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Comment by avenoir | Hacker News Reader

With South Korea trying to regulate anonymous trading on Korean exchanges, makes me wonder how long we have before regulations become more widespread. And if this happens do you think privacy coins even stand a chance?

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Not only they will stand a chance, they will grow substantially as the only way to mitigate the governments efforts to enforce surveillance and regulations. Darknet exchanges will emerge if not there yet. People have been dreaming of real electronic cash nobody can know you have or give to somebody for so long and wont give up easily. By the way this can even happen to be the way to the new kind of economy that relies on reputation and competition rather than surveillance and prohibition.

How does money get in or out of such a system. If you're cut off from all sources of fiat what's the point?

It can grow value of its own as the ecosystem grows and a black market can emerge for the needs of conversion.

The point is that people can still use it for things, and the various dark net markets that exist prove that there's at least some kind of use for unofficial (pseudo?)-anonymous currency.

Though, by no means are darknets the only way of getting some use out of unofficial currencies. There will always be desire and utility for such systems.

Those darknet markets are only used to buy illegal things, or circumvent currency controls.

I understand using a darknet to buy heroin and assassinations, but why on earth would I want to use a darknet market to buy a car? To pay my rent?

So all the spammers/scammers can't see what car you just bought and how much you paid for it and use it for spear phishing?

They can't see how much I paid for a car when I paid with a cheque either. This is not a problem that I, or 99% of human beings have.

Again - what is the darknet supposed to protect me from?

Seriously, I have yet to hear a single legal use case that Bitcoin improves.

Transferring large amounts of money overseas for large purchases is cheaper, faster and safer than using the current banking system. So that's at least one legal use case Bitcoin has improved for me. Even after exchange fees and miners fees, I paid less in fees then I would have using a bank and the transaction confirmed in under an hour vs several days or more through banks.

Mainly referring to the credit card companies that will sell your data.

1. You don't buy a car on a credit card. Dealerships won't even accept cards. Private individuals won't, either.

2. Your counterparty (the dealership) will sell your data, regardless of whether you pay with cheque, cash, bitcoin, gold coins, or lost pirate treasure.

No. Darknet markets also sell things that are unambiguously legal to buy everywhere, as well as products that are legal in some countries but not others. The products on sale are far from only the stereotypical drugs porn warez and fraud (and no you cannot buy assassination on darknet markets; any such offers are a mix of law enforcement stings and scams which take place without any marketplace providing escrow).

If nowhere but darknet markets let you buy a car with Bitcoin or Monero, then only darknet markets are what someone who has cryptocurrency and wants to buy a car with it will use. That being said, you can exchange cryptocurrency for a car safely and legally, without touching a DNM or doing anything shady.

> they will grow substantially as the only way to mitigate the governments efforts to enforce surveillance and regulations

Cash comes with substantial privacy benefits. It's also inconvenient. TL; DR Most people trade privacy for convenience.

What makes you sure convenience will not improve?

> What makes you sure convenience will not improve?

Nothing. I was responding to a comment claiming a national ban “will” cause Bitcoin to “grow substantially.” My position on Bitcoin has always been it’s an interesting moonshot being priced as an eventuality.

With increasing regulations around cryptocurrencies large private transactions will be much more regulated, or possibly illegal, which will cut down on usability. Even if it's actually anonymous and buyers don't have to worry about it sellers will have to or risk being shut down

The SEC is already moving in the direction of trying to mitigate large scale transactions. They know they can't stop the spread of crytpocurrencies, but they're doing everything they can to reduce people using it for larger scale transactions or investments.

>Not only they will stand a chance, they will grow substantially as the only way to mitigate the governments efforts to enforce surveillance and regulations.

Parent meant if it will ever stand a chance as a mainstream, legal, option. Not if it will make a second career as a tool in darkweb networks for buying CP, heroin, and "specialists".

>People have been dreaming of real electronic cash nobody can know you have or give to somebody for so long and wont give up easily.

People have mostly been dreaming of something like that you can easily use to buy regular things, and that wont land you in court if something goes wrong and they find you have it.

Well, the problem with regulating anonymous transactions is you don't know who's doing them.

You don't have to regulate the transactions, you just have to regulate the usage of them.

With Bitcoin that problem may be somewhat short lived. The blockchain is forever. Once unmasked, your permanent, irrevocable, and cryptographically-verified transaction log is sitting in the open for all the world to analyze.

Doesn't matter how many years it's been since you've done business. Doesn't matter if you knew that the random dude you bought an antique thimble from was a political dissident or not. You still sent money to that btc address, that address owned by a terrorist, and now they're gonna wanna know why you were funding terrorism...

> the problem with regulating anonymous transactions is you don't know who's doing them

Every government has departments of agents adept at tracing cash transactions. Bitcoin offers the advantage of total transactional transparency.

Shady wallet? Trace back until you find a known wallet. An exchange, vendor, et cetera. Subpoena, find their counterparty, rinse and repeat. Best case: you find your guy. Consolation: money laundering charges against the schmuck who didn't keep books and records.

Arrest someone who conducted a fraud, Ponzi scheme, ransomware scam or terrorist financing? If they did it with cash, the money is gone. If they did it with Bitoin, you have the option of tracing forward and seizing the funds the moment they hit a known wallet.

Of course with enough effort and investment you can probably stop many things, the point is whether the increasing marginal costs of enforcement are worth it to the government and society.

By that same argument, the US could round up every illegal immigrant and deport them, or every casual drug user and lock them up for life. We don't do that because it'd be ruinously expensive (not to mention immoral) and transform us into a police state.

The combination of privacy coins + tumblers + crypto + VPNs + TOR will make it very hard for a government to punish motivated individuals short of extremely draconian measures, and changes the strategic calculus for the society as a whole.

> the point is whether the increasing marginal costs of enforcement are worth it to the government and society

The same applies to cash. Investigating them is expensive. We don't bust the kid who fails to report the proceeds from their lemonade stand because (a) it's too small and (b) it's too mean.

> privacy coins + tumblers + crypto + VPNs + TOR will make it very hard for a government to punish motivated individuals

Analogs for each of these exist for cash. None of this is new, it's just shinier. (In any case, now you're talking about willful money laundering.)

> None of this is new, it's just shinier

Yes, but again, costs matter (this time on the other side). Money laundering with physical cash is expensive, risky, and time consuming.

You need to first get a bunch of physical cash, which itself raises suspicion and is easily tracked. Then you need to find someone in the physical world that you trust to help launder for you.

If you reduce the cost of 'money laundering' by 2-3 orders of magnitude, it indirectly raises the cost of enforcement significantly, because then the government will have to sort out all the 'harmless' infringement from the serious crimes that it cares about today.

I'm shocked at how often tumblers come up on this site. It seems very clear to me that using a tumbler is straight up money laundering.

While there's no doubt they are used for money laundering, they also serve an essential privacy purpose.

Imagine if every vendor you made a purchase from with your credit card also received a copy of your entire transaction history with that card. The mafia run business, the fetish porn shop, the megacorp, the government agency.

While it wouldn't be that easy to connect a wallets previous transactions to the real world sources, the more people use it, the more incentive there would be for databases/services to grow mapping wallets to people/companies. Just like the services now where you can provide an email address and get the persons full details.

And that transaction history is out there forever, to keep re-analysing as more wallet data is discovered.

It's not that tumblers are just "used for" money laundering, it's that they are money laundering, definitionally.

All the terrible privacy implications of using Bitcoin that you've described are true. The conclusion "so therefore it's okay if I launder money" does not follow. You could instead not use Bitcoin.

You're taking the different definitions of money laundering and switching between them as it suits you.

If by 'money laundering' you simply mean transacting in a way that is mostly anonymous, you can do this today just be using cash, finding someone else with cash, mixing your bills together, and none of that is either wrong or illegal.

If by money laundering you mean committing a criminal act and then hiding its financial traces, then that is only one possible use of tumblers, but there are other legitimate uses.

It's kind of confusing that you consider switching bills around to be a normal part of transacting anonymously with cash. I mean, make change if you need to, but this is usually not motivated by anonymity.

It's sufficiently anonymous for most people to just spend the cash they have. You didn't get the cash from D. B. Cooper, right? So nobody's watching the serial numbers. You just spend it.

It's only Bitcoin where that isn't an option.

Edit to be clearer about what my point is: cash has a moderate amount of anonymity, with practical limits. If those practical limits are a problem for you, you probably are covering up a crime. Bitcoin, however, has no level of anonymity between "everyone can see everything you spent" and "covering up a crime".

I think the phrase "motivated individuals" is doing a lot of work there.

I don't currently take any steps to try and obscure my transaction history from the authorities, and I presume that most if not all of the merchants I transact with keep some form of subpoena-able records. I'm not certain why I would expect that to change just because we switched currencies. I don't personally have any desire to violate any financial regulations, so why should I go to all the extra effort?

Anonymity protections aren't of much use if your counterparty isn't also using them, and they're worse than useless if they make you pop out of the statistical background noise for one reason or another.

The government doesn't need to go beyond finding the tumbler. Here's how a sample investigation would go:

Honeypot drug purchase, paid via bitcoin to DumbSeller. DumbSeller routes bitcoins to tumbler. Using the NSA backdoor in TOR, they trace DumbSeller to VPN service, who they then subpoena. VPN service either complies or gets charged as accomplice to money laundering and other crimes and gives up customer as part of plea deal. They then trace the payment to VPN until they reach a warm body at the other end.

Let me give you some more parsimonious paranoia: the tumbler operator is likely already working for the government, or accepting money from governments to forward them DumbSeller's transaction history. Why would they not?

Running a tumbler seems like a great racket if you can cope with the amorality (and particularly if you can rationalize the fact that you're sending money to ISIS with probability approaching 1). People pay you fees in exchange for "privacy", and have no way to tell if they got it.

If there exist tumblers that don't sell their customers' transaction history, in the ruthless capitalist world of Bitcoin, they are easily outcompeted by the ones that do. And a tumbler "customer" has no way to shop around for privacy.

Why in the world would one host a VPN service in the US?

>Of course with enough effort and investment you can probably stop many things, the point is whether the increasing marginal costs of enforcement are worth it to the government and society.

They have been fighting a war where the "marginal costs of enforcement" are not worth it, with the "war on drugs" for a century now.

And they'll not fight something that cuts the governments and society's tax funds?

Has either of the above ever happened historically, not counting jumps of just 1 person?

If you mean for bitcoin, I'm not sure, but probably, and there's no reason to suspect it wouldn't.

If you mean for cash/gold/diamonds/..., then yes, absolutely, all the time.

At the same time, Monero functions basically the same way cash does in this scenario. Most cryptocurrencirs do not, though.

Money launderers are usually caught because they're already under investigation. Others become apparent when lifestyle and reported income disagree.

When thinking about what the government might do in a specific situation involving cryptocurrency, I've found it helps to replace "Bitcoin" with "cash". "I tumbled Bitcoin" becomes "I laundered cash." "I got paid Bitcoin for my car" becomes "I have unexplainable cash because a stranger gave it to me for my car." "I used TOR while being paid Bitcoin" becomes "someone I don't know drops off cash for me in person." "How can they bust everyone using cryptocurrency" becomes "how does the government keep people and businesses more or less honest when it comes to reporting cash business." "Depositing lots of Bitcoin" becomes "depositing lots of unexplained cash." Et cetera

Less than 2% of "money laundering" is ever caught. That's despite the enormous time, money, and loss of dignity and privacy burdens, which are overwhelmingly borne by people with no connection to crime whatsoever. "Anti money laundering" is a parasite on humanity. They should let it drop to 0% and not bother with any of it: they doubtless keep lying to themselves that they are doing something worthwhile; they are not.

That's not a problem at all; just ban them. For example, I would predict that Coinbase and Gemini will never support Monero or ZCash.

That's exactly what the authorities will do. In fact it'll be extraordinarily trivial for the G30 to regulate Monero et al. out of common use in larger markets if they want to. If you want to use it, you'll be a financial criminal, 99.9% of people in the G30 will avoid it accordingly.

It's not so simple. You only need one exchange, anywhere in the world, that will exchange Monero for non-banned cryptos, and the market will flow freely.

Except that any exchange trafficking in an illegal coin could be banned as well, and so your transactions with that exchange in other coins (in order to convert to or from Monero) would be traceable and illegal.

What about coins forked from Monero?

What about other privacy coins?

Are certain cryptographic algorithms going to be banned when used in a cryptocurrency?

These are all loopholes they'd have to tie up if they want to go down that rabbit hole. It will cost them millions of dollars and man hours to stop it. You're baiting the government to play a neverending and increasingly complex game of whack of a mole. It seems like a beyond awful use of tax dollars to me. We cannot let our government get sucked down the black hole of trying to regulate the unregulatable. They need to come up with solutions to co-exist with it, not outright ban it. That will be a disaster in the making on par with the war on drugs.

> You only need one exchange, anywhere in the world, that will exchange Monero for non-banned cryptos

Have you seen how the United States enforces sanctions?

It's irrelevant whether exchanges accept privacy-focused cryptocurrencies, because people could always use atomic swaps: https://www.cryptocompare.com/coins/guides/what-are-atomic-s...

I don't think they're going to be able to ban atomic swaps.

Very few cryptocurrencies are anonymous, Bitcoin is NOT. OMG do people really think this still?

Now there are anonymous currencies like Monero.

The real threat to privacy focused coins isn’t government — its competition from within the blockchain space. If the lightning network works, it would effectively hide transaction history and activity similar to how TOR works.

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