Is the US Banning Crypto Wallets?
blog.shrimpy.io
blog.shrimpy.io
Once your government determines that participation in crypto networks without using a registered intermediary is illegal, they have reasonable grounds to subpoena network providers for participation in such networks.
Once your government can reasonably determine that your IP address has accessed a crypto network without using an intermediary, then they have probable cause for search and seizure of your digital and physical property.
If you are caught by any means to be using VPNs or TOR to dodge network-layer inspection, this will result in more strict sentencing decisions, as doing so can be interpreted as knowingly breaking the law.
Additionally, as a bonus risk to everyone who knowingly participates in crypto, consider the malware problem:
If you're infected by malware that is doing so without your knowledge or consent, you may regardless be found liable, depending on how poorly the law is written and how poorly the authorities choose to treat you, if you are found to be knowingly participating in crypto in any respect whatsoever.
(I am not your lawyer, this is not legal advice, seek legal counsel, etc.)
EDIT: Or any law like it passed it any non-US country, either!
disclaimer: also not a lawyer.
Especially since a very large use case for crypto - especially in non-custodial wallets - especially people avoiding KYC, is crime.
The ratio of ancaps to criminals on this list is likely very low.
[edit] The real risk of finding yourself on this shortlist of non-custodial wallets is suddenly finding yourself on the wrong side of the IRS.
Most blockchains are pseudonymous, and the government has tools to track and de-pseudonymize, or at least map and aggregate - transactions. If the government wanted to go after you for breaking this law, they'd probably just throw together a quick list of people the IRS should start poking around at.
They know as well as you do that you probably didn't report every transaction you've ever done on every exchange, DEX, or platform. That's tax fraud, straight up. Much easier to prove, and much harder to argue on merits.
I've said this before, and I'll say it again: if your government is coming for you, no amount of magic beans in your computer will keep you or your value safe. If you don't trust your government you've got bigger problems than crypto. If you trust your government crypto is irrelevant.
As Beria, Stalin's side-kick said, "Show me the man and I’ll find you the crime."
Even if you kept a blacklist of wallets with dirty money, I think it would be possible to spin up a chain of brand new wallets and quickly funnel coins through them before the blacklist could keep up in a way that would be impossible with fiat transactions and traditional banks. I could be wrong though, maybe someone’s got an algo for that.
Opinions my own.
This barely qualifies as an opinion. It's a simple fact.
Can't you spin up a chain of brand new offshore accounts/shell companies in a friendly jurisdiction and quickly funnel money through them before the blacklist could keep up?
The reason many, especially smaller, banks don't want to do business with criminals is they fear they'd lose their access to the US market through a termination of these relationships. This would then push the bank into insolvency.
I know this because all this happened to Tether, lol. There's been some documentation, likely as part of the NYAG lawsuit or the Paradise Papers leak -- or both. Noble initially refused to bank them for this reason, so they invested in Noble, who then took them on as customers. Their custodial bank (Wells, IIRC) told them to eat dirt, and it pushed Noble into insolvency.
This is far too black and white. You may trust your government not to engage in a vendetta against you for no reason and still not trust them not to pass onerous regulations that harm you unintentionally and then provide no recourse for the victims of that outcome.
I have yet to hear a solid argument for why it should be in all circumstances be regulated like investment securities even when only being used as currency (like cash).
But even accepting that the majority of existing holders are using it for speculation, why do we have to pre-ruin its ability to ever be used as a medium of exchange?
Acceptance obviously has network effects. The user doesn't have much incentive to set up crypto if nobody accepts it, and the vendor doesn't have much incentive to accept it if few of their customers have it set up. But everything starts that way. Then some large merchant or group thereof decides they want to promote its use and offers everybody a 15% discount for using it, so a third of their customers do so for the discount, and then millions of people have it set up and other vendors start accepting it now that there are a large enough population of customers. That hasn't happened yet, but what's your theory for why it never could?
The credit for that goes to the core team and the 7tx/sec limit.
Unless you're self-hosting your VPN, then your VPN has a record of your internet traffic, and most VPNs are even sketchier than your ISP.
presumably they can also ban VPNs while they're at it, but it doesn't seem plausible. If your threat model is a tyrannical government willing to do anything (ie. ban encryption, backdoor every piece of computing equipment, install 1984 style telescreens everywhere), then there's no real way to defend it.
Well, there is, you just have to abandon the premise that doing what your adversary tells you to do is the right thing.
Putting telescreens everywhere doesn't help them much if every one of them is immediately smashed with a rock and anyone who comes to repair it is also smashed with a rock.
This requires a certain amount of public resistance, because you can't be the only one doing it, but a certain amount of public resistance is what systems like that tend to generate. And when you're not the only one doing it, they run out of telescreens and telescreen repair personnel before you run out of rocks.
This whole "my math can save me from a tyrannical government" thing is so tired. If they don't play by the rules, and want to stop you, they will. They'll take your knee caps, your finger nails, your life, or the entire nation's internet service down. No amount of math will change that.
Here's a worked example. North Korea. Their leadership has amassed a few billion dollars of cryptocurrency they've used to finance their nuclear program. How much has crypto helped the average North Korean? Zero because it's super illegal, they'll get sent to the gulags, and their internal internet likely has it disabled seven ways to hell.
Think of this like blowing smoke in the face of a cop. Is it illegal? Probably? Hard to say. Will you immediately be arrested for something else you happen to be doing at that very moment that just so happens to be illegal? Oh yeah. Technically correct is not the best kind of correct in this situation.
Given our past interactions and your posting history, it's clear you have a strong dislike for crypto.
However, your opinion (or mine) will be irrelevant.
> They'll take your knee caps, your finger nails, your life, or the entire nation's internet service down
They totally can! The only problem is they eventually run out of people or things the country can sell. And in the meantime, even before reaching that ultimate point, they destroy the economy by destroying hope: forced labor is less productive that voluntary labor.
That's because it's hard to rule people who don't care anymore. Even the threat of death may not cut it: just look at the risks people took to flee the soviet block!
A good tyrant applies just a sprinkle of violence.
> Technically correct is not the best kind of correct in this situation.
Indeed. And you are correct the government monopoly of violence keeps people in-line.
But it's not without end: a tyrannical government survive only so long as the population is willing to tolerate it. As the person you replied to tried to explain, civil disobedience happens.
If you need current examples, look no further than people not wearing masks, or the riots that happened on the 2nd lockdown of Europe: the more force you apply, the more resistance you get.
I don't believe governments will find the "ideal" amount of violence to keep people in-line - not for something like money. The blue dollar in Argentina, the existence of a cash economy etc. - there are too many signs that show this can't be done. Same as for drug or alcohol: the prohibition failed. The war on drugs is currently failing.
Yet it's clear that crypto will not operate in a wild west forever: just like the internet, some rules will be added, to tax it.
But it won't go away, as governments prefer taxing to killing!
Sorry to break your dream of crypto becoming illegal and drying, but that ship has sailed.
My point as always is if you trust your government you don’t need crypto - as trust is a massive optimization - and if you don’t, you have much bigger problems. Just ask the North Koreans.
The rest is but a fictional dramatization of what life under authoritarianism might be like, just you, your MacBook Pro and your GPU cluster against the man, smashing TVs, killing TV repair men and scribbling down hashes. It just doesn’t reflect any reality I know of. I’d watch an HBO series based on it though! Maybe a modern reimagining of 1984 combined with Escape from Tarkov; we all know how 1984 ended yeah?
Opinion varies. For many people, being able to access drugs outside of government control (cancer patient victims of the opioid crisis), or receiving donations (wikileaks) is worth a lot more that the small drawbacks.
Same as due process and the "fruit of a poisonous tree" legal doctrine - it lets bad people walk out of jail, but overall I think it does more good than harm to society.
> Once it has the same constraints as traditional finance it offers nothing of value, and will wilt away on its own
Actually, at the bare minimum, it removes political control of the monetary supply, leaving only fiscal policy, which may enable better long term control of public deficit by implementing a Milton Friedman like rule (whether it's constant inflation, deflation, or nothing, all is good as long as it remains constant and predictable)
Given the long term inefficiency of the Phillips curve, and a lot of economic similar concepts, most economists would think it's for the better.
See also the founder charter of the ECB, which enshrined similar policies until politicians made it dance to their tune.
This shows the problem isn't our lack of understanding, but our lack of self control and long term motivation- just like kids with a cookie jar: we can't help it!
> if you trust your government you don’t need crypto
Hackers often fall prey to black-and-white thinking. Trust isn't binary, because you can't fully trust an organization made of people, regardless of how "good" they are, or which legal constraints they have.
If anything, look at HIPAA laws: even without them, you should be able to trust your healthcare provider, but if there're things you don't want out ever, you better not share them with your health provider regardless of the laws protecting the confidentiality.
Because leaks happen, even for whole countries sometimes (look at Finland mental health leaks)
This doesn't mean you have "0 trust", just 0.7 or something non binary.
We both know the ideal medical file would be encrypted with the patient private key, or would have some other mechanism of plausible deniability - just like how DKIM was denounced recently. It wasn't possible or even imaginable before we had the technology. Now that we do, it may take a while to get there, and the world will be a slightly better place.
Crypto is a similar small step for finance, and it may also enable most countries to use the same coin (because once monetary policy is out, there's little reason to use your own thing)
> we all know how 1984 ended yeah
It didn't end: we're right inside.
> Whatever. Makes no difference to me, once the harms are mitigated. JMHO.
You are so close to understanding, yet so far. I hope eventually you'll admit more complexity in your reasoning.
> Actually, at the bare minimum, it removes political control of the monetary supply, leaving only fiscal policy, which may enable better long term control of public deficit by implementing a Milton Friedman like rule (whether it's constant inflation, deflation, or nothing, all is good as long as it remains constant and predictable)
I don't agree with any of that. I don't want any of that.
> Hackers often fall prey to black-and-white thinking. Trust isn't binary, because you can't fully trust an organization made of people, regardless of how "good" they are, or which legal constraints they have.
Which is why we have legal recourse.
It sucks to have to re-explain this from first principals, but trust is infinitely more efficient, so long as you accept some small fraction of the time you'll get screwed. So, you create legal recourse.
However it's clear you're far more likely to get screwed over in a crypto economy with zero recourse than you are to get screwed over in a fiat economy -- separate from the fact you have recourse in a fiat economy.
I think our differences boil down to one thing: I don't share the belief than trust is better than trustless. Actually, I believe the opposite is true in most situations, because trustless allows abstractions in a simple manner.
For handling exceptions (ex: ETH DAO), we can revert to trust mechanism, but most of the time, we're better off without.
> > Actually, at the bare minimum, it removes political control of the monetary supply, leaving only fiscal policy, which may enable better long term control of public deficit by implementing a Milton Friedman like rule (whether it's constant inflation, deflation, or nothing, all is good as long as it remains constant and predictable)
> I don't agree with any of that. I don't want any of that.
Yet I don't think you are an economist, so I'm afraid your wants are biased. Most people don't want to wait - they want to break open the cookie jar. They want to eat the seed corn.
It's a human bias, with an economic name: the time discount factor, which has been researched in how it leads to substandard outcomes (ex: not saving for your own retirement)
At the society level, 401k and the like is a way of removing trust in your saving ability: the decision is taken for you in advance.
Of course, there are exceptions (ex: you're out of work or sick and need the money now), but that's when the "exception" of trust comes in handy.
> > To be clear I think all narcotics should be legal. It is the narcos who create the harm. I'm 100% pro dugs and 100% against allowing narcos to thrive.
I 100% agree, but yet I think it's better for me not to have vodka and cocaine at home - because if I'm extremely tired but can't sleep, I could be tempted to take the former, then if I have to fly somewhere and it's important I'd be tempted to take the latter the morning after.
So I don't buy any - another way of favoring a trustless system. If I want booze, I go to a bar as needed.
Crypto can offers many features like that, and I believe a smart contract that would automatically save to your retirement account (while exactly equivalent to a 401k on paper) would be better, by sheer virtue of removing the needed trust in the government: I could see a government plundering retirement accounts in a grand announcement of a more redistributive retirement made available to everybody past some given age.
It’s trustless for me and none for thee. Seriously. It destroyed the whole narrative.
If tustlessness was any better intrinsically vitalik would be on eth classic today. The smart contract worked as designed. Code is law is it not? How dare you tell me that vitaliks magic bean jar is more important thank my grandmas? :) is what’s good for the goose not good for the gander?
There’s a reason we moved past strict majority rule and added checks for the rights of the powerless or minority.
The difference between us is you’re ignoring the edge cases and I’m saying when livelihood is at stake basic function is table stakes edge cases are effectively the only thing that matters. I’m applying medical rigor and you’re applying My First JavaScript React Native app in the App Store - we can just patch it later whatever.
Or this now-poor bastard: https://www.reddit.com/r/Buttcoin/comments/k7cnrn/butter_los...
> I 100% agree, but yet I think it's better for me not to have vodka and cocaine at home - because if I'm extremely tired but can't sleep, I could be tempted to take the former, then if I have to fly somewhere and it's important I'd be tempted to take the latter the morning after.
Look up the Portuguese model that’s not what happens, evidence tells us. Anyone who wants drugs now can get them, and legalization doesn’t make people who don’t want drugs want them. We have laws that people tend to follow like not flying impaired.
But if this law gets passed, the government will be financially incentivized to put more budget on enforcing this. They can easily make life difficult for VPN providers for example, and as a result the price will go up, and it will no longer make economic sense for casual users to use crypto.
How would the accused have the mens rea?
Owning a crypto wallet is of course nice but it is the financial equivalent of putting money in an old sock under your bed: it's kind of not very safe at all. Sure they are hard to hack or break into but the very real scenario you have to worry about more than the government coming after you is that of a person with a gun forcing at gun point you to transfer your belongings to their wallet.
What's going to happen is that those people currently making use of loopholes in our laws to avoid paying taxes by using crypto currencies will find that using their secret stashes of wealth in a system that basically implements an extremely hard to forge transaction history, is going to be increasingly hard. There are ways around that but it doesn't change the reality that working in secret in a surveillance society is going to be increasingly hard. And like it or not, that's where we are heading. George Orwell was only off by a few decades.
In any case, laws can be changed and they change all the time. Changes provide short term opportunities. But the long term perspective is always that people with power impose their will on people without.
You saw what happened to banking in Switzerland for Americans, right? Not the best analogy on which to make your case. The law of the United States has a long arm, and it's questionable at best to believe that BTC is out of its reach.
FATCA is the reason American citizens can't open bank accounts in many parts of the world -- local laws forbid the banks from transferring the data necessary to comply with FATCA; and if the banks chose to serve US persons anyways, the US government would cut the banks off from the entire US financial system.
This is not only a solved problem, but there's strong precedent.
You wanna play in the big market? You play by their rules. Even if you don't chances are your bank does. And even if they don't, chances are their correspondent or custodial banks do. All roads lead back to DC for American citizens - and anyone one America's shit list.
... and before you consider renunciation, there's an exit tax to be paid in the amount of the capital gains due on all of your assets as though you disposed of them on your last day as a US citizen. And you better believe they'll be checking for your tax compliance on your crypto accounts on the way out. Of course tax evasion is an extraditable offence, too, which really limits your choices.
America has a big carrot and a whole lot of sticks, and it's willing to use both to get what it wants.
Sure, it IS possible to go through all kinds of convoluted ways to bypass the law, the same way you can go through all kinds of convoluted ways to illegally download movies (using Tor/VPN/etc.)
This means something like Bitcoin will end up being as mainstream as Tor. It will be enough to cripple the entire industry so it never grows to a meaningful size.
Also how "fucked" you are depends on what kind of amounts you are dealing with. If it is small amount you can just use it for online shopping or something.
> So, if you currently use a cold storage wallet like a Ledger Nano S or a software wallet such as MetaMask, you may soon find yourself running afoul of new regulations.
But apart from that, the rest of the article seems to agree with you.
I root for cryptocurrencies, but I think the government will deem them to be to risky for their monopoly on printing money.
Not to mention China investing tons of money into cryptos.
So stablecoins, which are vastly dominated by dollar denominated coins, actually increase the dominance of the dollar and allow people to get around chinese currency controls in ways I am not sure they like.
https://www.scmp.com/economy/china-economy/article/3098981/c...
"According to the company’s blog post, the Treasury Department and the Federal Reserve deposit funds seized by the U.S. into a bank account in the U.S. tied to the Guaidó government, which converts the funds into USDC that Circle then sends to Airtm."
https://tlaib.house.gov/media/press-releases/tlaib-garcia-an...
Biggest meritorious gold rush in decades with the potential to drastically uproot a very class based financial system and minorities have to be protected from it? This is absolute insanity.
We have had these laws in place for decades in the banking system and minorities have constantly been discriminated against. The last thing we need is for these same laws to be put in place in an arena where millionaires are printed overnight and no one even needs to know the color of your skin.
The more actions they take to thwart Bitcoin, the more evidence that it's working as designed.
So I say, bring it on.
Exodus is a non-custodial self-hosted wallet. This means that you have access to the funds and only you have access. We don't have access nor do we see your activity.
Betteridge's law of headlines applies here... i.e. no, the government is not banning crypto wallets.
I'm biased, but this regulation will be worse for exchanges. Each customer will likely have to take onerous actions to withdrawal their funds. This will further bifurcate centralized custodial exchanges and non-custodial decentralized products like wallets and DeFi.
You have a better Google results position for one URL (that you've paid lots of money for).
The bible still outranks you for every other result on the first page (Exodus wallet isn't until page 2), and Google adds rich snippets for the definition of "exodus" and the Book of Exodus above the link to your homepage.
So I guess you're less interesting than a dictionary?
Google searches tend to be contextualized and personalized, so i'm not sure if that's a universal statement - nonetheless, you seem to be the first result for me in an incognito window (although the knowledge panel does talk about the book of Exodus).
This is a stalemate. On one hand they cannot call it a Ponzi scheme, which is what it is, because everyone is already in, on the other hand, they want to regulate it to death and tax every single transaction.
So, adoption and other bullshit aside, the internet meme stocks for the poor will be allowed only on coinbase and others "certified" exchanges with direct data feeds right to IRS and other govt agencies. Everything else will be banned. Nice and simple.
It is when, not if. EU will follow.
I don't have issues with centralized exchanges, but if they're going this far, they could end up outright banning crypto, or banning everything but the government approved (tm) currencies. So, yeah, in reality, the value of BTC should drop like a lead bowling ball.
Also, this will impact large buyers of crypto and we should see less demand from the larger buyers (those that trade in the million $ plus range). Hence, more downward pressure on price.
Institutional buyers don't care about KYC.
Notice how following the elections, in many states, drugs are now at the "then you win" part.
I guess I'll have to lose my Ledger Nano S along with my firearms in my boating trip planned for late January ;).
Definitely still a potentially very profitable asset class but the taxation method is brutal, versus a system like stocks where you buy the stock and when you sell it for dollars that's the taxable event.
I don't see the difference. When you buy GOOG stock, and want to trade it for AMZN stock, you sell it, and buy AMZN with proceeds. This generates taxable event. Sounds like exactly same situation as you describe.
> Amount realized. The amount you realize from a sale or exchange is the total of all the money you receive plus the fair market value (defined below) of all property or services you receive.
The rules are exactly the same for stocks as for cryptocurrencies. There is no difference.
[1] - https://www.irs.gov/publications/p544#en_US_2019_publink1000...
And you can only cash out through these "custodial wallets". For example you can't "cash out" and convert your ETH into USD from MetaMask. So all that's needed for the government is to enforce the law on these custodial wallets.
It's not so different from how they deal with Tor. Even though the onion network gives the false sense of security, government agents mostly have taken over the entrance and exit nodes of the Tor network, and most criminals get caught this way. Using the "cash out" analogy, the entrance and exit Tor nodes are equivalent to the custodial wallets.