This is impressive analysis, but have I overlooked the laundering part? Money laundering is providing an explanation about why it is clean, not hiding the reason that it might be dirty.
This was the case maybe 20 years ago, but modern anti money laundering has moved the needle significantly in recent years. Where I live there are now rather strict limits on what consumers can do without subjugating themselves to what's called "Due-diligence". Which is in fact about NOT assuming cleanliness. Know You Customer is all about not blindly assuming your counterparty is honest.
Yup. This also why people should only use fintech banks (Revolut, N26, Bunq, etc) as a checking account and should keep the bulk of their money elsewhere.
Because of the relatively low-friction signup process, fintech banks are extremely trigger happy with account locks, and at that point you have to go through their permanently-overloaded customer service to get your money transferred to another bank, a process that might take months if you’re unlucky.
That’s just wrong. Revolut, N26 and Bunq all have banking licenses, which means funds are insured to €100 000, €200 000 if it’s a shared account.
It’s not that they “steal” your money, but unlike your local bank, their customer service is much less tactile which means that if you’re up shit’s creek getting out if it gets much harder.
A whitelist/allowlist is a system that defaults to rejecting everything, but allow someone to override that rejection.
A blacklist/denylist is a system that defaults to allowing everything, but can on-demand block/deny something.
Banking system for individuals today mostly have a blacklist/denylist for the common use case. Walk into a bank and ask to open an account, and they'll most likely allow you.
If you manage to trip up any alerts (big deposits for example), they'll ask you for more info, citing KYC/AML for the reason why.
> This is why everyone is always asking everyone to demonstrate the sources of funds in finance.
This usually happen after the funds have touched some account you own, hence it's a blacklist system. A whitelist system wouldn't allow you to deposit those funds until after you got verified somehow.
and when the crypto passes through a government’s address it magically becomes clean :))
so the whole blacklist concept is dumb because the same funds have to be reset, but the old chains of transactions are still being passed around as if its a “gotcha” but theyre really irrelevant quickly and reintegrated back into the economy quickly
I don't see what's dumb about it. It seems like blacklisting is the digital equivalent of "I don't want to do business with criminals" - I wouldn't knowingly buy anything from a thief, or from a store that knows some of its suppliers are thieves. If law enforcement has seized the property and auctioned it, then the criminals aren't profiting, so I don't mind.
The point is that when a government seizes crypto funds and auctions them off again, the funds are clean for legal purposes but transaction history doesn’t change, it just has an additional transaction.
Software that flags aspects of transaction is nullified by the reality that it doesn't actually know that one subsequent transaction cleaned the whole trail. There are hundreds of thousands of governments around the world when factoring in municipal authorities, even governments you don't respect are cleaning funds in the eyes of governments you do respect. In the eyes of the requirements of exchanges that have these automated chain analysis practices. Right now, only a handful of governments do crypto investigations and seizures, but as this increases it only moves towards the nullifying chain analysis, as many funds will be comingled with a flagged transaction but unknown to the software about how these funds have been washed by a nation state’s blessings.
If you don't want to do business with criminals, don't buy crime futures. Because that's essentially what crypto are (unless not held and only purchased on demand for whatever oddball transaction you'd want to do that's neither speculation nor directly related to crime): demand outside of pure speculation (which is certainly by far the biggest part) must be completely dominated by demand for paying ransoms, purchasing illegal substances and so on.
Even if "your" tokens are perfectly clean, straight from an artisanal miner running their rig purely on solar surplus or something like that, their value still derives almost exclusively from crime use cases, hidden behind no matter how many layers of zero-sum speculation.
> business with criminals, don't buy crime futures
Is your Crime same as my Crime?
Suppose I am a software developer living in Russia and I don’t want to pay taxes to a government that commits war crimes, is that a crime? Should a western bank be preventing that?
Suppose you were protesting in a dictatorship, and as a result your assets were seized, you have a criminal record, maybe you are collecting donations, should I as a western bank act to stop that ‘crime’?
Even simpler if you want to buy some weed, it’s a crime in country A but not in country B. Suppose so live in Country B, should I be concerned?
> Suppose I am a software developer living in Russia and I don’t want to pay taxes to a government that commits war crimes, is that a crime? Should a western bank be preventing that?
Yes, because that activity cannot be distinguished from thd Russian government evading financial sanctions. It sucks for the innocent party but there are many victims of their government with more serious grievances.
> Suppose you were protesting in a dictatorship, and as a result your assets were seized, you have a criminal record, maybe you are collecting donations, should I as a western bank act to stop that ‘crime’?
This has the same problem plus the gross negligence of advising anyone living under a repressive government to use a financial system designed to leave an immutable trail for the police to use when prosecuting them and everyone they know. The full retroactive deanonymization is incredibly dangerous for dissidents since it allows the authorities to prosecute them for transactions they made even before they were suspected of anything.
> Yes, because that activity cannot be distinguished from thd Russian government evading financial sanctions.
I am not sure this is true, but regardless I was going for a moral angle - the question was basically: Suppose a western bank was 100% certain that it was not Russian government avoiding sanctions, would that still apply?
I think in that hypothetical case you could say it’s morally okay with some debate over how much participating in the economy matters, but I don’t think that tells us much about the real world because how would you ever get anywhere close to 100% certainty that you are actually talking to the person you believe you are, they aren’t compromised, and that the government isn’t waiting to confiscate those funds? Unless the goal is just to stash money in a foreign account until you can escape the country there’s no way to avoid a fairly high level of risk trying to use it in country.
