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Bitcoin The Almighty Buck

US Wants To Officially Treat Crypto Anonymity Services As Suspected Money Launderers (wired.com) 54

Posted by BeauHD from the so-long-to-privacy dept.
An anonymous reader quotes a report from Wired: Hamas' attacks against Israel on October 7 have shifted the geopolitical landscape and triggered a looming Israeli ground assault in the Gaza Strip. Now the ripple effects are reaching the cryptocurrency industry, where they've become the United States Department of the Treasury's rallying cry for a crackdown on cryptocurrency anonymity services. The US Treasury's Financial Crimes Enforcement Network (FinCEN) [on October 19th] released a set of proposed rules that would designate foreign cryptocurrency "mixers" -- services that blend users' digital funds to offer more anonymity and make them harder to trace -- as money laundering tools that pose a threat to national security and would thus face new sanctions and regulations. The new rules, if adopted following a 90-day period of public comment and debate, would potentially represent the broadest restrictions imposed yet on the mixing services and could make it far harder for cryptocurrency holders to put their money through the services before cashing it out at a US cryptocurrency exchange, or even at a foreign exchange that accepts US customers.

While the proposed rules were almost certainly in the works long before October 7, the Treasury's announcement tied the push for a change in policy directly to the use of cryptocurrency by Hamas and militant groups in Gaza. "The Treasury Department is aggressively combatting illicit use of all aspects of the CVC ecosystem by terrorist groups," Wally Adeyemo, deputy secretary of the Treasury, wrote in a statement, using the term "CVC" to mean convertible virtual currency. Adeyemo says that this includes Hamas and Palestinian Islamic Jihad, a militant group that often aligns with Hamas, which Israel blamed for an explosion at a hospital in Gaza earlier this week.

Cryptocurrency mixers have existed almost as long as Bitcoin itself. They offer to take in a user's cryptocurrency, blend it with that of other users, and return the funds so that they are harder to follow from their origin to destination on blockchains, which generally record every transaction in full public view. The Treasury's rule change would designate those cryptocurrency-mixing services -- or at least the majority of them that are based outside the US -- as a "primary money laundering concern." They would thus be considered a threat to US national security as defined by section 311 of the Patriot Act, a section of the law designed to restrict how domestic financial institutions interact with potential sources of terrorist financing. The rule change would mean that US financial services, as well foreign ones with US customers -- including cryptocurrency exchanges -- would have to go through extra record-keeping and reporting requirements for funds that have touched a foreign cryptocurrency mixer, and it might even allow the Treasury to block US exchanges from handling those funds. "We've never seen anything like this before," says Ari Redbord, the head of global policy for TRM Labs, a blockchain analysis firm. Redbord notes that the rule change isn't proposing a blanket ban on foreign mixing services, only new rules for interacting with them. "The reality, however, is that 311 actions oftentimes have a sort of name-and-shame effect, where people are just not wanting to engage with these platforms out of fear of being caught up in money laundering or other type of illicit activity."

"I think the challenge for regulators is, how do we thread the needle between stopping illicit actors from using these platforms but at the same time allow regular users to enable some degree of privacy?" Redbord added. "I think the concern is that this could very much be throwing the baby out with the bathwater."
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US Wants To Officially Treat Crypto Anonymity Services As Suspected Money Launderers More

US Wants To Officially Treat Crypto Anonymity Services As Suspected Money Launderers

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  • That's exactly it is, laundering. That's the whole point/intention. I don't believe in crypto but I hope I'm wrong and it succeeds or some other type of alternative currency takes the money-monopoly away from the government, who doesn't deserve it in the slightest.

    • Re: (Score:3, Insightful)

      by HBI ( 10338492 )

      Money laundering is so ill-defined that it basically amounts to "doing things with money we don't like".

      I asked the question when I worked for a bank, I got the same blank stare I got from the nuns when I asked religious doctrine questions when I was a kid.

      • Money laundering is so ill-defined that it basically amounts to "doing things with money we don't like".

        I asked the question when I worked for a bank, I got the same blank stare I got from the nuns when I asked religious doctrine questions when I was a kid.

        So do you like my new crypto coin front load? It’s basis is honestly.

      • Pretty sure AML training is one of those mandatory for new hires and once a year things.

        Your bank would have an entire department dedicated to it, using specialized software and a team of people managing the reporting requirements and wrangling source of funds requests.

        If you really can't figure it out, it's what the lawyer and car wash was doing in Breaking Bad.

      • The best definition I have is: exchanging large amounts of money without a proper paper trail.

        If you canâ(TM)t show the government where the money came from or went to, then there is a good chance it will be considered laundering or fraud.

        • Yeah thats basically it, however its not just cash. property, other goods/services can also be used that's where it can get a bit hazy. Like If I have a car deal import business and I just buy my goods at a 30% premium than most other people do and sell them for a loss well that could easily be money laundering. The net effect is a flow of money that has no good explanation.

      • Can you tell me which bank you work for? (Score:4, Funny)

        by rsilvergun ( 571051 ) on Monday October 23, 2023 @09:11PM (#63947719)
        It's not that I don't believe you I just don't want a bank anywhere that would hire somebody with ideas this bad.

        • It's not that I don't believe you I just don't want a bank anywhere that would hire somebody with ideas this bad.

          He could have been a janitor.

      • Re: (Score:2)

        by XXongo ( 3986865 )

        Money laundering is so ill-defined that it basically amounts to "doing things with money we don't like".

        Money laundering consists of transactions designed to obscure the source of money to make it untraceable.

        Not sure why that's hard to define.

    • Re:Of course they consider it laundering. (Score:5, Interesting)

      by Kisai ( 213879 ) on Monday October 23, 2023 @09:54PM (#63947791)

      99% of it is laundering, and the 1% that is legit is for the people who are doing legal activities but can't use banks or credit cards to pay for those products because the banks either charge a high commission or refuse.

      Legal, but credit companies will generally refuse or flag:
      - Purchases of cannabis
      - Purchases of sex toys/at sex shops
      - Purchases of adult-oriented artwork (eg paintings, comics)
      - Purchases of porn, particularly gay porn

      Because federal US government people still regard cannabis as schedule I, it is IMPOSSIBLE to purchase cannabis with anything other than cash. So those crypto anonymity services provide a useful service so the company can avoid dealing in cash. Insurance companies won't insure them for losses when they get robbed.

      You could say "maybe people shouldn't have these vices then", yeah, well, I agree, but I would also want to see Tobacco, Alcohol and Firearms included under the "shouldn't have these vices", but I'm sure people will balk at the very idea that they can't make a wine Spritzer let alone consume a Spirytus. My issue is not that people have these vices, but that they are marketed in ways that they appeal to idiots who think it will make them cool or something.

      At any rate, the solution to this, really, is to limit crypto anonymity services to under $100USD or under $25USD and to have a cooldown on the recipient so that any amounts sent are delayed by 1 hour, thus the ability to quickly use it to move money is hampered.

      • Legal, but credit companies will generally refuse or flag:
        - Purchases of cannabis
        - Purchases of sex toys/at sex shops
        - Purchases of adult-oriented artwork (eg paintings, comics)
        - Purchases of porn, particularly gay porn

        Weed and gambling transactions are where you're not going to be able to use a credit card. Apple Pay also has some of their own strange limitations, such as not allowing transactions for firearms. Unless you're not talking about the USA, this is the first I've ever heard of someone claiming the credit card companies have a problem with adult entertainment oriented purchases.

        My experience as a gay guy has been that there is absolutely no shortage of gay porn sites which are more than happy to get ahold of

      • Re: (Score:2)

        by mjwx ( 966435 )

        99% of it is laundering, and the 1% that is legit is for the people who are doing legal activities but can't use banks or credit cards to pay for those products because the banks either charge a high commission or refuse.

        Legal, but credit companies will generally refuse or flag:
        - Purchases of cannabis
        - Purchases of sex toys/at sex shops
        - Purchases of adult-oriented artwork (eg paintings, comics)
        - Purchases of porn, particularly gay porn

        Because federal US government people still regard cannabis as schedule I, it is IMPOSSIBLE to purchase cannabis with anything other than cash. So those crypto anonymity services provide a useful service so the company can avoid dealing in cash. Insurance companies won't insure them for losses when they get robbed.

        You could say "maybe people shouldn't have these vices then", yeah, well, I agree, but I would also want to see Tobacco, Alcohol and Firearms included under the "shouldn't have these vices", but I'm sure people will balk at the very idea that they can't make a wine Spritzer let alone consume a Spirytus. My issue is not that people have these vices, but that they are marketed in ways that they appeal to idiots who think it will make them cool or something.

        At any rate, the solution to this, really, is to limit crypto anonymity services to under $100USD or under $25USD and to have a cooldown on the recipient so that any amounts sent are delayed by 1 hour, thus the ability to quickly use it to move money is hampered.

        If the US didn't have such a hard on about controlling consensual sex, 99.9% of Crypto would now be money laundering.

        • - Purchases of cannabis
          - Purchases of sex toys/at sex shops
          - Purchases of adult-oriented artwork (eg paintings, comics)
          - Purchases of porn, particularly gay porn

          Right, so it's 1% crimes, and 99% things that aren't crimes but are illegal. Come back with a warrant.

      • No. That's authoritarian bullshit.
      • uh, no? My wife and I enjoy erotica and we purchase all of the things you mention (except cannibis) online with our credit cards with no problems whatsoever. Go to amazon search sex toys and you will see they sell quite a lot... I have purchased personalized erotica via etsy and they were all paid via paypal which then billed my credit card. Cannibis, yeah, most likely. In most states for sure, but I am pretty sure that those states that tax cannibis sales (USA) will want their tax dollars delivered to th

      • Re: (Score:1)

        by kc-guy ( 1108521 )
        Don't forget the organizations censored for politically inconvenient speech, or individuals who want to purchase a firearm without their credit card company reporting it to the BATFE for further scrutiny.

    • Re: (Score:3)

      by khchung ( 462899 )

      That's exactly it is, laundering. That's the whole point/intention.

      Yes, 100% correct.

      If someone provided a similar service with real money, i.e. you send them X dollars and they will mix it with money from other clients, bounce them all through multiple payment services, to conceal the eventual recipient of your X dollars, that would have been shutdown as money laundering on day 1.

      The only unusual thing is it took so long for the authorities to act.

      • The only unusual thing is it took so long for the authorities to act.

        I agree. IMHO, the real question is if "laundering" should be illegal. It seems like it wouldn't be such a problem if the government wasn't dead-set on stealing from folks in the form of income tax.

      • Q: Who would take my money, mix it with other currency, and then let me withdraw currency unrelated to my original deposit?

        A: A bank

        • Not the same, because the bank keeps records of EVERY transaction.
          These "mixers" are NOT keeping records, that's their selling point. They have only one purpose: to obfuscate where the cryptocash came from.

  • Just wait until the Treasury discovers how much money is being laundered via USD and debt schemes.

  • What took you so long?

  • It seems like they're intentionally creating some nebulous definition of what constitutes "dirty" cryptocurrency in order to make it so burdensome for exchanges to accept deposits which originate from any untrusted sources that they reconsider if it's even worth remaining in business.

    Can't say I'm surprised.

  • Next stop... swapping currencies (Score:3)

    by ctilsie242 ( 4841247 ) on Monday October 23, 2023 @10:56PM (#63947915)

    If BTC tumbling/coinjoin/etc. services are outlawed, or coins are tainted by using them, there is always just changing all BTC to Monero, ZCash, or some other currency, then back to BTC, perhaps split among wallets. All this will do is make altcoins with anonyminity more valuable, perhaps get development and more ICOs with anonymous currencies, which would see a lot of people flock to them.

    It wouldn't take much for a Bitcoin 2.0 to come out, which fixes the pain points of BTC. Everything from being able to prune the blockchain so one doesn't have to parse 509 gigs of data per transaction, to anonymous trading, to even setting up ephemeral Tor-like nodes to ensure that tracing who made what transactions is intractable. Add in multiple ways to mine like proof of storage or other ways to grant blocks that are not energy hogs, some assurance that a 51% attack is not possible, and that might bring a lot of whales that way. Especially if the coin was more of a "companion" to BTC or Ethereum like silver is to gold.

    If someone did make a Bitcoin 2.0 which addresses these faults, all these companies spending billions to use state of the art AI to figure out who owns what wallets will all be for naught, as people just swap currency to BTC 2.0 and back.

    • Hah

      BTC 2.0 eh? Ever heard of BCH or BSV? Many have tried.

      • Bitcoin Cash has the name, but what not really the function.

        What "Bitcoin 2.0" would be isn't something that shares a similar name, but an altcoin designed from the ground up to fix the decade+ issues that Bitcoin has with it. Something that has the ring signatures of Monero, ability to preen the blockchain, and so on. Something that doesn't take so much energy to make a transaction, and something where the blockchain is useful for vetting a coin isn't double-spent, but that's it.

        The problem is that peopl

        • The real problem is that BTC is dominated by miners with an entrenched interest in not changing the block chain in any meaningful way. Scores of maximalists support this position. You can create the perfect replacement for Bitcoin on a technical level, but will anyone adopt it? Probably not. At least not among those mentioned above.

          I mentioned BCH and BSV since Bitcoin core has already gone to war over its future before, and the forces of inertia won out. The old problems that BCH and BSV attempted to s

  • Our own government funds Hamas and their Iranian backers. Now they want to use Hamas as an excuse to go after crypto mixing services? Please.

  • Meet the new boss, same as the old boss.

  • Who is paying Mike to say this?

  • Money laundering IS GOOD, not bad (Score:4, Insightful)

    by furry_wookie ( 8361 ) on Tuesday October 24, 2023 @10:44AM (#63948989)
    EVERYONE should be laundering their money. The government has no legitimate claim to know everything about you, your finances and what you do.
    • sooooo, you're saying the government has no right to tax you... well, I beg to differ, they are required to by law. You just don't like it.
  • In the grand scheme of things, I'm way more concerned about the money laundering that our own members of Congress engage in.

  • Because the service offer is literally money laundering if you accept crapcoins as "money".

  • No one can live without privacy, although everyone stupidly tries. Forget Bitcoin, Monero, or whatever other shitcoins you use that government regulators are poised, ready to obliterate. Use Pirate Chain instead. 100% mandatory anonymity. Zero knowledge proof technology leaves exactly zero traces behind. Perfect privacy on send. https://pirate.black/ [pirate.black]

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