The Slow Criminalization of Peer-To-Peer Transfers | Hacker News Reader

The Slow Criminalization of Peer-To-Peer Transfers

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181 pointspetethomas191 comments

If we want to draw the connection to cash, companies that trade in large amounts of cash are also subject to regulation and reporting. For example, U.S. financial institutions are required to file Currency Transaction Reports for deposit, withdrawal, exchange of currency, or other payment or transfer that involves more than $10,000.

Any organization that is facilitating those trades is subject to financial regulation, even if the trade is in cash. Indeed, if the transaction crosses the border even individuals carrying cash have to report it for sufficiently large amounts: https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_035....

If anything this enforcement is treating bitcoin more like cash, not less.

Agreed. The problem is that Bitcoin wants to be taken seriously as a currency while at the same time not being subject to all the rules and regulations imposed on currencies.

This was predicted years ago by most critics but was most often just hand-waved away by advocates, most responding that it was impossible to regulate the system itself.

Well.. yeah, so you regulate assets and income of the people and companies involved. That's how it works with regular currency too.

It's a problem any currency system has (even barter!)

Some of us see P2P cryptocurrencies as a way to opt out of government regulation. Governments can't regulate entities that maintain strong anonymity. Most vulnerable are asset movements to and from meatspace. But there are well-known methods for dealing with that.

It's... like you're repeating exactly the objection I mentioned and not addressing the core problem with it.

Oh no, that is what you just did. Ok then, carry on.

Yes, I'm arguing that these rules and regulations are the core problem.

you cant have your cake and eat it. you cant just opt out of regulation and not all the other things. you would litterally have to start your own nation from scratch.

Do you think people like Rosa Parks should have started their own nation? [0]

What an incredibly frightening way of thinking.

[0] https://en.wikipedia.org/wiki/Rosa_Parks

Rosa Park fought to get equal rights. You want to have privileges. The fact that you don't see that is the only frightening thinking here.

What we want is the right to be left alone. It's a form of nonviolent resistance.

Wanting to be left alone is exactly a privilege.

Why do so many libertarian dudes suddenly all want to be Rosa Parks? And how did they miss the part where she was arrested and convicted, as part of a coordinated activist effort to change specific laws?

She didn't just break the law and expect there to be no consequences. That's not how non-violence resistance works.

True. But it's not in meatspace. It's primarily online. And it's not really a nation. Voluntary associations only.

What you don't get is the ability to fight wars in meatspace. But long term, that's not such a bad thing. You'd need to focus on asymmetric cyber warfare. Maybe drone armies, if it came to that.

It doesn't matter whether it's online. If you want to be able to use it in meatspace for meatspace things then it will be regulated.

And governments have all reason to believe that when people try hiding money streams from them it is for something illegal like tax evasion, money laundering, etc.

I don't know about you, but I wouldn't like to live in a world with even more powerful criminal forces.

As I see it, the most powerful criminals control governments. And then they get to define whatever they don't like as criminal. The game is rigged. But fighting is pointless. It's better to just walk away.

The problem with no- or low-state solutions is that you remove accountability to the people that you even have in places like China.

I don't see a lot of "accountability to the people" anywhere. Just bullshit, propaganda and exploitation. The truly wealthy own everything, and the rest of us are pawns at best.

It's been that way for thousands of years. I see the Internet as the best shot for transforming that. Because it can empower individuals, permit free and private association, create space for people to be free of coercion, and so on. Time will tell.

> entities that maintain strong anonymity

An impossible task for the vast majority of people. Especially since bitcoin is not anonymous.

> An impossible task for the vast majority of people

I freelance ;)

> ...bitcoin is not anonymous

Bitmixer.io / bitmixer2whesjgj.onion

foggeddriztrcar2.onion / foggedddxlunnaaa.onion [Bitcoin Fog]

grams7enufi7jmdl.onion/helix/light

See https://www.ivpn.net/privacy-guides/advanced-privacy-and-ano... (somewhat outdated, but hey).

The whole reason we need bitcoin is to circumvent these unjust and immoral laws. If the united states wants to maintain the predominance of the US Dollar as a medium of exchange and a reserve currency, the best thing it could do is repeal the Bank Secrecy Act and dismantle FinCEN.

> we need bitcoin is to circumvent these unjust and immoral laws

What about fighting tax evasion is unjust or immoral?

The tax part.

You are right that they are treating it similarly to cash. The problem is that our society is slowly criminalizing cash as well. If cops catch you with a large amount of cash, they can just take it with no recourse. It's assumed to be for criminal activity, since why else would anyone transport cash? Using cash is increasingly seen as suspicious and possibly criminal behavior. If you deposit a large amount of cash it's reported to the government and you may even be investigated. Some other comments below have better examples.

The government stopped printing large bills and inflation is slowly going to make the smaller bills worthless. The same also applies to laws. The law says "any amount over $10,000 needs to be reported". And as inflation continues, the actual amount of value that represents becomes smaller and smaller from what it was when the law was originally written.

Before you run away with your paranoid hat on, think about it the other way around: voters want something done about organized crime, and politicians look for the easy wins. Since large untraceable cash transactions are almost always criminal in nature, it makes sense to lower the weight of evidence required to seize unusually large amounts of cash.

And frankly, I'm fairly comfortable with that. It'll never affect me, because I don't deal in large cash transactions, and I can't imagine any world in which I would. The largest would be buying a second-hand vehicle privately, but I wouldn't spend 10k on a private purchase - the mugging risk is too high.

Yes, poor saps do get caught up, especially if they're doing something like collecting money for charity - small numbers add up. They're ought to be easy ways of appealing the decision for legitimate reasons.

I don't really buy the slippery slope argument either. I think the limit will be quickly raised once it's obviously too low.

Alternatively, the cops could do actual police work instead of robbing people of their cash at random.

>And frankly, I'm fairly comfortable with that. It'll never affect me, because ...

Statements such as those aren't sufficient justification for shredding freedoms that have existed for hundreds of years.

It's also worth noting that the seized cash usually benefits the organization seizing it, creating a perverse incentive in the process.

If people would get off their lazy asses and vote, we could have nice things.

Here's what voting can get you: California Governor Signs New Criminal Conviction Requirement For Civil Forfeiture

https://www.forbes.com/sites/instituteforjustice/2016/09/29/...

Err, voting didn't create that law. Voting simply elected the person as the Governor. If the Governor didn't already want to institute the law (regardless of campaign promises), the most voting could do is replace them with someone the voters hope will do what they want (but probably won't).

So, voting didn't enact the law, all it did was indirectly create the conditions where the law could come into being.

Do you think tax is robbery too?

The people are sovereign in a democracy. That's how it works.

Don't take cash from citizens without proper process through the courts. Simple as that!

What is the proper process?

In the US, civil asset forfeiture laws are state specific. Wikipedia has a good break down by state if you're interested.

https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United...

Probably

i) a court case

ii) a judge giving a decision

iii) proper legal representation, free if needed, for everyone involved

iv) possibly "balance of probabilities" rather than "beyond all reasonable doubt".

Those things would prevent a lot of the abuse that the US Civil Forfeiture system sees.

http://www.washingtonpost.com/sf/investigative/2014/09/06/st...

> There have been 61,998 cash seizures made on highways and elsewhere since 9/11 without search warrants or indictments through the Equitable Sharing Program, totaling more than $2.5 billion. State and local authorities kept more than $1.7 billion of that while Justice, Homeland Security and other federal agencies received $800 million. Half of the seizures were below $8,800.

> Only a sixth of the seizures were legally challenged, in part because of the costs of legal action against the government. But in 41 percent of cases — 4,455 — where there was a challenge, the government agreed to return money. The appeals process took more than a year in 40 percent of those cases and often required owners of the cash to sign agreements not to sue police over the seizures.

EDIT: throwing in a great specific example:

http://listverse.com/2015/06/29/10-egregious-abuses-of-civil...

> restaurant owner Dale Agostini was pulled over on the same stretch of highway as Jennifer Boatright and Ron Henderson for the same reason: driving in the left lane without passing. After using what turned out to be an untrained police dog to sniff the vehicle, officers found over $50,000 in cash but no evidence of drugs. Agostini explained to the officers that he had family in the area and he intended to buy restaurant equipment at a local auction with the cash he was carrying. At the time, Agostini was traveling with his fiance and their one-year-old child, along with a cook who worked at Agostini’s restaurant.

> Agostini and the passengers were informed by Lynda K. Russell, the district attorney who had arrived on the scene, that they would face charges for money laundering and for engaging in organized criminal activity, and the baby would be turned over to Child Protective Services. The car, the $50,000, six cell phones, and an iPod were all seized.

> No criminal charges were ever filed.

Oh I think there have been terrible injustices, and appeal ought to be easy and swift. There are injustices everywhere in law enforcement; innocent people get killed in the US by police because of the policy of carrying guns, combined with rules of engagement covering their use that minimize discretion. But that doesn't mean I'd advocate disarming police in the US, not without a lot of other changes too.

The point I'm making is that you can't make an omelette without breaking some eggs. There are tradeoffs in public policy, and organized crime is a particularly tough omelette to fry. I'm OK with targeting their binding protein, their assets, with a reduced presumption of innocence, because I think it's works. I'm thinking of the Criminal Assets Bureau in Ireland in particular.

http://www.garda.ie/Controller.aspx?Page=28

Conflating cash seizures with reporting standards is silly - one is not the other and they stem from very different problems in the US.

The two are strongly related. Large cash transfers are an indicator of some quid pro quo in the other direction. If it's a legitimate transaction, it can be reported on. For one thing, that'll help ensure that the correct taxes get paid, whether now or in the future in an audit. Without reporting, it's deeply suspicious; the other half of the trade is probably illegitimate, or someone is evading tax, which is an attack on the state and its people.

That wasn't my point - my point was that the policing issue (cash seizures with incentives because it goes to department revenue, and costly recovery measures for citizens) are a very different problem to the question of whether or not we should have the reporting standards we do - which we absolutely should, for the reasons you note.

"I think the limit will be quickly raised." I can't think of a single instance of regulation where a limit has ever gone up with inflation, or for any other reason, ever. 10k limit across borders for, uh 30 years? It gets more harsh, not less.

EU: "Cash controls - New proposal On 21 December 2016 the Commission proposed to extend the already existing controls on amounts of cash entering or leaving the Union equal to or in excess of 10.000 euros.

The measures will extend cash controls to unaccompanied cash such as cash sent in postal parcels or freight consignments

and to precious commodities such as gold, which serve as 'quasi-cash' and are used to circumvent the obligation to declare.

The proposed changes will improve the exchange of information between competent authorities at national level and between Member States

and allow them to act on amounts lower than the declaration threshold, provided that there are indications of criminal activity."

I'm suspicious the large criminal operations are using cash (or crypto). They are probably using Banks, Politicians and Regulators. These laws are meant to control the simple citizen, or the smaller criminal operations.

I also think we need to be much tougher on white collar crime. There needs to be far more custodial sentences, and not merely fines. People need to go to prison. White collar crime is such a parasitic attack on the complexity of the modern economy that I think it should be dealt with more harshly than petty street crime. Sentences need to be risk adjusted take into account the low probability of getting caught, not just for the specific crime being convicted.

Here's an idea: what if we had undercover police units actively setting up shell companies to try and bribe politicians, and convict them for life if they are susceptible. It's something I wouldn't be unsupportive of, but it would be very hard to get politicians to vote for.

In th US, "bribing" politicians is actually legal. Large campaign donations are not illegal and occording to Citizens vs United, are protected free speech.

As far a white collar crime goes, if you are talking about banking when mention a "parasitic attack on the complexity of the modern economy", I think that bank lobbying has made things that you would hope people would go to jail for, legal or unenforceable.

Thankfully our President is going to "drain the swamp"... /s

That's not true at all. You certainly cant bribe politicians by giving them money directly. You cant even donate it to their campaign like you say. All you can do is donate to an organization they aren't affiliated with or agree to run ads on their behalf.

That's not great, but its a lot different than normal corruption.

What I meant by "bribe" (notice the quotes), was that it isn't illegal to buy influence.

There is a simpler solution make it impossible to seize assets of any variety without getting a conviction first.

If you can't prove a crime you have no business seizing anyone's assets. Innocent until proven guilty is a thing.

I think we live in a democracy, and the people set the rules. If we the people say that large cash transactions get preemptively intercepted that's ok, because the people are sovereign.

Voting for 2 seconds every 4 or 5 years does not make you sovereign, in theory, practice or in day to day reality.

No, we (speaking as a US citizen here) do not set down most of the rules. We instead elect representatives who we "trust" to make the rules on our behalf.

Asset forfeiture was not one of the laws which would have hit the ballots; it came down from the federal level.

> people say that large cash transactions get preemptively intercepted that's ok

It's doubtful that this was never actually presented to the public - at most the public raised concerns about drug runners using their ill-gotten gains too freely, so the elected (and appointed) officials decided to implement a solution this way. It's also equally possible that the public had no input whatsoever in the process.

This is a wholly and totally ridiculous line of argument on several levels. The people merely pick representatives for a whole host of reasons they rarely get a say regarding an individual law so its extremely difficult to argue that a given law is by default the will of the people merely because it exists. Further even if we were to accept such a thing it is insufficient to abrogate our responsibility to exercise our critical thinking regarding the nature and effect of the law.

More importantly the US constitution clearly and in plain language makes such taking illegal unless the government undergoes the arduous process of amending it which would pretty clearly signify public acceptance of such a change.

The fact that such an amendment is not merely unthinkable its laughable seems to suggest that the public will you imagine exists is wholly a figment of your imagination.

You are missing the point. Cash is a way to get around the system when it fails. Every system fails at one point or another. By making cash harder to use, it makes it harder for the population to protect itself against a failing system. Be it war, dictatorship, banks taking over your money like in europe, or just plan economical crisis, an electronic money only country is in a terrible struggle.

More than ever, we need fail safes. Our systems are not bullet proof and they may put us in bad situations in this very life time.

> accused of illegally selling more than $1,500 in bitcoins

Unless I'm missing something, the threshold for reporting Bitcoin transactions is apparently now a fraction of that for cash (if there even is a threshold?).

Regarding how awesome Bitcoin must be, can I just take a moment to point out that only half the reason crap like randomware exists (and hits places like hospitals, etc.) is suboptimal security. The other half is untraceable digital payments. Food for thought.

Bitcoin payments are anonymous, but they are perfectly traceable. Quite the important distinction there.

Tainted money like that would need to be put through a Bitcoin tumbler which is unsafe and imperfect or only ever used to pay for other criminal activities as exchanging it for fiat in an exchange cooperating with any authorities could be pretty hard.

> Bitcoin payments are anonymous, but they are perfectly traceable. Quite the important distinction there.

And I was merely saying Bitcoin has been making untraceable digital payments possible (and practical/easy).

Nowhere was I saying it is impossible to also use Bitcoin for traceable digital payments.

And you'd still be wrong. There's nothing about bitcoin that makes payments untraceable (quite the opposite).

It takes longer, but it's possible.

"It takes longer, but it's possible"?

That's like saying decrypting RSA "takes longer, but it's possible". Yeah, good luck.

There used to be ransomware that demanded cash by mail. RSA analogy? Way too harsh.

That's good to know, I wasn't aware. But cash by mail... at what scale? How many people were attacked?

And I don't see why the RSA analogy is "too harsh". Impractical is impractical.

Floppy disk days, no big thing. But practical enough to work in the wild. RSA bruteforce is (I hope) impractical on a different level.

But tracing bitcoin is not impractical. It's been done.

Isn't the ledger public ? Isn't it easier to track for the authorities than cash serial numbers ?

It's easier in many ways but due to anonymity you have to cross trace more.

But yes, it's WAY easier to trace than cash

It's more like saying "breaking sha1 is slower than md5".

Like, it's more awkward but quite doable especially with decent resources.

Ransomware existed before Bitcoin, generally using something like Western Union.

Bitcoin just became preferred is all. In no way did it "enable" ransomware to exist, it simply lowered the bar.

> Bitcoin just became preferred is all. In no way did it "enable" ransomware to exist, it simply lowered the bar

Would love to know where the heck you pulled the quoted "enable" from, because it certainly wasn't from my post.

And you say "it simply lowered the bar" as if that's somehow insignificant. Actually, it's the entire freaking point. There's orders of magnitude difference between the two. We're not proving undecidability here...

Perhaps the ease with which vulnerabilities can now be monetized will lead to them being found and fixed more quickly, vs being secretly used by more insidious attackers over time.

> Perhaps the ease with which vulnerabilities can now be monetized will lead to them being found and fixed more quickly, vs being secretly used by more insidious attackers over time.

Yes, because we clearly need to fix software vulnerabilities at any and all costs, hospital patients and the poor/elderly be damned. And it's obviously their fault for paying for indirectly supporting the development of insecure software, right? Only an idiot would think tackling the payment side of ransomware might be a better solution. After all, ransomware must've obviously been a bigger problem before; there's no freakin' way our cryptocurrency like Bitcoin has made these problems worse or that it might be causing more problems than it's solving. Clearly the ability to make anonymous or untraceable payments is a human right more fundamental than being able to live a life free of others demanding such ransom from them in the first place.

Your point may be valid, but the tone undermines the post. Derisive sarcasm is only worthwhile if it's amusingly written.

A little bit of background about this site (bitcoin.com). This site is owned by a very controversial figure in the bitcoin world (Roger Ver). Many people feel his use of the domain is unethical, as the URL looks like an official voice for bitcoin when it is far from it.

Satoshi Nakamoto (bitcoin's creator) registered the bitcoin.org site to present information on bitcoin, with the .org domain reflecting the open source, community engaged spirit of early bitcoin development. Roger Ver purchased bitcoin.com from a domain squatter and uses the site to frequently attack core developers of bitcoin and to hype altcoins. From the submission title this article doesn't appear to fall in either of those categories but I think it is still worth pointing out the dubious background of this site to anyone just becoming interested in bitcoin.

Roger Ver isn't an angel, but the core developers are far from deserving uncritical respect. They've failed for 3+ years to implement any of the dozens of proposed scaling improvements.

This is a very political comment. The Core developers are free to do what they want. The software is open source and running it is the choice of the users. The Core developers are not compelled by any means to do any implementation even if the majority of users, exchanges and investors want it.

The parent comment implied that saying anything negative about core developers is a terrible thing, which is a view that many people don't share. My comment was intended to provide some insight into that aspect.

The problem is with deployment, not with development. The code is there.

Well, they haven't released any versions of the bitcoin client that support scaling, either. I do believe the core developers are in charge of releasing new versions of the reference client.

I think using a domain name you paid dearly for, to promote a project you've got millions invested in, and many ancillary businesses in the space you also have millions invested in is entirely ethical. Do you think searchengine.com is unethical because google exists? I'm pretty sure Ver is a bitcoin maximalist as well.

Yeah, I don't think you've supported the "dubious" claim. Also his attempt to create lower fees through software "upgrades" may be flawed, but the intent seems honest to me.

Satoshi Nakamoto also intended for the block sizes to go up after an amount of time, yet the bitcoin core team isn't willing to upgrade and tries to promote their own agenda (blockstream).

The "core developers" not only deserves to be attacked but should face fraud, DDoS and CFAA indictments for criminally handcappig and limiting bitcoin while pushing for SegWit, a proposal that discounts smart contracts they write (Lightning, Sidechains) by 75% while engaging in astrosurfing, censorship, DDoS attacks against those who actually want bitcoin to prevail instead of becoming Blockstream's pet project.

Blockstream, armed with venture funding tried (and is still trying) to "embrace, extend, extinguish" bitcoin to their own "open in name only" system. Just look at their attacks (including DDoS attacks against nodes, and reckless security disclosure motivated by sabotage) against Bitcoin XT, Classic, and Unlimited.

I can't wait until the day they go to jail.

In all of these cases, the bitcoin vendors did not register on FinCEN's website. Registering is simple but by doing so the person/company is required to check ID's of their customers and make sure there is no money laundering involved. Including filing reports with the gov't for any suspicious activity and large cash transactions amongst other things.

How would one launder money with bitcoin?

What would that look like?

Buy bitcoin using cash at local bitcoin atm. Put bitcoin in a mixer. Cash out bitcoin and declare the income.

The last step doesn't work. I mean, you might as well declare the cash as income. You'd be pressed to explain where either came from.

More useful would be to buy Bitcoin with cash, mix, and then invest assets somewhere anonymously. But it's a hard problem, because wherever assets appear in meatspace, there's typically the need to explain their origin. That's where many people get caught. Such as Tomáš Jiříkovský of Sheep Marketplace infamy.

The problem actually seems worse on the Bitcoin side to new than in meat space. Someone might have a Saas business that receives a lot of payments in BTC. Interestingly there isn't all that much traffic. You know like in mani pedi salons that make surprising amounts of money despite never being really packed. It's harder to notice that with a Saas business especially if the logs aren't kept for long. However, it would be strange to see that most of the customers BTC addresses only ever received money from a source other than an exchange and all just used it to pay for the Saas. It would be easier to launder money by just allowing "customers" to pay by mailinh cash to a PO box.

OK, so you just run your SaaS business as Nomen Nescio, using anonymously leased servers, managing them through VPNs and Tor, and so on. Then Bitcoin go somewhere.

The money still isn't laundered though which was the premise of the money laundering operation.

Oh, I get it. You were proposing the SaaS business as the front. I was thinking of it as the income source.

Well, it could be an all-too-typical small startup, losing money to build market share. You could pose as the major investor, living in some war zone, and funding through Bitcoin. But I doubt that it would pass an audit.

Actually laundering money through Bitcoin is nontrivial. You can replace networks of agents, moving cash around, with anonymous Bitcoin wallets. But you may still need to explain where the assets came from.

You can create credit cards on the fly and charge them with bitcoin. Another possible action is to use the money for advertising, product development, etc... and build a somewhat legitimate business. The business might not be quite profitable but that's the price you pay for laundering?

Yes. But spending lots of money in meatspace attracts attention.

Make yourself a Bitcoin "lottery" and win it.

That's good :)

But maybe too obvious. Anonymous lottery, right? Suspicious.

There's a lot of things about the Bitcoin ecosystem that are intrinsically suspicious starting at the very beginning where the creator is unknown.

Buy bitcoin, put in mixer, use it to pay for accounts from your "legitimate" SaaS product.

Through virtual credit card numbers you charged from crypto.

> At first, the purchase of bitcoin was apparently conducted through digital currency exchanges such as Coinbase and Bitstamp, with the sale occurring on Localbitcoins.

That's not really peer-to-peer, is it? It's just acting as a middleman between a peer and a trusted, central exchange.

Peer-to-peer, in my opinion, would be Joe Sixpack selling bitcoins, that he earned by mowing someone's lawn, to someone else who wants to pay for a service sold for bitcoins.

The author belies the libertarian quirk of mind that conflates something being regulated with something being made illegal. Quite different things!

This strikes me as a cousin to the libertarian intuition that if it is possible to craft an activity that is literally impossible for the government to discover, such an activity simply can't be illegal. (I'm sympathetic to this intuition, but it doesn't take long to see the illogic behind it.)

Where is the illogic behind it?

The law can say it is illegal, but it is not enforceable is it really a valid claim?

Yes, it is really a valid claim. It's not even "un-enforceable," it's just "difficult to discover."

Murdering someone and getting away clean doesn't make murder legal.

Largely because, as an extension of the fact that we're discussing the real world and not a fantasy (https://xkcd.com/538/), everything is eventually discover-able, and if you give the government sufficient incentive, they will discover it.

The way you describe this is that it's impossible to make something undiscoverable, which is quite a big claim and one I don't really agree with.

> The author belies the libertarian quirk of mind that conflates something being regulated with something being made illegal. Quite different things!

You're understating how blurred the line is. A Texas regulation on abortion clinics was struck down last year for being too close to a ban on abortion. Regulations on tobacco products are introduced and strengthened over time with the goal of eliminating the use of tobacco. Gun control lobbyists commonly push regulations on gun form factors, bullets, magazine bans, and all sorts of other things since a ban on handguns has been consistently ruled unconstitutional.

I disagree. The practice of medicine in general is one of the most highly regulated professions. It does not follow that such regulation is a slippery slope to the practice of medicine being made illegal.

The contrary argument is easier to make: when an activity is regulated, by the government, it has been officially sanctioned as a legal activity.

There is no logical reason that an activity such as trading bitcoin should be able to be conducted outside of the legal framework of the state the trader does business in.

The value of bitcoin was always to evade taxes and launder money, both of which are criminal enterprises, the only thing that is changing is enforcement.

Don't forget rampant speculation and tulip mania. The author of the article speaks disparagingly of a "money grab" by the government, as if money grabbing wasn't what most bitcoin traders are after.

Government grabs money by force. That is the difference I guess.

Government is the legitimate exercise of force. That's kind of the whole reason it exists.

That doesn't mean this particular use of force is legitimate. Unless you mean that all uses of force by the government are legitimate, in which case you'll have much to defend.

They're almost all legitimate uses of force by definition, unless the government breaks the law. This is orthogonal to moral or utilitarian concerns, however.

But whenever I see people upset government uses force, I think: of course it does. It's like birds using wings or Emacs users using the control key.

My point is that people may be upset at this particular use of force, not of the use in general. That it is legal is beside the point.

I much prefer the government collecting a fair share of money to uphold public goods than criminals running away with all my money (happened to me with shares in a Chinese miner).

Hm, what's the difference? That the money goes somewhere you like?

Perhaps the value is the fact a central bank can't obliterate the value of the currency based on a whim, using a bunch of esoteric economic logic to justify such policies?

see "taxes"

No, instead a small set of Chinese miners can obliterate the value instead.

How wrong you are sir

Have you looked at the current hashrate distribution?

I just did, I consulted https://blockchain.info/pools

The 4 top pools are chinese and amount to almost 40% of the latest blocks mined.

Miners can't change the issuance schedule. They can only delete blocks and form new ones with valid* transactions, and only if they collude, and are okay with destroying the value of their capital assets.

* transactions where the private key associated with a public key holding value authorizes an outgoing transfer of value.

They can stop you spending the money, and the "they wouldn't do it as they would kill the goose" applies to banks and governments too.

How can they do that?

I would recommend going and reading about how the blockchain would in depth, it is complex but interesting.

In short, miners build up a log of all exchanges of currency. While you have to "sign" any payments you make so no-one can steal your money, miners can choose to ignore your payments, and not add them to the blockchain.

Now, if the mining power was spread among many people, someone would put your payments on the chain. However, we are currently in a situation where a very small number of groups (between 4 and 6, depending on when you check), control over 50% of all mining. If they went rogue they could, in principle, lock the account of anyone they like, stopping them spending any of their bitcoins.

Yes they can do that. But that's not what the parent comment asserts. With respect to Banks and governments, they're different in that they have a monopoly over their jurisdiction.

I agree with this to some extent.

As much as I consider myself a 'small l' libertarian, is a society in which taxes could be evaded so freely on such a large scale really desirable? We already struggle with this problem enough with 'traditional' financial tools. It's certainly worth thinking about.

I don't fully understand the article... How is this different from the days when everyone just used cash?

On a side note, I don't really understand how bitcoin is somehow this new anonymous wealth hiding scheme. I can lookup any given wallet that's participated in a transaction (everything is public), so what stops me from de-anonymizing people? Lets say in the future everyone pays with bitcoin online and I'm working for the feds screening packages for UPS. I just saw a few amazon shipments come through for somebody's home address, one with a specific computer, one with a box of pens, and one with a pair of shoes. Go back, look up the item prices and then cross reference with transactions that took place in that time period. Yea, you can use multiple wallets and addresses but at some point, there'll be enough public domain information to track you down, especially with current advances in ML.

I would say much of the negativity is because certain very large institutions have a huge incentive to not want bitcoin to "succeed" and would paint it in a negative light any way they could.

> is a society in which taxes could be evaded so freely on such a large scale really desirable?

Tax evasion has been and always will be an issue of popular morals. All you need for evasion is a medium of exchange (or barter) and for both sides not to report the transaction.

Collecting taxes is trivial when either (or both) of the parties to a transaction report it and impossible if they don't. So the only way taxes can work is for most people to be convinced that the taxes are reasonable and what they pay for is justified. If most people are not convinced then they'll lie for each other and the government is screwed; see Italy. Central banks can't save you from that, only your own citizens can.

And the laws against money laundering have nothing to do with tax evasion by the common man and everything to do with the war on drugs. Putting a stop to that train wreck would only help everybody.

Maybe this is a sign we should switch away from income tax to use, for example, a land value tax. https://en.m.wikipedia.org/wiki/Land_value_tax

Couldn't we just primarily tax income which entities are obligated to report to the government?

I don't agree with the idea that the value of bitcoin was always to evade taxes and launder money. Maybe that's a primary motive for many, but I don't think that constitutes the value of bitcoin in toto.

I have no skin in the bitcoin game--I've never possessed any bitcoin and don't feel any burning desire to in the near future.

As monetary transactions have moved to the electronic sphere, there's been an important shift from how value is verified. With paper currency, the physical form of the coin or bill acts as verification of its value (thus the focus on counterfeiting, etc.). The trust in the value comes from the physical object possessing certain characteristics. Electronically, though, in the current system, everything is based on verification by trusted institutions. So there's no way of Alice paying Bob without it being verified by Ted, who then makes a lot of money and has lots of control over the financial system.

Bitcoin and other cryptocurrency tries to get back to the idea of peer-to-peer financial exchange without needing that third party, which I think is really valuable in society.

I agree with the concerns being raised in the article that there's a danger of criminalizing peer-to-peer financial transactions, because it basically starts granting new power to institutions that were previously held indirectly by the currency issuing bank.

Also, if everyone in my city wanted to start trading in tulips, why should the government criminalize the tulip trade (as opposed to criminalizing not reporting the value of the tulips you own)?

> Bitcoin and other cryptocurrency tries to get back to the idea of peer-to-peer financial exchange without needing that third party

No, it doesn't. Because it relies on validation by a number of third-parties (whose identities and degrees of influence are opaque), who must (collectively, if not individually) be trusted and who (again, collectively, though this can end up fairly narrowly concentrated) control the financial system in the same way as “Ted” in your hypothetical.

That's a silly argument. Bitcoin does not rely on validation by 3rd parties. It relies on validation by a large number of independent third parties who can only act in a way inconsistent with the rules of the system if a majority of them collude. And even then what they can do is very narrowly prescribed (a double spend attack, specifically). That is vastly different from trusting a single independent third party like a bank who has literally no restrictions whatsoever on what they can do unilaterally.

Well, banks have tremendous restrictions on what they can do, in collusion, or unilaterally.

One very good reason for this high level of regulation is that banks are a primary component of the money supply system. Having a functional monetary system is a great thing, for the society as a whole.

It has aspects of being a public good. (Some people argue that banking should be made a government supplied service, for this reason.)

Almost every aspect of modern life is subject to laws and regulations, by a sovereign entity of some sort.

Such an entity has very valid reasons for regulating the use of bitcoin.

Even people using bartering systems have gotten in trouble with the IRS.

> Bitcoin and other cryptocurrency tries to get back to the idea of peer-to-peer financial exchange without needing that third party

What's the benefit? I suppose it becomes faster but seeing that Bitcoin transfers takes hours to verify currently I don't know if that's an argument.

While I am sure those reasons play a part I think thats not even close to all of what makes it valuable. Ease of use is a huge one. I can set up a wallet in less than a minute and someone from across the world can send me bitcoin in the time it takes for it to clear the block, other cryptos even faster.

One can post their wallet address and make jokes on social media and receive bitcoin just because people like the content and are happy to support it. (yes that works)

You can receive bitcoin without giving anyone your name,address,etc,same with sending it to someone and do so for legal purposes.

Try to do any of those 3 above with dollar bills and its just not even in the same realm. I see great value in that.

> Ease of use is a huge one.

Bitcoin is very complicated to use, doubly so to use securely. I've lost count of the number of stories I've read of someone losing everything, and then being chided by the community because "you deserved it, you weren't doing it the ~right way~", and of course there are a thousand mutually incompatible explanations as to what the right way is. This happens so often there's an entire subreddit for it.

(EDIT: For example, 12 hours ago an Ethereum startup burned $13 million because of a typo: https://www.reddit.com/r/ethereum/comments/6ettq5/statement_.... The top comment, of course, is "you deserved it, validate your inputs". I'm not kidding when I say this happens every day)

> I can set up a wallet in less than a minute and someone from across the world can send me bitcoin in the time it takes for it to clear the block.

Which is anywhere from half an hour to days and days, depending on how much you're willing to pay in fees.

> One can post their wallet address and make jokes on social media and receive bitcoin just because people like the content and are happy to support it. (yes that works) You can receive bitcoin without giving anyone your name,address,etc,same with sending it to someone and do so for legal purposes.

I can do all of this with a PayPal account, both more quickly and with lower fees than Bitcoin. I need a real name to cash out, but you need that with Bitcoin too unless you're using a service that's breaking the law and not doing KYC.

> Try to do any of those 3 above with dollar bills and its just not even in the same realm.

Yes, digital transactions are certainly faster and more convenient than physical ones, because that's an apples-to-oranges comparison. On all these metrics though Bitcoin loses to PayPal, and when you're losing to a company that is the embodiment of pure evil, that's not a good look.

That is a UX problem, though. The comparable problem in the 'old' financial system is legislative and cultural. I have tremendous faith that the rough UX edges of cryptocurrencies will get smoothed out by designers and coders looking to make a buck on-boarding people. I don't have the same faith regarding the vested interests of the existing financial infrastructure.

Two things:

1) Bitcoin isn't new, it has been around for years now, and millions in venture capital has been poured into it. It's still a pain in the ass to use at all and basically impossible to use securely. I'm starting to think that if it could be fixed, it would be by now.

2) Not all those problems are UX faults. A lot of us happen to consider transaction irreversibility to be a bug and not a feature, for example.

> 1) Bitcoin isn't new, it has been around for years now, and millions in venture capital has been poured into it. It's still a pain in the ass to use at all and basically impossible to use securely. I'm starting to think that if it could be fixed, it would be by now.

I think it's improved quite a bit in that time. Especially so if you consider some of the newer cryptos. Is it there yet? No. But these things take time. Computer interfaces took a long time to get where they are today. It takes a while to find the right abstractions, and people are constantly iterating on these things in the crypto space.

> 2) Not all those problems are UX faults. A lot of us happen to consider transaction irreversibility to be a bug and not a feature, for example.

Well, I respectfully disagree. You may want to build reversibility as a layer on top of Bitcoin. Perhaps something mediated by trusted third parties. But that should be opt in. You want the underlying financial infrastructure to have immutable, irreversible transactions. On top of that base, you can and likely should build support for reversibility in certain contexts.

> You may want to build reversibility as a layer on top of Bitcoin.

How is that supposed to work? Once the money has been sent to someone's private key, you rely on their cooperation to get it reversed.

To effectively force them to give it up, a trusted third party would have to hold an even larger amount in escrow. But then what if that third party refuses to cooperate? You would need a larger escrow service to hold the escrow service accountable ... or they would have to make their identity public and be personally liable for any losses, putting government regulation back in the loop.

And this is assuming the transaction was made voluntarily in the first place. If someone steals your money they are not going to make the transaction reversible if they can avoid it. Unless you have the clout to convince a majority of miners to do a hard fork, good luck getting your money back.

In Ethereum, reversibility could have strict constraints. For instance, you could devise a contract in which the funds are held in escrow for 90 days, during which time a neutral third party may reverse the transaction using their key.

The important point is that the actual parties to the transaction may choose how they want to mediate this, whether they want reversibility, what conditions they want it to have, and have it all enforced by code and cryptography.

Of course, this burden would only really take place on high value transactions. For most transactions, there'd be a standard configuration people and merchants would use.

A major innovation by Silk Road was its escrow system.

Paypal has been found to have done a whole lot of shady crap. What comes to mind right now is that numerous individuals have had their money held for 6 months with no recourse. They are also famous for letting fraudsters reverse transactions after they already received your goods/services.

> I can do all of this with a PayPal account, both more quickly and with lower fees than Bitcoin.

Thanks for pointing out that the fees of Bitcoin are actually currently higher than those of Paypal, for donations up to around $60. I'll add the details here in case someone else was skeptical about this.

Fees for donations via Paypal are $0.30 + 2.9% per transaction https://www.paypal.com/us/webapps/mpp/fundraising.

Fees for Bitcoin transfers use an auction system based on the transaction size, but according to the current statistics and median donation size for https://bitcoinfees.21.co/ one arrives at a fee of 81,360 satoshis, i.e., $2.02.

I can get Bitcoin in Nigeria. Try doing that with Paypal.

None of those things necessitate bitcoin, though. If your bank let you setup a public deposit-only account with an anonymized alias, you'd get al the same benefits, except that it would not be viable for criminal enterprises. Electronic payments don't require anonymity to be convenient, which is where all the value you refer to comes from.

Bitcoin does much more than that though. It gives you sovereignty. If you've ever tried to get illegitimate bank fees refunded, you may recognize the value of this. When you and the bank disagree about whether or not a fee was appropriate, you have no recourse. Your account balance is what they say it is, and they may choose to deduct what they like from it. This is not possible in Bitcoin. In Bitcoin, nobody else can originate a transaction from your account. Only the holder of your private key may do that.

The existing money/payment ecosystem is pull. Vendors, merchants, and banks pull money from your account. Bitcoin and other cryptos are push. You push money to others. Push is obviously the right underlying architecture for a financial system. Pull architectures are singularly responsible for basically all credit card fraud, for instance.

What is missing from this picture is that whoever wants to send you bitcoins needs to get them. This is still a huge barrier especially with having no idea what your bitcoins are actually worth and also it's a given that your wallet will be stolen sooner or later so you want to buy only a little at a time but that has overhead so...

As for transferring money, Transferwise is leagues ahead in usability when you consider that the sender has some sort of currency and the receiver wants currency (and bitcoin is not a currency, no matter how hard these Ayn Rand types insist, not without a nation state backing it). All you need is a name and an account number and the UI is super friendly and the transfer is cheap.

Transferwise is stupidly expensive. Costs about $140 in fees to transfer $10k from US to Canada vs. ~$0 for BTC depending on how sophisticated you are in timing the trade.

How much does it cost to buy and sell those BTC? And are you saying transaction fees are zero?

No, I'm saying the market is illiquid enough (or it was a year ago when I was doing this) to write a bot and wait for the price difference across the US exchange and CA exchange to cancel out the 0.5% round trip trading fees.

Which, by the way, are already much cheaper than transferwise at 1.4%.

I can't understand what you are talking about. I am in Canada, sending EUR to my brother in Austria. With Transferwise this takes as much as entering the amount, my ebank username and password and it's done.

With bitcoin, hell, I dunno. https://www.quadrigacx.com/account-funding-withdrawal this wants me to do a bank wire to avoid fees which I can't do online, it's one of my major complaints how the simple transfers in Europe are missing in Canada but I digress. If I use interac online, ding, 1.5%. Then I get bitcoins which I need to store securely, send them and it seems https://cex.io/fee-schedule#/tab/trade there are fee schedules expressed in a language I sure never heard of and then my brother also needs to find an exchange to get EUR out of. Seems hell of a bother to me to save a little money. I am not sending 10K, good for you if you do, I am sending 1000 EUR a time or so, we are talking of saving a few EUR. No way.

Still, are those benefits really worth it? Seems pretty minor to me but maybe I fail to see the bigger picture. Sounds like these things can be achieved easily with traditional money as well (like how it works in South Korea, where the social tipping you speak of is very popular). How are states supposed to collect taxes if they can't see anything?

I would also add that there are many cryptos, that comes into play in a few ways. One major difference with traditional "money" right now is the wild price fluctuations. You can have $100 worth of a crypto one day and the next its worth $1000. In some ways that is bad, but in others it is very very good!

I am no bitcoin evangelist by any means, but I do try to see both the positive and negatives. With taxes I have a feeling in due time because of the "recorded" nature it will be even easier to track than cash. How is the government supposed to collect taxes if I sell someone a baseball card for $1000 cash? I personally would pay taxes on cash or crypto just to avoid any hassle.

Criminal to governments, sure.

But peaceful political activism is criminal to many governments. Bitcoin serves an important purpose of helping to circumvent local product/service bans.

Yes, that is likely illegal. But it's certainly not categorically wrong.

With deterministic statements like this you are no different than the current President of the United States. In my opinion you should approach topics from more than one angle and then only make deterministic statements when you decided what agenda you want to push.

There are all kinds of legal and legitimate reasons to pay for something in a way that isn't easily tracked. You can do it now with cash and it isn't illegal. Just because you want privacy does not mean you are a criminal.

But Bitcoin is just Pseudonymous, not anonymous and tracks all transactions publicly.

Regular banks offer better privacy.

Do you have any examples of those?

Buy a surprise gift for someone who shares your bank account.

Don't share a personal bank account. This problem is solved, plus it avoids a few pitfalls in case the relationship or other person goes sour.

Whistleblowing websites or donation to banned media sources.

Bitcoin is the opposite of private. Everything you do, every single transaction, is recorded, shared with everyone, forever.

I found it useful for lower costs in sending money across country and currency borders.

Someone will reply and say it's not actually cheaper, but what is available for the average joe it is definitely cheaper. It's also faster and more convenient if both sides have bitcoin exchange accounts.

One may wonder, however, why traditional money transfer is more expensive if it doesn't even require mining. Is it because of regulations by any chance?

Banks have a very profitable spread when buying and selling foreign currencies.

For transfers of money in the same currency... it's just greed, in my opinion.

Regulatory capture. It's not easy to open a competing bank.

Nonsense; they are also useful for purchasing illegal goods and services!

Peer-to-peer electronic cash has numerous uses beyond tax evasion and money laundering, just as physical cash does.

But to your point, even these laws are part of a new trend. Money laundering is a relatively new crime, and widespread taxation of private transactions only came into force in the early 20th century, with governments around the world instituting income taxation.

50 years ago, almost all transactions were in cash, and the income tax was widely evaded through the use of cash. The government knew very little about what people were buying and how much wealth they had. With the emergence of electronic payment systems, large Trusted Third Parties emerged that collated transactions, and settled them periodically through the respective central bank. These TTPs became gatekeepers and information gatherers, and enabled central authorities to monitor the most intimate interactions of the population - their financial interactions - in incredible detail. Cryptocurrency holds the promise of returning privacy and economic power back to the decentralized distribution that historically existed, but power, once attained, is jealously guarded, and those who have it will likely not want to give it up.

It is also important to say that the trend of making you most likely criminal "because you use cash" will continue.

It is already known restaurants owners are getting in trouble for small deposits. Its not even $10,000 or $9,000 you deposit.. if you happen to make daily deposits of even few hundred dollars you are guilty of "structuring" aka smurfing.

Another thing is to make sure you can track back your physical hoard of cash. My friend's father is in deep explanations with FBI (and over $50,000 in attorney fees) because when his wife passed away he took all the money they hoard at home under floor and put it in the bank. Some $600,000 of it. IRS didn't like that and proving you had a job all your life and you paid taxes on Over $10,000,000 in income did not stop the case.

He might have been better off laundering it.

Or keeping it as cash. Or buying gold informally.

I mean, why put it back into the system?

I should add his wife was an older date and back then people did not trust banks like they used to nowadays. So her husband respected her point of view. Once she passed away he simply didn't want to keep that kind of cash at home.

I rather got that. And it's a sad story.

It's pretty clear that his wife was right about the financial system.

I like the buried lead here - you jump from "inconvenienced restaurant owners" to over half a million dollars under floorboards. That's taking, conservatively, >$10000 a year of losses from cash rate interest alone just sitting there.

> Peer-to-peer electronic cash has numerous uses beyond tax evasion and money laundering

What are the biggest ones? I don't see any point of physical cash personally but I'm in a country where no-one uses it.

Transactions solely transacted via physical cash don't require a middleman be paid at every step. Even if you never see a line item for the middle man its effectively part of the bill you pay when you check out anywhere that accepts plastic.

The middlemen by setting costs that include a minimum charge per transaction also make transactions below a certain threshold non viable because the transaction fee would be higher than the actual charge.

Cash comes with costs too, often paid to middlemen. Large businesses need vaults, secured trucks, extra time wasted counting and verifying it, etc. Even small business will often need extra insurance, plus the risk of getting their employees harmed on the way to the bank.

Ask all those marijuana shops trying to get bank accounts if they don't have any costs passed on to the customer for dealing with cash.

Physical cash is a primitive technology so its use cases are quite limited given the superiority of alternatives.

Electronic cash in the form of cryptocurrency can make money transfer much cheaper than it otherwise would be. It also doesn't require you to jeopardize your privacy every time you form a financial relationship with a new company, as happens every time you use a credit card with a new company. In fact, your privacy is at risk every time you use an identity linked payment system, given the possibility of hacks/leaks.

Or to avoid losing too much money when traveling abroad and using your credit card in bank-initiated currency conversions.

Seriously, some simple grocery shopping I did had a 'currency exchange' tax of about 10% - 15%.

Learn from the Greek. Use cash.

And the Internet is for porn, but some of us would like to avoid paying currency exchange fees and would also like a hedge against their local government's currency. Of course, the wild fluctuations in value don't make this much of a reality today, I think the promise is real. Look at all of the people that lost everything during the cuban revolution, argentina, greece.

I thought the IRS decided bitcoin was property, not currency?

The IRS determined that, under tax law, it was property.

That has no bearing whatsoever on how money transmission business law treats it.

Different laws often have different applicable definitions for similar terms.

For the purpose of money transmission business law, what is considered money and what is not?

The banks and governenrs would never allow a currency that they can't control and tax and which doesn't benefit the rich.

I am not sure how btc, right now, is not driving buy the rich Chinese corrupted business man or government officials...

This is unfortunate. The world needs electronic cash, for all the same reasons it needs physical cash. If it weren't for financial bearer instruments, millions would have died all across the globe over the last decade.

To understand why, you have to understand System D. System D is the global informal economy, and it is $14 trillion in size.

It provides a lifeline for hundreds of millions of people around the world who cannot operate in the formal economy due to a myriad of structural deficiencies in their economy. The only type of money that works in System D is cash. With electronic cash, the opportunities System D affords expand. Suddenly people in the informal economy can rent servers, and sell digital music online. They are not just confined to their local economy. The benefits of economic development through expansion of System D, in reducing mortality rates, crime and civil strife, far outweigh the cost of criminal activity that is enabled by electronic cash at the margins.

> System D

They implemented another useless thing?!?!?

To all the people who think they can bypass the legal system through smart technological solutions:

The judge won't care how smart you think it was.

So if I sell a bitcoin to my friend for cash, I'm breaking the law?

Nope, but if you started a business where your friends gathered to sell each other large enough quantities of bitcoin for cash you would be.

(Edited to add that IANAL and none of this is actually legal advice.)

You are wrong, selling any amount of bitcoin for money is considered money transmission and is a crime without licensing.

Surprising. I thought Bitcoin is classed as a commodity. So if I sell some copper for cash, or a second hand book is that considered money transmission?

Please link to some information.

they're scared that rather then end[ing] the fed, we'll make it irrelevent.

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