government consistently omits threats from state bodies in its risk analyses, then the public tends to overlook that danger and ...
Well, it can be true (meaning that in general people are probably more prone to accept compromises when they feel threatened), but such a general discussion is in my opinion out of context here. Monero was designed to handle transactions in a way that pushes privacy to the extremes, unluckily at the same time the same mechanism can be used as well by criminals.
Personally I think that "currently" the ones benefiting of the features offered by a cryptocurrency like Monero are mostly criminals as I don't think that most people have a strong need for highly-private transactions (might change in the future). Monero's other features of flexibility/access/etc... (to e.g. be able to trade in 3rd world countries without the need to have a bank account) are already offered by other cryptocurrencies.
>>In general I would say that it's less likely
I would say the potential risks from the state are much more extreme, even if they are less likely to materialize.
>>Monero are mostly criminals as I don't think that most people have a strong need for highly-private transactions
Cryptocurrencies right now are largely unusable due to them actively compromising their users' privacy.
Crypto users are aware of this and their attempts to cover their digital tracks makes use of crypto cumbersome.
Privacy-protected crypto solves this.
I would say the potential risks from the state are much more extreme, even if they are less likely to materialize.
>>Monero are mostly criminals as I don't think that most people have a strong need for highly-private transactions
Cryptocurrencies right now are largely unusable due to them actively compromising their users' privacy.
Crypto users are aware of this and their attempts to cover their digital tracks makes use of crypto cumbersome.
Privacy-protected crypto solves this.
There are many ways to account for this in a risk-based approach however. Asking for basic information about a customer's occupation and source of funds (as is common when opening a bank account) can adequately address ML/TF risks. You don't see exchanges freaking out over other higher-risk activities like onboarding PEPs, but they can do this with proper risk controls.
https://www.perkinscoie.com/en/news-insights/anti-money-laun...
https://www.perkinscoie.com/en/news-insights/anti-money-laun...
It also says that use of such coins is not necessarily for use in or proof of crime.
In reference to companies accepting it, not individual users. Come on man.
“Companies that choose to offer AEC products should consider the increased risks of money laundering and financing of criminal activity, and should evaluate whether it is possible to adopt appropriate AML/CFT measures to address such risks.”
“Companies that choose to offer AEC products should consider the increased risks of money laundering and financing of criminal activity, and should evaluate whether it is possible to adopt appropriate AML/CFT measures to address such risks.”
Governments could certainly compel exchanges to not list Monero or other privacy coins.
But even if they compelled users to list addresses of the coins they own, the nature of Monero makes it very redundant. It would be ineffective and a waste of time, and it wouldn't stop users from exchanging it.
But even if they compelled users to list addresses of the coins they own, the nature of Monero makes it very redundant. It would be ineffective and a waste of time, and it wouldn't stop users from exchanging it.
Creator of the Breaking Monero series and a compliance analyst at a cryptocurrency OTC desk here.
This mixer was penalized for running an unlicensed MSB. This is far more about that then it is about banning privacy technologies generally. For traditional Bitcoin mixers as in this case, someone receives money from users and then transmits money to many users. This is money transmission and requires registration with FinCEN and sometimes requires registration with states (though some states have exemptions for completely crypto to crypto transmission that doesn't touch USD or other fiat).
Mixing in this case is interactive where there is a clear money transmitter. In Monero's case, the ring signature "mixing" (mixing is a terrible/misleading way to refer to ring signatures) is non-interactive, and there is no intermediary (eg: a mixer) acting as a money transmitter. Thus, there is nothing to fear from this specific enforcement action.
I'm happy to answer other questions as well. But for money transmission to occur, an intermediary needs to accept customer funds. For a Monero transfer, there is no intermediary. Someone could build an MSB on Monero itself which would require registration, but using Monero to send funds directly to a merchant for one's own purchase, for example, is not money transmission.
This mixer was penalized for running an unlicensed MSB. This is far more about that then it is about banning privacy technologies generally. For traditional Bitcoin mixers as in this case, someone receives money from users and then transmits money to many users. This is money transmission and requires registration with FinCEN and sometimes requires registration with states (though some states have exemptions for completely crypto to crypto transmission that doesn't touch USD or other fiat).
Mixing in this case is interactive where there is a clear money transmitter. In Monero's case, the ring signature "mixing" (mixing is a terrible/misleading way to refer to ring signatures) is non-interactive, and there is no intermediary (eg: a mixer) acting as a money transmitter. Thus, there is nothing to fear from this specific enforcement action.
I'm happy to answer other questions as well. But for money transmission to occur, an intermediary needs to accept customer funds. For a Monero transfer, there is no intermediary. Someone could build an MSB on Monero itself which would require registration, but using Monero to send funds directly to a merchant for one's own purchase, for example, is not money transmission.
I don't necessarily disagree with you that the specifics of this case may not be exactly applicable to Monero. However, I think people are being woefully naive if they think that the US Government will be OK with people sending large sums of money anonymously. Whether it be through finding existing laws that can be applied, or just flat out changing the law to explicitly ban these types of transactions, I can guarantee that when people think they have found a technical loophole the law usually comes down on the side of "does what you're doing constitute behavior that the original legislation was meant to prohibit". Just look at what happened with Aereo [1], I think the same thing will (at least eventually) happen with cryptocurrencies where the ledger isn't fully traceable.
[1] https://en.wikipedia.org/wiki/Aereo
[1] https://en.wikipedia.org/wiki/Aereo
Indeed, it wouldn’t take much for them to legislate to make the whole ring signature mechanism illegal.
Or you just can't exchange crypto currencies against dollars because the finance industry is already regulated and has to follow the rules.
All really has to happen is to make ACH transfers to cryptocurrency exchanges illegal. Banks will very happily comply with blocking those transactions.
You could just buy and sell them for cash, you don't need banks for that
Depends on the country but if you exchange money you have to comply with regulatory rules.
Rules are only interesting when it's likely that you can be forced to follow them. In this case, they're not germane.
>I'm happy to answer other questions as well.
>This is money transmission and requires registration with FinCEN
Could you clarify the practical constraints on this assertion? If I am an alien living on the moon and connected to the Internet with lasers, who is enforcing any "requirement" and how?
>This is money transmission and requires registration with FinCEN
Could you clarify the practical constraints on this assertion? If I am an alien living on the moon and connected to the Internet with lasers, who is enforcing any "requirement" and how?
Is this legal advice about the definition of "money transmitter"? It sure reads that way.
Obviously not legal advice, but FinCEN's guidance is quite easy to follow here:
https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20...
> Providers of anonymizing services, commonly referred to as “mixers” or “tumblers,” are either persons that accept CVCs and retransmit them in a manner designed to prevent others from tracing the transmission back to its source (anonymizing services provider), or suppliers of software a transmittor would use for the same purpose (anonymizing software provider).
> An anonymizing services provider is a money transmitter under FinCEN regulations. The added feature of concealing the source of the transaction does not change that person’s status under the BSA.
> An anonymizing software provider is not a money transmitter. FinCEN regulations exempt from the definition of money transmitter those persons providing “the delivery, communication, or network access services used by a money transmitter to support money transmission services.” This is because suppliers of tools (communications, hardware, or software) that may be utilized in money transmission, like anonymizing software, are engaged in trade and not money transmission.
Another resource: https://www.perkinscoie.com/en/news-insights/anti-money-laun...
https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20...
> Providers of anonymizing services, commonly referred to as “mixers” or “tumblers,” are either persons that accept CVCs and retransmit them in a manner designed to prevent others from tracing the transmission back to its source (anonymizing services provider), or suppliers of software a transmittor would use for the same purpose (anonymizing software provider).
> An anonymizing services provider is a money transmitter under FinCEN regulations. The added feature of concealing the source of the transaction does not change that person’s status under the BSA.
> An anonymizing software provider is not a money transmitter. FinCEN regulations exempt from the definition of money transmitter those persons providing “the delivery, communication, or network access services used by a money transmitter to support money transmission services.” This is because suppliers of tools (communications, hardware, or software) that may be utilized in money transmission, like anonymizing software, are engaged in trade and not money transmission.
Another resource: https://www.perkinscoie.com/en/news-insights/anti-money-laun...
> Providers of anonymizing services, commonly referred to as “mixers” or “tumblers,” are either persons that accept CVCs and retransmit them in a manner designed to prevent others from tracing the transmission back to its source (anonymizing services provider), or suppliers of software a transmittor would use for the same purpose (anonymizing software provider).
How does that not make Monero itself liable as an "anonymizing software provider"?
How does that not make Monero itself liable as an "anonymizing software provider"?
Well, you see what FinCEN says about those:
> An anonymizing software provider is not a money transmitter. FinCEN regulations exempt from the definition of money transmitter those persons providing “the delivery, communication, or network access services used by a money transmitter to support money transmission services.” This is because suppliers of tools (communications, hardware, or software) that may be utilized in money transmission, like anonymizing software, are engaged in trade and not money transmission.
In simple terms, the Monero developers are providing software (the Monero network, nodes, and wallet software) that can be used for money transmission, but the developers do not need to register as MSBs unless they also have a side company that conducts money transmission.
> An anonymizing software provider is not a money transmitter. FinCEN regulations exempt from the definition of money transmitter those persons providing “the delivery, communication, or network access services used by a money transmitter to support money transmission services.” This is because suppliers of tools (communications, hardware, or software) that may be utilized in money transmission, like anonymizing software, are engaged in trade and not money transmission.
In simple terms, the Monero developers are providing software (the Monero network, nodes, and wallet software) that can be used for money transmission, but the developers do not need to register as MSBs unless they also have a side company that conducts money transmission.
Nothing posted on a pseudo-anonymous internet forum is ever legal advice.
Have you paid for this advice? Are you a client? Was this directed at you?
If not then this is opinion.
If not then this is opinion.
> Have you paid for this advice?
Payment is generally not required to establish an attorney-client relationship.
> Are you a client? Was this directed at you?
No, but I'm looking at it from the perspective of the poster it was directed at.
Payment is generally not required to establish an attorney-client relationship.
> Are you a client? Was this directed at you?
No, but I'm looking at it from the perspective of the poster it was directed at.
At the very least, wouldn't an attorney be required to establish an attorney-client relationship?
BTW here's some legal advice: don't jaywalk. I think it's illegal in some places.
BTW here's some legal advice: don't jaywalk. I think it's illegal in some places.
No, a preexisting attorney-client relationship isn't always required. Offering advice pertaining to the application of laws or regulations to a specific person's facts is generally considered offering legal advice.
Some states regulate this very heavily, others don't care as much. Generally, California tends to regulate this pretty heavily for lawyers (for purposes of creating an attorney-client relationships that can subject them to malpractice claims) but otherwise not at all for non-lawyers unless they specifically hold themselves out to be in the business of providing legal advice (very common with immigration issues). So, offering random advice on the internet wouldn't be an issue for a non-lawyer (but could be one for a practicing lawyer if they get too specific).
Some states regulate this very heavily, others don't care as much. Generally, California tends to regulate this pretty heavily for lawyers (for purposes of creating an attorney-client relationships that can subject them to malpractice claims) but otherwise not at all for non-lawyers unless they specifically hold themselves out to be in the business of providing legal advice (very common with immigration issues). So, offering random advice on the internet wouldn't be an issue for a non-lawyer (but could be one for a practicing lawyer if they get too specific).
My understanding (that is, I was told by a lawyer I know) is that if the person receiving the information thinks there's an attorney-client relationship, there is. Presumably there's some defense of "a reasonable person wouldn't have thought that", but this is why lawyers tend to be very diligent about saying "this is not legal advice".
[deleted]
Legal advice is regulated where it means applying the law to the specific facts of another person's case, because that is considered the "practice" of law.
Applying the law to a generic set of facts, or to your own facts, is fine.
Applying the law to a generic set of facts, or to your own facts, is fine.
I wholeheartedly agree with your assessment. But at the end of the day, this defense is predicated on making a US federal judge understand all those technical details.
I think the most commonsense reform is to have computer crime handled by specialized courts, much the same as tax law currently is. These domains are simply too complex to have them handled by legal generalists, who are expected to learn it all from first principles on each and every case.
I think the most commonsense reform is to have computer crime handled by specialized courts, much the same as tax law currently is. These domains are simply too complex to have them handled by legal generalists, who are expected to learn it all from first principles on each and every case.
What do you think this is? Some kind of meritocracy?
Can't tax law cases eventually make it to the Supreme Court anyway?
Anything can go to the supreme court if you try hard enough: https://www.law.cornell.edu/wex/mandamus
But also yes, the Supreme Court has discretionary appeals jurisdiction over any federal case.
But also yes, the Supreme Court has discretionary appeals jurisdiction over any federal case.
>This mixer was penalized for running an unlicensed MSB.
In addition to laundering money. But they were charged with money laundering too.
"COUNT ONE (Conspiracy To Launder Monetary Instruments)"
https://www.justice.gov/opa/press-release/file/1249026/downl...
In addition to laundering money. But they were charged with money laundering too.
"COUNT ONE (Conspiracy To Launder Monetary Instruments)"
https://www.justice.gov/opa/press-release/file/1249026/downl...
>>But for money transmission to occur, an intermediary needs to accept customer funds. For a Monero transfer, there is no intermediary. Someone could build an MSB on Monero itself which would require registration, but using Monero to send funds directly to a merchant for one's own purchase, for example, is not money transmission.
They are huge fines and decades in jail sentences at play in money laundering. How sure are you? Not that anyone is going to do X or Y because someone in a thread said so, but things aren't as simple sometimes. Add the potential penalties and...
They are huge fines and decades in jail sentences at play in money laundering. How sure are you? Not that anyone is going to do X or Y because someone in a thread said so, but things aren't as simple sometimes. Add the potential penalties and...
Don't take my word for it. Read what FinCEN says directly:
https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20...
https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20...
This.
It should also be noted that government does not seem to know how to deal with privacy oriented coins ( ref#1 - discussion of current regime for crypto as seen by US AG ). That said, they seem to suggest ( page 41 ) that using Monero is inherently risky and prone to illicit activity and businesses allowing its use "should consider the increased risks". Knowing how banks read those types of documents, you can safely bet banks will simply refuse to bank anyone if there is even a whiff of transaction with Monero, Zcash, Dash.
Ref#1:https://www.justice.gov/ag/page/file/1326061/download
edit: Disclaimer. Do not be an idiot. I am just a guy on the internet. If in doubt, hire an actual lawyer.
It should also be noted that government does not seem to know how to deal with privacy oriented coins ( ref#1 - discussion of current regime for crypto as seen by US AG ). That said, they seem to suggest ( page 41 ) that using Monero is inherently risky and prone to illicit activity and businesses allowing its use "should consider the increased risks". Knowing how banks read those types of documents, you can safely bet banks will simply refuse to bank anyone if there is even a whiff of transaction with Monero, Zcash, Dash.
Ref#1:https://www.justice.gov/ag/page/file/1326061/download
edit: Disclaimer. Do not be an idiot. I am just a guy on the internet. If in doubt, hire an actual lawyer.
Gemini exchange seems to have no difficulty with banking. Coinbase seems to have no difficulty with banking.
You are not wrong, but the link I listed is relatively recent. Things like that rarely change that fast. Not to mention, both of your examples likely have working compliance units ( and FinCEN wants exchanges to be compliant ). The mixer FinCEN busted didn't and wasn't.
Also, again, I am not a lawyer. In other words, I fully accept the possibility that I am wrong.
However, I do know how conservative banks are.
Also, again, I am not a lawyer. In other words, I fully accept the possibility that I am wrong.
However, I do know how conservative banks are.
Kraken just started banking in the U.S. too, and they even list Monero.
Notably, Coinbase does not handle Monero.
I understand the argument with interactiveness, but even so, do you think it'd be unreasonable to think that Monero miners/node operators could be targeted?
Do you see CoinJoins as implemented by Samourai and Wasabi to be possibly liable in the same way?
If transaction obfuscation violates laws regarding trackability of financial transactions, then and cryptocurrency that builds obfuscation into their protocols has a product that is inherently illegal. It would be no different than building any feature into software that violates the law, say DRM circumvention as an example.
However I don't know if obfuscation alone would be considered illegal: In this case, the services went beyond merely facilitating obfuscation. They were not properly registered as a Money Services Business, and they specifically marketed their services for use in illicit transactions. Going back to the DRM example, it's the difference between software that has legitimate uses but could be used to break DRM (Think binary editors to crack a video game's DRM) as compared to advertising your binary editor not as a general purpose tool, but for that specific illegal purpose.
(Disregarding, for a moment, the philosophical issues surrounding the use of DRM, on which I tend to lean more towards less use of DRM)
However I don't know if obfuscation alone would be considered illegal: In this case, the services went beyond merely facilitating obfuscation. They were not properly registered as a Money Services Business, and they specifically marketed their services for use in illicit transactions. Going back to the DRM example, it's the difference between software that has legitimate uses but could be used to break DRM (Think binary editors to crack a video game's DRM) as compared to advertising your binary editor not as a general purpose tool, but for that specific illegal purpose.
(Disregarding, for a moment, the philosophical issues surrounding the use of DRM, on which I tend to lean more towards less use of DRM)
We also have the prior art of: cash.
In a way having Monero is like having large piles of cash. As long as you can prove they came from legitimate sources and that all taxes on them were paid, you have nothing to worry about.
You also need to be careful not to deny in an official way that you own Monero if that is the case.
You also need to be careful not to deny in an official way that you own Monero if that is the case.
No, there is another risk here. At some point Monero could be dropped by exchanges due to regulatory pressures or even perceived exposure, since every transaction involving it is untraceable they could find it impossible to implement future tracking and reporting requirements. This sort of thing is not unprecedented, just look at Poloniex (which never dealt in actual dollars, only Tethers) who finally gave up and banned all US custmers. This, of course, would devalue the currency.
>At some point Monero could be dropped by exchanges due to regulatory pressures or even perceived exposure
Could be argued that it hasn't yet been picked up by exchanges for this reason.
Also, looking at the more corporate friendly Zcash which was dropped by Coinbase UK [0]. Likely from pressure from their banking partner ClearBank.
These coins won't last without a mechanism to covert to fiat.
[0] - https://www.coindesk.com/coinbase-uk-dropping-support-for-cr...
Could be argued that it hasn't yet been picked up by exchanges for this reason.
Also, looking at the more corporate friendly Zcash which was dropped by Coinbase UK [0]. Likely from pressure from their banking partner ClearBank.
These coins won't last without a mechanism to covert to fiat.
[0] - https://www.coindesk.com/coinbase-uk-dropping-support-for-cr...
> Could be argued that it hasn't yet been picked up by exchanges for this reason.
Monero is traded at Kraken, a U.S.-based exchange. Kraken even has a banking charter in Wyoming.
Monero is traded at Kraken, a U.S.-based exchange. Kraken even has a banking charter in Wyoming.
On-chain atomic swaps with Bitcoin reduces fiat exchange to btcusd exchange.
Look at Japan for an example of a country (there are probably others?) where exchanges are not allowed to list or trade Monero, Zcash et al.
Here's what a law firm says about privacy coins:
https://www.perkinscoie.com/images/content/2/3/v3/237411/Per...
TL;DR: I wouldn't be nervous if I was you.
https://www.perkinscoie.com/images/content/2/3/v3/237411/Per...
TL;DR: I wouldn't be nervous if I was you.
Mixing and transaction obfuscation are built into good old fashioned cash, right? I wonder what the legal basis is there, and how that could be applied to a cryptocurrency with cash-like properties.
Not really; every federal reserve note has a serial number. People just assumed that no one had the incentive or ability to track them.
What about coins then? Those don't have any serial numbers or anything like that, and there's some legal basis that makes that "untrackable" currency legal.
[deleted]
It's not an assumption, normally people DON'T keep track of any of this. When I go to the bar and buy a beer with $10, the bar tender is for sure NOT writing down the serial number on the bill, checking my ID, and forwarding that information off to the FBI. The $10 can sit for a day or two in the till, and then be returned to another customer as change. In this way it continues its anonymous passage through the economy.
The Department of Justice released an enforcement memo just last week that states merely using Monero, zcash, etc. are treated as criminally suspicious :(
I suppose the liability, if so broadly interpreted, would fall on the miners, but only if it could be proven that they won a block that contained a transaction used for illicit purposes.
The interpretation that somebody is liable for mixing at all, with no illicit use proven within the transactions, is probably questionable. The miners are also not receiving dirty money as compensation, so even more so.
And even with illicit use shown, laundering can happen with just about anything you can buy and sell, so, unless every retail store is doing KYC, then they could also be exposed to such liability.
Above all, I don't know if coercion is a successful long-term strategy for defeating privacy coins. Even for criminals, the value must tie back to average citizens purchasing it from them, and even with no enforcement they would not want to be part of that, and the value would collapse. If a privacy coin does have value, it reflects political fears of the average citizen, and aggressive enforcement unaligned with common values may actually increase its value.
The dollar system is the most valuable partially because it does enforce common values, and permits all else within. But obviously not everybody believes that this is guaranteed in the future.
The interpretation that somebody is liable for mixing at all, with no illicit use proven within the transactions, is probably questionable. The miners are also not receiving dirty money as compensation, so even more so.
And even with illicit use shown, laundering can happen with just about anything you can buy and sell, so, unless every retail store is doing KYC, then they could also be exposed to such liability.
Above all, I don't know if coercion is a successful long-term strategy for defeating privacy coins. Even for criminals, the value must tie back to average citizens purchasing it from them, and even with no enforcement they would not want to be part of that, and the value would collapse. If a privacy coin does have value, it reflects political fears of the average citizen, and aggressive enforcement unaligned with common values may actually increase its value.
The dollar system is the most valuable partially because it does enforce common values, and permits all else within. But obviously not everybody believes that this is guaranteed in the future.
Money laundering does not require the actual source of the money be illegal. You can fall foul of 18 USC 1956 through a.2.B.ii route, where merely deliberately concealing the source or destination is punishable by a fine for the entire amount concealed. a.2.C provides for 2 years in prison if you didn't report when you had to. This is not a questionable interpretation, this is the law as written -- mixing is illegal on its face, no matter the source or destination.
Thank you for the citation, but now that I've read the law, every section in here seems to require that at least part of the money is proceeds of unlawful activity: https://www.law.cornell.edu/uscode/text/18/1956
Those clauses are joined by an "or", not an "and". One element alone is enough to satisfy.
Wow, okay, so pawn shops too I guess: https://news.ycombinator.com/item?id=20602562
If reporting is already required for all cash transactions, then certainly it will be built into the digital USD.
And Monero miners would have a problem here too. KYC required on every transaction in every block.
Okay, so, what if you did KYC on all the inputs, but you ran a mixer such that the outputs would be obfuscated? Is that legal? What if you take outputs from a set of those mixers? Is there any legal way to provide irreversible privacy for known legal sources?
If reporting is already required for all cash transactions, then certainly it will be built into the digital USD.
And Monero miners would have a problem here too. KYC required on every transaction in every block.
Okay, so, what if you did KYC on all the inputs, but you ran a mixer such that the outputs would be obfuscated? Is that legal? What if you take outputs from a set of those mixers? Is there any legal way to provide irreversible privacy for known legal sources?
I'm not a lawyer, but I believe regulatory agencies would need new legislation to make use of privacy-protecting cryptocurrency software illegal. It's that legislation that I would worry about.
The IRS is offering $625k right now to anyone who can break Monero's privacy:
https://www.forbes.com/sites/kellyphillipserb/2020/09/14/irs...
https://www.forbes.com/sites/kellyphillipserb/2020/09/14/irs...
I sold off all my crypto and put the money into regular stock as soon as my country announced it would start taking an interest in taxing it and that you were responsible for proving whatever they though wrong.
It’s just too much of a risk and a bother, and I suspect it will only get worse from here.
I really don’t need something that might come back to bite me financially or even criminally 25 years from now.
It’s just too much of a risk and a bother, and I suspect it will only get worse from here.
I really don’t need something that might come back to bite me financially or even criminally 25 years from now.
Nothing stops exchanges from doing KYC prior to XMR txs in order to comply with AML regulations. Mixers probably aren't doing KYC...?
Mixers don’t even work.
Good luck FinCEN, you've now just forced mixers to go dark. There's no killing them.
They don't even have to go dark. There are fully autonomous decentralized mixers like CashFusion running on Bitcoin Cash.
They don't need to kill the mixers. In fact, forcing them to go dark makes it much easier to accomplish FinCEN's end goal.
Once mixers are go dark "dark," the presumption is that anyone using their services is doing so with the intent of avoiding money laundering laws, which will drive away the few legitimate users they had, reducing their usefulness as mixers because tainted coins will simply be mixed with other tainted coins.
Once mixers are go dark "dark," the presumption is that anyone using their services is doing so with the intent of avoiding money laundering laws, which will drive away the few legitimate users they had, reducing their usefulness as mixers because tainted coins will simply be mixed with other tainted coins.
There were never legitimate users of mixers.
There are if you assume there are legitimate uses for Bitcoin.
Without mixers, your entire transaction history and balance is public. It would be like broadcasting your bank account to the world. If I was paying my friend some Bitcoin I would want to mix it first otherwise they would know exactly how much I own.
Without mixers, your entire transaction history and balance is public. It would be like broadcasting your bank account to the world. If I was paying my friend some Bitcoin I would want to mix it first otherwise they would know exactly how much I own.
You should be aware that some (if not all) blockchain analysis software gives a higher risk score to coins that have come from a mixer.
I generally agree, as all of the legitimate uses I could think of would be more easily accomplished without the use of mixers (or even cryptocurrency), but their may be use cases I hadn't thought of.
More easily, but less safely. Using a mixer or CoinJoin or similar for normal, legal payments allows you to pay people without revealing how much Bitcoin you own.
For normal, legal payments, cash/credit card is much easier and you also don't reveal how much money you own.
On top of that, with credit card you get a significant number of protections.
Like I said, there are no legitimate use cases I could think of for cryptocurrency where cryptocurrency is easier than using normal methods of payment.
On top of that, with credit card you get a significant number of protections.
Like I said, there are no legitimate use cases I could think of for cryptocurrency where cryptocurrency is easier than using normal methods of payment.
Sure. The point was just that if you are already using crypto for whatever reason then there are legitimate reasons to use CoinJoin.
Like avoiding extortion, kidnapping, robbery.
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Only a fool would use a mixer for legitimate purposes.
Money laundering laws make it so that mixers don't actually "clean" the money. But legally they do make the clean money dirty.
By mixing your clean money with dirty money, you end up with only dirty money. So why would you anti-clean legally obtained money?
Money laundering laws make it so that mixers don't actually "clean" the money. But legally they do make the clean money dirty.
By mixing your clean money with dirty money, you end up with only dirty money. So why would you anti-clean legally obtained money?
To spend it on illegal things.
Right. I agree that it naturally follows that the only two reasons to use mixers is if:
1. You have committed a crime (dirty money) 2. You are about to commit a crime (buy illegal stuff)
Sometimes both.
In other words, like I said "Only a fool would use a mixer for legitimate purposes".
1. You have committed a crime (dirty money) 2. You are about to commit a crime (buy illegal stuff)
Sometimes both.
In other words, like I said "Only a fool would use a mixer for legitimate purposes".
You are essentially correct.
Many (if not all) blockchain analysis companies give a higher risk score to coins that have come from a mixer aka they are "dirty".
Many (if not all) blockchain analysis companies give a higher risk score to coins that have come from a mixer aka they are "dirty".
I don't just mean practically. I mean legally.
Cryptocurrency advocates often ignore this. They think they are solving bureaucracy with math. They think that whatever they can do technically with smart contracts and money transfers is legal. They think they found a loophole in AML and KYC laws. They have not.
It's the old ignorance of "I'm a good engineer, so the legal issues must be a minor detail I can just solve with code".
They seem to think that the legal roadblocks were put in place by accident of history. But no, they are actually codifying almost entirely society's intention. Perfectly? No. But infinitely better than what cryptocurrencies are trying to do.
Cryptocurrency advocates often ignore this. They think they are solving bureaucracy with math. They think that whatever they can do technically with smart contracts and money transfers is legal. They think they found a loophole in AML and KYC laws. They have not.
It's the old ignorance of "I'm a good engineer, so the legal issues must be a minor detail I can just solve with code".
They seem to think that the legal roadblocks were put in place by accident of history. But no, they are actually codifying almost entirely society's intention. Perfectly? No. But infinitely better than what cryptocurrencies are trying to do.
That’s why generally speaking you don’t launder money by just soliciting input, shuffling some bits around, and then providing output.
You launder money by operating a tangential legitimate enterprise. So, to pick the humorous example: you open a laundromat called Bill’s Cleaning, and then ostensibly you have expenses and profits related to laundering clothes, but you pad your books with fake wash/dry cycles to cover your illicit in/out flows.
You launder money by operating a tangential legitimate enterprise. So, to pick the humorous example: you open a laundromat called Bill’s Cleaning, and then ostensibly you have expenses and profits related to laundering clothes, but you pad your books with fake wash/dry cycles to cover your illicit in/out flows.
Mixing tainted coins with other tainted coins will still be useful for criminals who want to hide the origin of their money. Without mixing, a prosecutor may be able to link the coins to a specific crime.
I mean, let's not pretend that output from Bitcoin mixers ever was "clean money" in the first place. If you buy a house or whatever, the government is going to ask where you got the money, and they're not going to be satisfied with "You'll never find out, because I used a 100% legal Bitcoin mixer to hide the origin of my money".
I mean, let's not pretend that output from Bitcoin mixers ever was "clean money" in the first place. If you buy a house or whatever, the government is going to ask where you got the money, and they're not going to be satisfied with "You'll never find out, because I used a 100% legal Bitcoin mixer to hide the origin of my money".
Of course there is, simply make it a crime to use coins that at any point in their history touched a mixing service.
Why do "mixers" still exist if we have trustless coinjoins?
https://wasabiwallet.io/
https://wasabiwallet.io/
Helix shut down years ago. The tech that enables wasabi is pretty recent (segwit, etc).
Just wait until an enterprising DA decides to charge everyone in the coinjoin as a criminal conspiracy.
IS this not a mixer?
The key thing that enabled the action in OP was the custodial nature of the mixer. CoinJoin (which Wasabi implements) is non-custodial. There is no central party who could be targeted as in the action in OP.
I suppose it is a mixer, but with more modernized protocols.
In earlier days AFAIK, a central coordinator was required to take custody of coins.
Now its mostly trustless.
In earlier days AFAIK, a central coordinator was required to take custody of coins.
Now its mostly trustless.
I heard about people justifying these.
Something about privacy.
Everything just feels so twisted in perceptions tied to cryptocurrency.
Everything just feels so twisted in perceptions tied to cryptocurrency.
One way you could think about this is that there are (at least) two very opposed intuitions about the status of cash vs. electronic funds transfers.
One intuition is that cash is a really unfortunate technology that had to exist in the past as a compromise due to technological limitations [because strongly authenticating value transfers is hard in an offline world], but now that we have better technology, we can try to get rid of it or de-emphasize it, and make money the way it's supposed to be — like EFTs that are transparent (at least to states), traceable, seizeable, reversible.
Another intuition is that custodial/intermediated EFT payments are a really unfortunate technology that had to exist in the past due to technological limitations as a compromise due to technological limitations [because making digital bearer instruments, especially fully or partly decentralized ones, work well is technologically difficult and fraught with subtle trade-offs], but now that we have better technology, we can try to get rid of them or de-emphasize them, and make money the way it's supposed to be — like cash that's really owned outright by its bearers and provides privacy about who spent what where.
The former view is for example Kenneth Rogoff's view in The Curse of Cash or maybe the view of the Indian government in demonetizing some large-denomination notes in 2016, while the second is the traditional view of cypherpunks and some libertarians. The disagreements are pretty fundamental. :-)
One intuition is that cash is a really unfortunate technology that had to exist in the past as a compromise due to technological limitations [because strongly authenticating value transfers is hard in an offline world], but now that we have better technology, we can try to get rid of it or de-emphasize it, and make money the way it's supposed to be — like EFTs that are transparent (at least to states), traceable, seizeable, reversible.
Another intuition is that custodial/intermediated EFT payments are a really unfortunate technology that had to exist in the past due to technological limitations as a compromise due to technological limitations [because making digital bearer instruments, especially fully or partly decentralized ones, work well is technologically difficult and fraught with subtle trade-offs], but now that we have better technology, we can try to get rid of them or de-emphasize them, and make money the way it's supposed to be — like cash that's really owned outright by its bearers and provides privacy about who spent what where.
The former view is for example Kenneth Rogoff's view in The Curse of Cash or maybe the view of the Indian government in demonetizing some large-denomination notes in 2016, while the second is the traditional view of cypherpunks and some libertarians. The disagreements are pretty fundamental. :-)
>One intuition is that cash is a really unfortunate technology that had to exist in the past as a compromise due to technological limitations
I can't vouch for the accuracy of the historical perspective, but I came across an intriguing and new-to-me assertion/idea that credit is the oldest financial tech, and cash/coinage was originally a niche tech used perhaps for mercenaries and/or other people who were outsiders relative to a money-using (i.e. credit using) community.
Hence, it might be that what bitcoin aspires to be never was mainstream or primary in the widest context of all of human history.
It reminds me of the general pattern of fundamentalists looking back to an original state of something that never really existed.
I can't vouch for the accuracy of the historical perspective, but I came across an intriguing and new-to-me assertion/idea that credit is the oldest financial tech, and cash/coinage was originally a niche tech used perhaps for mercenaries and/or other people who were outsiders relative to a money-using (i.e. credit using) community.
Hence, it might be that what bitcoin aspires to be never was mainstream or primary in the widest context of all of human history.
It reminds me of the general pattern of fundamentalists looking back to an original state of something that never really existed.
Note that the civil forfeiture penalty is only part of it. He's also probably going to jail for some number of years:
https://www.justice.gov/opa/press-release/file/1249026/downl...
https://www.justice.gov/opa/press-release/file/1249026/downl...
This is ridiculous. Mixing is a foundation of cryptocirrency, cryptocirrencies don't make any sense without mixing. Who wants their entire transactions history to be public? That would make them an easy target for many kinds of fraud and other kinds of attacks.
> Mixing is a foundation of cryptocirrency, cryptocirrencies don't make any sense without mixing.
I'm going to need a citation on this one. Many people who are still stuck on Bitcoin maximalism these days seem to have gone the "nothing to hide" route, and actively denigrate the idea that privacy tech should be implemented at all.
> Who wants their entire transactions history to be public?
Use Monero.
I'm going to need a citation on this one. Many people who are still stuck on Bitcoin maximalism these days seem to have gone the "nothing to hide" route, and actively denigrate the idea that privacy tech should be implemented at all.
> Who wants their entire transactions history to be public?
Use Monero.
Wait, I thought the foundation of cryptocurrency was about trust not privacy.
But privacy is essential to make it possible. Seriously, would you choose a bank which would post details for every payment you make online, available for everybody to read? Try imagine what can bad people do with that information.
essential for it to gain users but by no means a technical requirement.
Besides getting actual privacy with cryptocurrency requires jumping through a lot of hoops, covering a lot of tracks, and trusting a lot of people. I think privacy is the killer feature that we will never actually have.
edit: you are of course right and I am splitting hairs, but I do think real privacy is impossible.
Besides getting actual privacy with cryptocurrency requires jumping through a lot of hoops, covering a lot of tracks, and trusting a lot of people. I think privacy is the killer feature that we will never actually have.
edit: you are of course right and I am splitting hairs, but I do think real privacy is impossible.
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> cryptocirrencies don't make any sense
that summarizes it better.
Cryptocurrencies aren't a smart workaround around the financial system. They are simply violations of laws.
They're not loopholes. Thousands of years of economic theory wasn't suddenly made obsolete by something new. It's just crime. Economic systems already knew we don't want money laundering and we do want reversibility. Some techie thinking mixers aren't money laundering and thinking reversibility is a bug doesn't make it so. They were on purpose. Because that's superior.
that summarizes it better.
Cryptocurrencies aren't a smart workaround around the financial system. They are simply violations of laws.
They're not loopholes. Thousands of years of economic theory wasn't suddenly made obsolete by something new. It's just crime. Economic systems already knew we don't want money laundering and we do want reversibility. Some techie thinking mixers aren't money laundering and thinking reversibility is a bug doesn't make it so. They were on purpose. Because that's superior.
That's superior for central governments who want to be able to get half of your economic output, punish you if you do drugs and that try to push an insane level of consumerism at the expense of businesses (reversibility).
Fraud protection could very well be kept under control and prevented with insurance, instead of potentially invalidating every economic transaction.
Fraud protection could very well be kept under control and prevented with insurance, instead of potentially invalidating every economic transaction.
Like it or not, this is what people want.
Not everyone is an ultra extreme libertarian. By far most people want police, fire department, roads, FDA, FCC, OSHA, national security, social security, and even the DMV. And the system of taxes is something that achieves that.
People want those things, and they don't want the old Chinese drug dens.
Does that mean that the implementation is perfect? Absolutely not. Especially in the US. Mass incarceration is counterproductive and horrible. Cannabis illegality has a racist history. But personally I don't think people should be allowed to use fentanyl, meth, and heroin.
Even libertarians should recognize that there's no way such use doesn't have a huge externality caused by people who are judgement proof, on people who had nothing to do with the use.
Looks like you are an ultra extreme libertarian. And that's fine. But like anarchy I don't think it's a bad ideal, I just think it's a pipe dream.
How do you mean reversibility leads to increased consumerism? You mean because I wouldn't buy things online if my credit card wouldn't allow me to reverse the charges if it's a scam?
That sounds like capitalism, to me. You're free as a business to only accept debit cards. Debit cards don't (in my jurisdiction at least, and AFAIK most or all) don't have the same protections as credit cards.
Do you not like capitalism? This seems incompatible with the libertarian values you seem to have.
> Fraud protection could very well be kept under control and prevented with insurance,
I truly wish you good luck with that. No sarcasm. But I do also mean "yeah, good luck with that".
> instead of potentially invalidating every economic transaction.
Oh, you mean like the Ethereum DAO split? That was the true "socialism for the people who have connections, capitalism for the poor".
Not everyone is an ultra extreme libertarian. By far most people want police, fire department, roads, FDA, FCC, OSHA, national security, social security, and even the DMV. And the system of taxes is something that achieves that.
People want those things, and they don't want the old Chinese drug dens.
Does that mean that the implementation is perfect? Absolutely not. Especially in the US. Mass incarceration is counterproductive and horrible. Cannabis illegality has a racist history. But personally I don't think people should be allowed to use fentanyl, meth, and heroin.
Even libertarians should recognize that there's no way such use doesn't have a huge externality caused by people who are judgement proof, on people who had nothing to do with the use.
Looks like you are an ultra extreme libertarian. And that's fine. But like anarchy I don't think it's a bad ideal, I just think it's a pipe dream.
How do you mean reversibility leads to increased consumerism? You mean because I wouldn't buy things online if my credit card wouldn't allow me to reverse the charges if it's a scam?
That sounds like capitalism, to me. You're free as a business to only accept debit cards. Debit cards don't (in my jurisdiction at least, and AFAIK most or all) don't have the same protections as credit cards.
Do you not like capitalism? This seems incompatible with the libertarian values you seem to have.
> Fraud protection could very well be kept under control and prevented with insurance,
I truly wish you good luck with that. No sarcasm. But I do also mean "yeah, good luck with that".
> instead of potentially invalidating every economic transaction.
Oh, you mean like the Ethereum DAO split? That was the true "socialism for the people who have connections, capitalism for the poor".
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>cryptocirrencies don't make any sense without mixing
And this is a problem for government how? They’d probably be delighted if they could kill crypto
And this is a problem for government how? They’d probably be delighted if they could kill crypto
I love lawyerspeak.
> As such, they have an obligation to register with FinCEN; to develop, implement, and maintain an anti-money laundering compliance program
Hmm yes, this business which existed to launder money did not implement anti-money-laundering measures, therefore it will be fined.
> As such, they have an obligation to register with FinCEN; to develop, implement, and maintain an anti-money laundering compliance program
Hmm yes, this business which existed to launder money did not implement anti-money-laundering measures, therefore it will be fined.
What does this mean for coinjoin groups like samurai wallet and wasabi?
REN is the best mixer. If you know you know.
This is exactly what the people behind the initiative to preserve the original bitcoin protocol has been saying: You need to be able to prove where you money came from.
>You need to be able to prove where you money came from.
If only we had a way to capture this. A chain of transactions of sorts...
If only we had a way to capture this. A chain of transactions of sorts...
So what are the KPI's for a mission focused enterprise?
What does the protocol do to hold orgs accountable?
What does the protocol do to hold orgs accountable?