The way I usually phrase this situation is something like
"The goals of a strong government are in direct opposition to the goals of most modern cryptocurrencies", and this is yet another subset of those goals where we can see the forces fighting against each other. I find it hard to convince myself cryptocurrency can win out in the long-term, as the more rules they find ways to skirt around via technology and decentralization, the more they will be clamped down upon by regulations.
You can spend a decade developing a provably-anonymous cryptocurrency (which we have indeed now done), and all it takes to break your anonymity is a law that forces you to report all transactions on a form, or else face prison time.
FinCEN was particularly aggressive and quick to act here, so I do hope they change course, especially given the unusually short comment period. This is where cryptocurrency users should be thankful for some of the less-centralized bodies in the ecosystem (e.g. Coinbase) who will happily spend millions (if necessary) to help fight these actions legally on behalf of their users and business.
The Soviet economy had a substantial black market, especially if you include the Blat system of favor-trading [1]. New York today is seeing growth of ostensibly illegal, unlicensed street vendors, in reaction to lockdown restrictions [2].
Government is not efficient, and cannot effectively enforce rules, so cryptocurrency will undoubtedly survive.
I agree with this at the macro level. It’s easy for a government to strong arm an individual into regulation, a small company even. When the markets themselves shift, that’s when government is going to have a hard time regulating. Crypto, good and bad, is here to stay because government is slow to respond to shifts.
What’s going to be interesting to see is how this government regulations vs the people’s needs play out. The street vendors are suppling a demand, there’s a need, illegal vending or not.
Q: What proportion of Bitcoin holders are actually using as an approximate alternative to fiat currency (regularly purchasing real life stuff using Bitcoin) vs holding and hoping to get rich?
Monero (XMR) is the most notable example, but there are other coins that implement the same technology of truly anonymous and untraceable transactions.
FinCEN will not change their course. From their perspective, they would rather try to kill or stifle all cryptos than allow illegal activity to be done within that market without an ability to seize assets or trace funds.
Right now they have total control over traditional non-cash monetary transaction - and the US gov't specifically has a long reach into the global economy to enforce things like OFAC and sanctions.
Cryptocurrency openly defies that power base by design (censorship resistance). There is fundamentally no solution here where the two will play nicely together.
Cryptos will simmer in the background as the section of the global economy they facilitate grows (black market transactions), and erode the western financial power base. It's mostly limited today by the lack of scalability in the coin networks.
I wonder if there's a future where innovation in scalability allows for a single crypto to reign supreme globally and eliminate all national currencies in our lifetime.
It would be a monumental shift of power, which will undoubtedly involve a great deal of political/technological struggle and civil chaos.
Monero priced in Bitcoin is down 60% in the last year and it's down 90% since its peak in 2018.
If Monero's purpose is to be anonymous and untraceable, and Bitcoin's purpose is to be a store of value, then it appears the market prefers the store-of-value use case.
There's a popular idea that crypto currencies are only good for illegal activity. But the evidence so far from a nearly trillion-dollar market says that avoiding law enforcement is not what's driving the crypto phenomenon.
There's another popular idea that central bank money printing is devaluing national currencies when priced in crypto. I'm sure that's part of it, but inflating the money supply by 30% doesn't really justify a 10x increase in crypto valuations.
It's a small sample size, but the handful of wealthy families I'm acquainted with who are investing 0.1% to 2% of their net worth into Bitcoin (and a little into Ethereum) are more afraid of a collapse of the western political order than central bank money printing.
Institutions and high-net-worth individuals aren't looking for privacy for illicit transactions so they're not putting their wealth into Monero.
They've witnessed or researched what the collapse of the USSR did to the ruble and asset prices in the former Soviet Union, and they're buying some insurance against a similar unraveling in the US and Europe.
This all the way. Not being able to just reach into your financial affairs would be seen as a huge affront. This is similar to how law enforcement believes encryption is a major impediment to building a case.
Years ago, at a time when money was tight, a bank transfer to my landlord for rent disappeared. OFAC seized the funds. The best reason I can come up with is that my landlord has a Muslim-sounding name (I don't actually know his nationality or religion).
It took many calls to my bank to learn this information. The whole thing was shrouded in messaging that it was delayed and would post "tomorrow," day after day. Finally, someone at a branch had some compassion and spent some time figuring it out.
I received a case number or incident number and was told that I could contest the seizure. A family member helped me cover the rent. I sent a form contesting the seizure and switched to depositing post office money orders into my landlord's local branch, which was a huge inconvenience.
Eventually, I received a letter from OFAC stating some excuse that I can't even remember why my case was moot. This was after maybe six months. I gave up.
It wasn't worth it, to me, to fight the government bureaucracy that I knew would be involved. Sorta like paying a traffic ticket that you know you could beat in court because it's easier than going to court. They can basically do whatever and get away with it by making things a pain in the ass to fight.
The problem isn't tax evasion per-se, but rather logic inconsistencies.
For example, I've met quite a bit of people that don't want to pay any taxes. Yet they all want for them and their goods to be able to use roads for free, roads that are built and maintained with taxes.
That's actually ok: two incompatible goals just means you have to make a trade-off; welcome to engineering.
The problem is that none of them understand why they can't have both. In their minds, there is no trade-off to make, because they want both, feel entitled to both, and having both should be possible.
No idea why they are not able to understand that both things are incompatible. If there is some option that allows both that I am missing, they didn't manage to explain that.
That's strictly false. ~65% of the US budget is mandatory spending, and ~86% of that goes to things like social security, unemployment, Medicare, and so forth. Military spending is priority #3 by share of the budget, not priority #1.
Even if this wasn't a falsehood, characterizing all military spending as "bombing brown people in the middle east" is ignorant, incendiary political flamebait.
That's the federal budget. Aren't things like road or education typically part of the state/city budgets?
I'm not American, but I used to live in NYC, and thus paid my taxes there. I was always under the impression that: federal budget is for the armies/FBI/CIA/NSA/FDA and other three letters agencies. On the other hand state taxes, city taxes, and sales taxes are for roads, schools, hospitals, firefighters, police and the MTA.
I'm surprised the federal budget even has a line item for Education, or Housing & Community!
I’d absolutely pay the subscription for roads, conflict resolution insurance (Justice as a Service), health insurance (deregulated unlike in USA), etc. I never asked for government to violently enforce monopolies in these markets where I live.
While I certainly know people who for whatever reason fail to understand the relationship between taxes and benefits, I don't think they are really at all a significant portion of people who have taxation-related policy objections. The problem is amplified in America because of the long history of institutionalized subjugation and discrimination and the liberal use of violence both at home and abroad are taxpayer funded. Thanks to civil and administrative asset forfeiture that adds up to billions of dollars worth of cash and property seized without the government establishing a link to actual criminality that they can establish probable cause on (or for administrative forfeiture, there's no hearing at all, and they account for $500 million to $600 million a year). In a particularly galling and absurdist sort of way, Americans every day are paying for their own robberies, or paying in part for the settlement they receive after especially egregious cases manage to get past all of the legal hurdles protecting the authorities. Since most victims of what normal people would consider egregious abuse won't even get past that, we're talking about the victims of Chicago PD's systemic Holamn Square torture site and the likes, chipping in, along with their fellow citizens, while the perpetrators received pensions and when needed, covered for each other. All that are your taxpayer dollars at work. In some places, the police, with a hefty chunk of change from the Treasury and DoJ throigh "equitable sharing", are simply more incentized to use that taxpayer money to conduct more no-knock raids, because the war on drugs gets the feds involved which gets the local PD a chunk of federal funding as well. All that come directly from your tax dollars, in many cases far more than what goes into infrastructure.
Your taxx dollars pay for the carceral state, they pay for ICE raids conducted through ruses and guises ordinarily illegal but not in the administrative law context. DHS has a discretionary budget of around $50 billion a year. A similar amount is earmarked for nondiscretionary disaster relief which pretty much lost all meaning lately. Of course, the agencies bring in somme revenue as well, but that's usually even worse news. In July an IG's report fouhnd that the DEA, without legally required congressional oversight, have been profitably laundering money for the cartels for most of the past decade, and had even somehow got involved in buying a private jet that was then left off initial budget reports. Like Aliens v. Predator, whoever wins, we lose, since this is self-justifying behavior, not in the public's interest but to create reasons for their own relevance. Some degree of fraud, waste,and abuse is bound to happen in all bureaucracies, but in America the impact isn't felt evenly. Black and brown parents have to have a second talk with their kids about encounters with the police. Immigrants, documented or not, pay taxes but receive either abbreviated or absolutely no means-t4ested benefits. In spit4e of contributing to the continued survival of social security, they're literally considered second-class citizens subject to indefinite detention. Or, for about a few thousand Americans, you'll experience the exact same because that's about how many Americans get deported a year to god knows where.
And there's plenty of indicators showing that mere spending isn't really sufficient to achieve any of the goals we thought we could just throw taxpayer dollars at. HHS has a $2 trillion budget, almost half of that is used in conjunction with medicaid programs and grants, yet, neither party seems particularly happy with the status quo, not to mention that it excludes 20 million or so immigrants. And we have really convinced ourselves that money can cover up expertise and competency. American farmers are seeing their entire year's revenue coming from subsidies due to the trade war this year. For so many communities in this country, it makes perfect sense to wonder where the tax money go, since frankly it's pretty difficult to see sometimes, and what's most visible sometimes is also the most disturbing, egregious, and kafkaesque one can witness in the system. When that's the vector you interact with what your tax dollars pay for, it's perfectly logically consistent to want actual services yet not want to pay for the abuse. And we don't do public infrastructure stuff well anymore anyway. Think how long it took for the 2nd Avenue subway to go up 3 stations.
>For example, I've met quite a bit of people that don't want to pay any taxes. Yet they all want for them and their goods to be able to use roads for free, roads that are built and maintained with taxes.
That's a complete strawman and you know it. Any libertarian would say they'd be happy to pay to use privately-run roads.
>No idea why they are not able to understand that both things are incompatible. If there is some option that allows both that I am missing, they didn't manage to explain that.
Privately owned/built roads! These even already exist: https://en.wikipedia.org/wiki/Private_highways_in_the_United.... What's hard to understand about roads being built by people that aren't the government? Yes such roads might not be as optimally placed/efficient, but the libertarian's goal isn't efficiency, it's minimising what they consider the moral injustice of taxation.
This is what I don’t get. Great, you can transfer Bitcoin to anyone for cheap, anywhere in the world.
But that Bitcoin is useless to you or whoever you give it to unless it’s converted to currency. That’s where the gov’t puts it’s grip.
Move as much Bitcoin wherever you want. Who cares. Want to convert to dollars or Euros or Yen? That’s where the gov’t steps in and say fine - prove who you are for this transaction. With the public Bitcoin ledger they can now connect you back to the source of the money.
It doesn't need to be convertible to cash to have economic value. As long as people are willing to trade bitcoins for other goods, they have value. So even if it could never be converted to another currency, that wouldn't necessarily mean it's useless.
Are you sure? At some point someone along the line needs to convert it to currency. The only time that wouldn’t be true is if there was a big enough marketplace that anything you might ever want can be purchased in Bitcoin. Otherwise you’d need some way to convert to currency to access other goods and services.
Of course. Currency itself only has value due to its ability to be traded for other objects. Currency on its own has no value. Bitcoins are in the same boat. If bitcoins can be traded for other objects, they have value regardless of any ability to trade them for currency. Put another way, the only thing that bitcoins (and dollars for that matter) require are that people perceive them to have value.
Besides even if bitcoins cannot be directly traded for dollars on an exchange, the same could still occur with intermediate objects. If I give you bitcoins in exchange for a laptop, I can then turn around and sell that laptop for money. It's not as convenient (and could be illegal), but it would work.
Just wrap your Bitcoin into renBTC on Ethereum, and exchange it for DAI stablecoin. Then, deposit it into a zero knowledge mixer contract called tornado.cash and withdraw to a fresh address. Now you've broken the link. An entirely decentralized process of converting BTC into a stablecoin without an intermediary while maintaining some privacy.
How many bites of the pie did you lose during those 4 transactions? Besides, you still need to convert DAI to fiat to use it IRL in most ways, DAI is just another form of space money despite being pegged to the dollar.
I could also see criminalization of mixing tools being a thing.
No, I mean criminalization of mixing services in specific, regardless of their use. In the same vein as KYC laws.
It's currently not illegal to obscure your financial trail as long as it's not in service of anything that is itself illegal, but I could see the legislators saying that any funds from a mixer are to be considered tainted, and made de facto illegal all on their own.
That would depend on the transaction size and market, no? As early as yesterday, any single transaction involving ETH would have cost no less than $3 due to gas prices even at the slowest acceptable pace, and that's before the bid/ask spread on the exchanges eat some more
I'm quickly coming to the conclusion that while crypto cuts out a lot of the obvious middlemen, there are a lot more hidden ones. It is currently non-economical to do small transactons.
Right, so how do I convert stable coin to cash to pay my rent?
I’d need to go through a registered money exchange and the gov’t will have a record of my name and the cash I received in the exchange. If it’s enough cash they will ask about the source of funds.
In the end you still need to convert/exchange that last rinse crypto into cash. The exchanger may want to know where you've got that crypto from and the person(s) that sent you the crypted have been subjected to KYC. Just like with real money.
That's what obfuscating coins like Monero or ZCash (with private transactions) are for - in theory. In practice no exchange directly offers conversions between those and "classic" currencies so you have to somewhat awkwardly convert via a more commonly used cryptocurrency. Oh and if anyone ever finds a deadly bug in the protocol transactions might be de-anonymized in the future.
On the other hand if you pay digitally with "classic" currencies today, your privacy is severely diminished as well. Fintech companies often rely on third parties for some aspects of their services and financial data has special legal standing making it harder to control like you could do with other personal data (under the GDPR, for example).
Sorry to burst the tax evasion bubble, but it is pretty easy to stop cryptocurrencies. Just require KYC at points of entry and exit into the ecosystem.
This would still leave cryptocurrencies as a valid currency for the criminal underworld, and the points of entry/exit will become stolen/illegal goods/services.
Not taking either side, just pointing out this fact.
Stolen goods seem like an efficient enough way, and I can't see theft going away even if you eliminate the "elephant in the room" which is drugs (by either decriminalizing them or hypothetically winning the war on drugs)?
Theft doesn’t scale that very well. You try laundering $10 million by selling stolen goods at the pub. It’ll take you a while, and I can guarantee that the police are gonna notice.
Even then you’re just turning your goods into cash. Which is still difficult to spend when buying high value assets like property. At some point if you’re a criminal that wants to spend their cash, and live in a developed country you need to turn your crypto into clean fiat in a bank account, or prove the crypto didn’t come from illicit sources.
If criminals are the only people using cryptocurrencies, it becomes socially trivial to criminalize the possession of software that interacts with cryptocurrencies.
A law is only good if it can be enforced. Technically piracy is illegal and yet pirated content exists and keeps being consumed because there's no way (for now) to control what people run on their computers and even more so when there's a direct financial incentive which could even fund building dedicated hardware if general-purpose computers can no longer do the job.
It's as easy to enforce this law as it is to enforce laws that criminalize possession of bits - for example, child pornography. Which, by the way, get enforced all the time.
The only reason piracy isn't enforced is because it's largely a civil, as opposed to a criminal matter, which constrains the tools available to copyright holders to go after pirates. Criminal investigations, in comparison, are not hamstrung the way that Warner Brothers going after someone downloading The Matrix is.
You significantly overestimate the financial incentives for building special purpose hardware solely for the purpose of participating in a criminal economy. That would be trivial for the police to shut down, because hardware manufacturers have a very conspicuous physical presence.
There's a reason nobody sells 'piracy-solutions-in-a-box'. It's because you need factories to build those, and you can't exactly own a factory in secret.
> There's a reason nobody sells 'piracy-solutions-in-a-box'. It's because you need factories to build those, and you can't exactly own a factory in secret.
Piracy boxes are a thing. There are Android TV set top boxes loaded with all kinds of piracy software being sold at a premium, and they manage to do so without factories.
Similarly, you don’t need a factory to build a Bitcoin wallet if (hypothetically) you can no longer use a general purpose computer for that - a microcontroller and hobbyist-level tooling is enough to build one.
I guess for the purpose of travel, and you really need to, you can always use symmetric encryption to encrypt your seeds with a strong passphrase, then travel with that.
I believe privacy advocates needs to be more involved in the financial sector for there to be any meaningful change and provide counter proposals to balance.
The problem now is that a lot of cryptocurrencies are prime targets for money laundering, financing organized crime and terrorism networks. I often get shat on when mentioning that, especially by loud proponents of cryptocurrencies, but it is a real issue that must be resolved.
Our old-fashioned bank system is far from perfect but it is harder to do illegal things unnoticed, banks report thousands of cases to authorities every year.
Cryptocurrencies is the future, and we should not let our guard down allowing criminal elements to exploit it.
> The problem now is that a lot of cryptocurrencies are prime targets for money laundering
The issue is that you can't actually solve this. It's already over.
The premise of money laundering rules is that you have two conspiring parties transferring illicit gains between one another and the regulations have the bank as an intermediary informing on them to the government.
The existence of cryptocurrency makes it possible to do this without an intermediary party. It has already happened and you can't put the genie back in the bottle. It doesn't matter how you regulate above-board exchanges and transactions in the US because the illicit transaction can occur digitally outside of the sphere of influence of a given country without using any of the intermediaries being subjected to the regulations.
What it means is that all the costs of AML and KYC regulations are no longer buying you anything because actual criminals now have an end-run around them, but they're still costing you something, as the law abiding people trying to comply with the rules, for as long as they remain on the books.
Well, not quite. You seem to be conflating "money laundering" with all "undesired"/illegal transactions.
Laundering implies transition from "dirty" to "clean".
This is the kind of scenario that these kinds of regulatory requirements impede:
"Dirty BTC" transferred to Binance, traded for ETH, sent to Coinbase, traded for USD, and sent outward to a fiat bank account.
Like you say, strictly peer-to-peer value transfer is game over. If every point of contact between cryptocurrency and a regulated entity requires full KYC, those illicit funds can be prevented from entering the regulated economy.
What's happening here is effectively a battle over the fungibility of cryptocurrency. If the transactional history of each UTXO comes under scrutiny for a business to touch a BTC transaction, the practical value of each satoshi differs. This was actually brought up many years ago as an argument for why bitcoin in its current form (sans untraceable transaction) may lose the "fungibility" property and thus will lose its utility as money.
This was early on a main selling point for Monero; "truly fungible cryptocurrency".
> Laundering implies transition from "dirty" to "clean".
But this doesn't really work directly with fiat anyway. If a million dollars suddenly appears in your bank account and the IRS wants to know where it came from, and your answer is "I sold some Bitcoin" their next question is where you got the Bitcoin.
Money laundering works with front companies. Your front company is e.g. an electronics retailer. Your foreign supplier is in on it. You transfer money to them for a truck full of televisions and game consoles, but when the truck comes, it has twice as many as you could ordinarily get for that amount of money because you paid for the rest under the table.
Then you sell the products and get clean money. It used to require a truck full of cash or diamonds going the other way, now it's cryptocurrency. That's what they're complaining about. They used to be able to catch that truck crossing the border with a hundred thousand dollars in cash, now they can't. But you can't stop that by regulating exchanges or anything else that law abiding people are doing.
> If every point of contact between cryptocurrency and a regulated entity requires full KYC, those illicit funds can be prevented from entering the regulated economy.
You can't get there when cryptocurrency is used internationally. The foreign entity selling the criminal organization the televisions isn't subject to KYC regulations in its own country. Or it is on paper but that country's government is corrupt and looks the other way.
It also doesn't actually solve the problem even if you managed to do that. Suppose the cryptocurrency of unspecified origin is prohibited from being used above board in the US. So then it isn't worth as much. Great, then it can be acquired for a lower price; doesn't impact its utility as a medium of exchange. And then the criminals still use it for that and the electronics wholesaler in Russia doesn't really care that the cryptocurrency it receives can only be used in Russia because that's where it is anyway.
All the regulations do is make things harder for people who follow the law.
Oh, I agree that these measures are futile, counterproductive and won’t stop organized crime. That being said, you seem to underestimate the global reach and compliance of banking regulation. Check out FATCAs travel rule.
Also, the difference with a truck and a UTXO/address is that the latter can be reliably and deterministically tracked. Assign identifiers once and bob’s your uncle, if you want to surveil economic activity.
> Also, the difference with a truck and a UTXO/address is that the latter can be reliably and deterministically tracked. Assign identifiers once and bob’s your uncle, if you want to surveil economic activity.
That seems a lot more useful if people were using it like a bank account. Once you figure out that a given address belongs to Alice, if that address starts paying for hotels and cloud services, now you know what Alice is up to.
But anybody who would be interesting to surveil would know not to do that. So you get an address that keeps receiving transfers and then sending it to an unregulated foreign exchange because they're using the cryptocurrency to buy their local currency. From there the cryptocurrency goes into the hands of various uninteresting randos with no connection to the original party.
Bitcoin has a public transaction record but the parties are nameless. All you see is times and amounts. And cryptocurrency mixers make those not very easy to trace.
Also, "solving" it by doing anything that would only cause criminals to switch to something else that already exists doesn't really solve anything, does it?
Bitcoin transactions are not nameless in practice because people will nearly always interact with exchanges and merchants. There is so much information from that. Mixers and CoinJoins don't work well enough when used by a small percentage of people, and they will cause redflags in AML analysis systems. Privacy is already being priced out as the transactions fees rise, too. With strong regulations it will enable surveillance on scale greater than anything we have seen before.
Terrorists and such will just use something else, sure. However, lack of liquidity and network effect will be problematic. I would be comfortable saying that stopping them is an excuse rather than the real goal - mass surveillance on citizens. Same with how the government is intent on complaining about end-to-end encryption apps like Signal when the real terrorists will just use PGP.
they have to clamp down on financial privacy because they invented financial crimes
the federal crime of "money laundering" requires the state to use public resources in whitelisting every transaction, and having the entire population stigmatize the concept of ever having money themselves let alone actually moving it
and that 50 year old absurdity is pretty much what they are doubling down on
If you’ve seen the real harm that caused in the world by money laundering, you would be less inclined to condemn its prevention.
I’ve personally seen cases of money laundering where the money comes from sexual exploitation, human trafficking, modern day slavery, organ trafficking, high value thefts (petrol, or digits bank robberies), standard social engineering scams etc
These aren’t special one of events, this happens in small bank on every day ending in y. Most fincrime teams don’t have the energy to deal with normal people moving their cash, or even high net wealth people moving their cash. They’re too busy tracking down and cleaning up after some really nasty people.
> sexual exploitation, human trafficking, modern day slavery, organ trafficking, high value thefts (petrol, or digits bank robberies), standard social engineering scams etc
That kind of logic can be used to justify putting government cameras and microphones inside everyone's homes too.
Having laws requiring the state to get a warrant from a court to conduct a search, is not an extreme. Instituting warrantless mass-surveillance, like monitoring every transaction above a certain size, is the extreme.
You’re not wrong. There’s clearly a balance to be made, but financial institutions are good choke point for detecting and preventing a great number of different crimes. After all few engage in criminal behaviour just for fun, without the profit motive most serious crimes just wouldn’t be worth it.
I don’t advocate for wholesale financial surveillance, and I certainly think the rules advocated by FinCEN here are both naive and an overreach.
But I do think banks should have an obligation to detect, prevent and report financial crime, if only to make sure banks don’t become complicit. Providing financial services to criminals is incredibly lucrative, far more than providing services to ordinary consumers.
Giving government agents the ability to conduct warrantless dragnet surveillance on the population's private financial transactions is extremely dangerous, even if it is a tool government officials can use to combant malevolent criminal behavior.
This type of mass-surveillance concentrates power in the hands of the few, and gravely endangers both private property rights and political freedoms.
No one should have this power in a free society. Not you, not me, not the most trustworthy individual in society. And with all due respect to the countless men and women who honorably carry out their duty in law enforcement agencies, we don't even have law enforcement agencies with unblemished reputations, to be giving awesome illiberal powers to.
In the Silk Road case, two agents, from two different agencies, conspired to steal BTC, and they only got caught because of the mistakes they made due to the novelty of the financial technology. It's any one's guess how much corruption goes undetected.
Giving mass-surveillance powers to a select subsection of society is just asking for massive corruption and abuse.
Mass-surveillance makes government in general too powerful even ignoring employee-level corruption by those who administer the surveillance programs.
The government should not have so much information on the populace that it could enforce any conceivable law. There should be widespread use of privacy-enhancing technologies, like end-to-end encrypted communication, cash and cryptocurrency, so that some laws are hard to enforce, and the government's ability to micromanage people's lives is inherently limited. Absent that, dystopia is only one bad election away. Non-political checks on government powers, like widespread use of cash and its electronic corollaries, are an important institution of a free society, as a failsafe in case of a failure of the political system.
Capital Gains Taxes + Inheritance Taxes (more so in the UK) + Inflation means that all wealth is gradually eroded. The stigmatisation is to prevent transactions occurring outside of the taxation and government credit system.
Hard limits to cash transactions exist in most countries around the world. For example, in France, as a business, you can't accept payment in cash above 1000€. Between consumers, you need to produce an invoice.
I personally deeply disagree with the EFF regarding FinCEN. From my point of view, the obligation imposed by the regulation strikes a good balance between protecting private life and fighting tax dodging and money laundering. Records only start at $3000 and reporting at $10000. This puts most transactions between individuals in the no reporting zone.
As someone that works in financial crime prevention, I think these rules are a very blunt instrument that will almost certainly do more harm than good.
There have been banks in the past that have operated similar policies, and regulators have raked their senior leaders over the coals for implementing such naive rules.
Transaction size alone tends to be an extremely weak signal for money laundering, but does tend to be a very strong single of high net wealth. Any criminal worth their salt will split up illicit transactions into smaller ones to avoid these types of rules, it’s money laundering 101.
> Any criminal worth their salt will split up illicit transactions into smaller ones to avoid these types of rules, it’s money laundering 101.
FinCEN mandates that all transactions conducted by or or on behalf of the same person during the same business day have to be aggregated and the $10000 dollars limit is per individual not per account.
So if all >1000€ transactions need to be reported, that means that they need to be recorded in an electronic system. That data is recorded for the purpose of sharing with various institutions and agencies, and you do not know who will see that data or how long it will be shared for.
There is basically no privacy for transactions above 1000€.
Worse, that data can be hacked and leaked to the internet. Eg. Criminals will be able to see that last summer you bought an expensive watch, and know that you may be a good target. Such data has often been leaked to the internet before.
There was a recent incident where the sales data for the Ledger cryptocurrency hardware wallet was hacked and leaked to the internet. Including names and addresses of people. I guess this stort of stuff will happen more frequently in the future.
> you do not know who will see that data or how long it will be shared for.
Of course I know, these things are regulated separately. Sure, my bank could share it illegally but they could already have done that even without mandatory recording.
> Worse, that data can be hacked and leaked to the internet.
As could my fiscal declaration, my bank statement or all records of my transactions with any sellers.
I personally am fine with my state mandating that large transactions between individuals have to be recorded for fiscal purpose in the same way that I'm fine with it imposing accounting standards to corporations and asking people to fill tax declarations.
You're personally fine, until your transactions are posted to the internet along with the address to where you live. Period.
As for the regulation, things like the recent GDPR helped a little - if you are an EU citizen, you can now legally request them to provide a list of the time someone accessed your details. I recently did that with a financial provider and had a very unpleasant experience when I found out who they share the data with - basically companies and institutions I've never heard of, like credit score providers & other financial information data mining companies.
The idea of fiat currency only works when people are forced to participate in it. The petro-dollar was fairly obvious in the late 20th century, but now things are more subtle.
The key thing is ensuring that all exchanges of wealth only occur within a currency controlled by the authorities. They are not really concerned about minor instances of tax avoidance; the primary concern is that large scale economic activity could start occuring outside of a government controlled credit market place.
The goal here is to ensure that Bitcoin is financed in USD, and that the finance of this asset remains in government controlled credit. You can borrow bitcoin sure, but its in USD credit markets.
You can't at this stage get a bitcoin-mortgage, or a bitcoin credit card that never references USD. Imagine if you could transact in bitcoin all the time, and post assets as collateral to get bitcoin loans with interest pay-able in bitcoin. This would be a point where people stop measuring bitcoin in USD and start measuring things in bitcoin, and is something the US regulators seek to avoid at absolutely all costs.
> The key thing is ensuring that all exchanges of wealth only occur within a currency controlled by the authorities.
I don’t think even this is a requirement. Really all you need is all large transfers of wealth to be reported to central governments so they can collect tax, and enforce money laundering prevention rules.
Don’t think a government really cares what currency you use, fiat or crypto, as long as they get their cut in a currency of their choice.
They care a lot about control over credit markets. The entire premise of central banks controlling inflation via the money supply becomes precarious when people are able to issue and access credit outside of the controlled money supply.
You're entirely right that they want their cut, but they also don't want to end up like a country such as Indonesia or Vietnam where all the financing has to be organised in the USA. The US FED can print money during a recession to ease credit conditions; many non-western countries have no such luxury because while they might have a sovereign currency, all the serious enterprise in their country is financed in New York and cities in Western Europe.
I'm way behind on my news and weak on understanding. I thought I had read that the total number of bitcoin has an upper bound. How can you have interest when there's an upper bound?
I mean, I could lend you 500 sheep and request 500 sheep + 10% per annum for each year you hold my flock. If you held for 1 year, it would be 550 owed. 2 years, 605. 3 years, 665.
With sheep, you might approach this by breeding them with the aim to produce more sheep than are owed, or selling the wool to buy more sheep or whatever.
However, we could also do this with a scarce and inorganic resource such as palladium ingots. In this case there can still be interest but you would have to exchange other resources in order to acquire more palladium to pay back the loan. It is still functional provided the market for palladium has good liquidity.
EDIT: for more clarity, you could borrow bitcoin with a bitcoin-interest component in order to acquire an asset. Then if you could get paid a salary in bitcoin as well, you would be able to pay the loan back.
While you may not be wrong with your conclusion, you're likely wrong withe the argument behind it. Something being done "like this" in the past is not an argument for or against continuing.
Counterpoint: Throughout all of human history people warred, raped, pillaged, and enslaved.
Because it's cumbersome enough to use cash. My main problem with cryptocurrencies isn't that it's used by organized crime, but that it risks eroding public trust in the tax system. In high tax/high trust systems, that can be disastrous.
Is it a bad thing? Maybe taxes shouldn't be a thing, or should be low enough that it's easier to pay them than to dodge them?
One of my problems with taxes is that it's essentially a free, automatically-replenishing pool of money for stupid politicians/government officials to spend recklessly (often prioritizing short-term wins that give them the most political clout) without the "pressure" a typical business in a competitive environment faces to use their money in the most efficient manner possible.
Very few low-tax countries are pleasant to live in for the average human being. Clamors for low tax are inevitably made by millionaires or misguided people that believe they might one day be millionaires. Taxes exist for a good reason and have a demonstrable positive effect on the societies where they are levied. Trust in politicians doesn't factor into that, as taxes are generally spent by government officials.
> taxes are generally spent by government officials
By politicians I meant to include government officials; I've edited my comment to reflect that.
> Very few low-tax countries are pleasant to live in for the average human being
I agree, but I don't see the current situation being great either; I think the countries where high taxes are demonstrably increasing quality of life are outliers, and similarly you can increase QOL without a significant (or any?) raise in taxes.
My point is that in my opinion taxes break the typical market dynamics (that private companies are subjected to) that incentivise the entity (the company, or in this case the government) to spend their money in the most efficient way possible. Instead, taxes are seen as a near-infinite pool of money you can afford to burn with no ill effects because it'll just keep replenishing itself forever.
A recent example in the US another scam going around is the "Solar Roadways" which the electronics engineering community has debunked years ago and yet they recently secured yet another grant from the DOT to burn public funds on something that is known to not work (give this fact, the only reason it was chosen is because someone in power wanted to take advantage of this opportunity to show their support for sustainability/renewable energy/eco-friendliness to gain more political support).
If you pull up a list of countries by tax rates and some quality of life index they seem to be pretty corrolated so I would not say it is an outlier, where as the outliers are those with low tax and high QOL for example UAE, Oman and Qtar, but all those have a pretty significant income in another way compared to most countries.
I think you have the causation backward. The poorer the country the less of a cut the government can take without bringing everything crashing down. These places are low tax because they cannot afford to be high tax.
If you look at local taxes and fees between US cities the same pattern emerges.
I think this is exactly right. Low tax jurisdictions are also often desperate to attract business. Mobile people are willing to pay high tax only when they get something else like stability and high quality of life
>> If you pull up a list of countries by tax rates and some quality of life index they seem to be pretty corrolated
Try correlating restrictive immigration policies and quality of life index. Should we tax people a lot and make it very hard for immigrants to become citizens? Scandinavian countries do precisely both.
Compared to the US almost every country has lax immigration policies. Specifically for Sweden, I would say that it doesn't have significantly more strict immigration policies (language, job skills that are required) than any other EU country that someone would actually want to emigrate to.
Low government spending as a percentage of GDP is strongly correlated with higher rates of economic growth [1], which is a strong indication of a well-functioning society.
Maybe in the nice countries taxes are high because it's possible for them to be high, what with it being a nice country full of nice rich people that accept to be taxed.
Maybe in not-so-nice poor countries (which again means the people, we're not talking about the landscape here) the goverment would love nothing more than to raise taxes but it's impossible for them because the people just won't take it.
Oh, and if you're still thinking the other way around: No, starting with high taxes doesn't work to make your not-so-nice country into a nice one (Google "Communism")
Taxes are corrupt. I profited from a publicly funded project in CA and the abuses were atrocious. You should minimize your tax burden as much as possible.
What exactly is this scary crime that is supposively happening with money? They didn't need much money to do 9/11 besides some airline tickets and box cutters, I'm sure it wouldn't trip any bank report flag that would have allowed them to stop it from happening. Organized crime, is that even a thing? If no one is even going after obvious ico scams that have defrauded investors out of hundreds of millions of dollars and other similar things operating out in the open then what exactly are they so scared of that they want to track every transaction? It's just money, what's wrong with someone buying something?
To put it more succinctly, no part of the Patriot Act would have flagged the 9/11 terrorists.
The Bank Secrecy Act and every expansion of it (like the Patriot Act) is just some data broker's pet project to fill some lucrative government contract.
So much of this feels like someone invented a teleporter and now reactionaries are condemning teleporters because they can be used by smugglers to evade customs enforcement.
But the cat is out of the bag. The smugglers are going to keep using it regardless of what rules you impose on law biding citizens.
and otherwise law abiding citizens are the only ones ensnared by this.
most of the time its because they are paranoid about triggering government reporting requirements that they don't understand, and avoiding that is a crime too!
its always the people without money trying to act sketchy about $10,000 so they can avoid being seen as sketchy
Terrorist acts are only part of it though. Sure 9/11 was cheap but implementing punitive sanctions across countries hundreds officials requires an awful lot of tracking and monitoring.
As regulators catch up you can expect same forms and reporting for any crypto account as a regular account. If you ignore the rules expect big penalties until you comply- just like how banks have been paying billions in fines and are now tarpits of paperwork.
> The problem now is that a lot of cryptocurrencies are prime targets for money laundering, financing organized crime and terrorism networks.
I'd argue otherwise. A good (or successful) cryptocurrency should allow such transactions and be safe from the government. A good cryptocurrency should be ready for adversity and if it is censorship-resistant and really private, the government shouldn't have much power over any transaction.
> Our old-fashioned bank system is far from perfect but it is harder to do illegal things unnoticed, banks report thousands of cases to authorities every year.
We are happily open to suggestions on ways to stop crime that don't involve collecting any additional data, but I think you'll find it very difficult to come up with systems that satisfy both stakeholders here, as the way I see it they are at a constant impasse.
Capitalism will sort it out. There are perverse incentives for violations of privacy in almost all consumer verticals. When the surveillance stops being profitable we will be free.
The main real-world uses for bitcoin are (1) evasion of currency controls and (2) facilitation of extortion and fraud. That's all illegal, btw. The surprise is FinCEN didn't act until now to align its surveillance of bitcoin with the rest of the financial world. I also would speculate that the short action timeline and comment period have a typically cynical purpose to deploy one of a grab-bag of regulatory actions at precisely the moment the price of bitcoin has again caused a stir.
Bitcoin isn't worth fighting for here, sorry EFF, but it is a useful canary warning about the current state of low financial freedom and privacy (by historical standards) and surprising degrees of unofficial suppression of viable alt-moneys. I would be happily surprised if the FinCEN reg forced unlawful use cases out of the bitcoin ecosystem leaving a vibrant, healthy marketplace....
>>Bitcoin isn't worth fighting for here, sorry EFF, but it is a useful canary warning about the current state of low financial freedom and privacy (by historical standards) and surprising degrees of unofficial suppression of viable alt-moneys. I would be happily surprised if the FinCEN reg forced unlawful use cases out of the bitcoin ecosystem leaving a vibrant, healthy marketplace....
This is a completely incoherent paragraph. In the first half you bemoan the lack of financial privacy and freedom, and in the second cheer on privacy-violating and freedom-suppressing FinCEN regulations.
The bitcoin ecosystem is a cesspool of ransomware payoffs, international money laundering and speculation. Eliminate 2 of those use cases via financial surveillance and I will be happily surprised if the 3d survives, or if any similarly robust marketplace springs up from the ashes. Because the bitcoin ecosystem is such a mess, it's not worth saving, in my opinion. It's a feature, not a bug, and it gives all alt-moneys a bad reputation.
I don't like dragnet-style financial surveillance, in general. If it bothers you when applied to bitcoin for philosophical reasons, it should bother you more when applied to other alt-moneys with less nefarious uses.
Any dragnet surveillance applied to Bitcoin will apply to other alternative digital currencies as well. If you want a future where people have financial privacy/freedom, you should not welcome dragnet surveillance of any digital currency, let alone the current flagbearer of digital currencies.
We should not sacrifice privacy to make law enforcement easier. It's ok to make law enforcement work harder and less efficiently rather than the people they serve.
I don't see how this is about "privacy". How are you defining that?
I'm not even sure why anyone would cant to consider money exchanges "private". You want currency exchanges to be recorded for auditing, at the very least. The idea of invisible transaction causes and allows more harm than good.
Fiat barter is always an option if you want to avoid a ledger.
n. The quality or condition of being secluded from the presence or view of others.
n. The state of being free from public attention or unsanctioned intrusion.
I would argue that these new regulations are in a way a breach of the Fourth Amendment, which is supposed to protect people from unreasonable searches.
The way I see it: Governments have already lost the battle with decentralized tech stacks - the ship has sailed. They can propose and push just about any regulation. They can start whitelisting/kyc Bitcoin wallets, trace transactions and whatnot, but almost all valuable protocols for p2p transacting are open sourced and we can always run a new blockchain network under the radar. The ability to own a locally generated key pair in such a network and, under the assumption that one already owns some assets tied to that specific network, one can freely transact and interact with other parties safely - is something that can never be regulated. While I'm transacting within boundaries of such a p2p network (i.e. not exiting to fiat) I should be safe. Needless to say that I'm expecting even more of the blockchain development going in these directions to make network resistant to government's regulatory attacks.
You know, I really would have thought that the Trump administration would have represented the "deconstruction of the administrative state": https://www.washingtonpost.com/politics/top-wh-strategist-vo.... This is the common framework that justifies reducing the activity of the US State Department, generally relinquishing the status of the USA as world police, and a sort of libertarian view of personal liberties.
In that framework, you'd think the administration would be very against the government monitoring all financial transactions. Trump himself you'd think would greatly enjoy legally being able to anonymously move any amount of money around. Trump can personally direct FinCEN policy as it's part of the executive branch. Yet here we are, the policy is undistinguishable from the Bush or Obama years.
There could have been silver linings for personal liberties to this administration if they actually stuck to the principles they claimed.
This may come as a shocker, but the principles that any politician claim sooner or later tend to crumble when faced with the realities of government. In the case of libertarian principles, what you find is that the core of the principles that survive the governing machine is but to relieve the rich of taxation and other cumbersome regulation.
The pretty principles live on in the rhetoric, but any objective onlooker can not avoid perceiving them as hollow to the point of deception.
You can spend a decade developing a provably-anonymous cryptocurrency (which we have indeed now done), and all it takes to break your anonymity is a law that forces you to report all transactions on a form, or else face prison time.
FinCEN was particularly aggressive and quick to act here, so I do hope they change course, especially given the unusually short comment period. This is where cryptocurrency users should be thankful for some of the less-centralized bodies in the ecosystem (e.g. Coinbase) who will happily spend millions (if necessary) to help fight these actions legally on behalf of their users and business.