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Comment by rahen | Hacker News Reader

It's KYC. Thanks but no thanks, I'll keep using DEXes...

KYC is a legal requirement. If you want cryptocurrency to be adopted, it needs to be legal to use. Even if it becomes cost competitive, most businesses aren't going to touch something which exposes them to risk of getting involved in a money laundering case.

With fiat money, you can legally retrieve anonymous cash from an ATM if you choose so, without suspicion. Or likewise, you can reveal your identity for a transaction when appropriate. This should be the same with crypto.

Let's see it this way: surveillance is needed and those who seek privacy may indeed conceal illegal activities. But I think we can agree not everyone is a criminal and if I have a right to privacy with cash, I should have the same right with cryptocurrencies.

Paper cash is "analog" and local, crypto is digital and global. It's the equivalent of buying DVD copies off someone at a market stall vs a torrent site.

Except with crypto you have the government after you directly for tax avoidance, money laundering and the prospect of $GovIssuedCurrency being sidelined. With torrents it's the MPAA sending lawyers after you.

My feeling is if you can't do it anonymously with cash the government probably has a reason to be interested. What should happen is all businesses must be forced to accept cash transactions, I don't like then trend towards cash-free shops.

What about ZCash-like networks with anonymous transactions?

That's a privacy coin. It mostly attracts agorists, not businesses.

But, given a choice, wouldn't you choose your own transactions to be untraceable?

Of course. I used to like Monero (XMR) despite its shortcomings, but Lightning is now more promising. It essentially solves all the flows in Bitcoin: scalability, fungability and privacy.

The KYC stuff goes hand in hand with regulation, which is important if you don't want all of crypto to be eaten alive by future FTXes and SBFs

That makes no sense. Ftx and Celsius had KYC and that didn't help at all in preventing them from stealing users money.

In fact it shows how bad KYC is, because Celsius users transactions, funds, addresses etc were "leaked" in their bankurpcy filings.

KYC and "regulations" didn't do shit to prevent a fraud from laundering customer funds between business entities to gamble and try to save his failed hedge fund. That crime was pretty much crypto only in the sense it involved an exchange and they overleveraged themselves, but the actual crime was just straight fraud.

What financial regulations were FTX under the jurisdiction of, in the Bahamas? Did FTX require KYC (I honestly don't know)?

Yeah, they were technically a Bahamas entity and fall under the jurisdiction of that country, technically, but likely under US jurisdiction as well in order to operate in the country. There's a whole really confusing business entity diagram I saw floating around somewhere, but can't find it offhand. But the way they were structured was obviously for tax havens and to blur their financial ties between entities. I'll be honest in that it goes above my head as I'm not deep into finance and regulations, however seeing statements about the level of fraud being unprecedented by the overseer of the Enron bankruptcy (who's overseeing FTX bankruptcy as well) is not very reassuring.

And yes, they did require full human-verified KYC to access any exchange functionality. Actually that was a downside, because the day they filed Chapter 11, their site was compromised and who knows who potentially accessed the PII from all their customers in that mess.

But yeah, SBF was very much a proponent of increased regulations and worked closely with US politicians and the SEC. They were "legit" to public view, but behind the scenes was unprecedented financial incompetence and fraud. And to clarify, they definitely had a business presence in the US with their US site and that would fall under US jurisdiction. I thought of applying there because it seemed like a cool place to work but they were only hiring for their Chicago office at the time. Glad I dodged that bullet in retrospect

The fact that you don't even know if FTX had KYC shows how unfounded your former comment was.

Yes, it had KYC. And FTX.us was under US jurisdiction.

You're reading into things I didn't say. I don't claim that KYC will protect people--I claim that the regulations that do protect people go hand in hand with KYC.

Crypto as the libertarian dream of government-free "money" will never go beyond libertarians. Crypto as a broader-scale augment to existing financial systems? Who know? But that won't happen without KYC and regulation.

Know who seems so far unaffected by this? Coinbase. The one exchange who has been operating entirely within US jurisdiction and laws; trying to be as bank-like as possible, following all the rules.

Binance has been doing better than Coinbase by a large margin, fwiw. Their US presence is probably not as strong as Coinbase, but by and large they are the #1 worldwide exchange. US regulations are not necessary and really are just a pain in the ass because everything the US government touches becomes inefficient beyond belief, it simply relies on the owners of the exchange not being incompetent & fraudulent.

Nope: no amount of regulation fixes stupid.

Personal responsibility to understand how things work? Unwelcome to most folks, but the only thing that works.

If your institution is keeping their internal operations hidden (no provable compliance), then “regulation” is at best a delay of the inevitable corruption.

Vast majority of the complaints about crypto fall into two categories:

-lawless: e.g., ponzi scheme, rug pulls, etc. -useless: "this is just a database"

For crypto to be useful, both of these challenges need to be addressed; well-designed regulation certainly will help the former, and also its perception.

They're already addressed by Bitcoin (which has zero centralized team, marketing, or promotion of future "gains").

"Crypto" (anything that isn't Bitcoin) is by design a way to run a legitimate ponzi scheme, primarily for VCs who realized it was easy money [1].

[1] https://twitter.com/SilvermanJacob/status/159505980620064358...

That doesn't work when the guy running the operation is being glad-handed by politicians behind the scenes and given a cake walk instead of a perp walk.

Youre completely correct...how do you deal with this? (I think they are called laws, which are a bit like regulations)

Assuming you're speaking of corruption, there is no system of custody that inherently prevents fraud unless it's self-custody. Any middleman, anywhere, as a matter of principle cannot be 100% trusted, ever. We use laws and regulations to give us the veneer of trust, but in reality, those laws and regulations are only ever one morally corrupt individual away from being circumvented. Hence why Bitcoin and self-custody are such important ideas and how this problem ultimately gets solved. The solution being: to financially disincentivize corruption to such an extent that your only option is violence which necessitates financial corruption to exist on a meaningful scale.

There's resistance to that idea because people hate to take responsibility for their actions and would rather defer/delegate it to someone else. It's the same exact problem as obesity, credit card debit, etc. "Well it couldn't possibly be my fault that I'm fat and poor, it's the evil greedy corporations!" Ironically, and at best, it's often the oroborous of government enabling the potential for malfeasance that's coming back to bite people (see: French regulation around nuclear reactor temperatures near wildlife forcing an energy crisis [1]).

If the system (whatever it is) enables people to be lazy or careless, they will be. And of course, they have to deal with the consequences of that behavior, whether they are willing to mentally/emotionally accept it or not.

[1] https://www.reuters.com/world/europe/frances-asn-nuclear-reg...

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