Isn't 'tumbling' literally a money laundering operation?
yes, and it proves GP's point about crypto enabling crime. It's trivial to implement.
It's just a ledger kept outside so there is no link between the money going in and the money coming out.
Money laundering involves the intentional hiding of the origins of funds obtained through criminal activity. Attributing the source of funds as being criminally obtained is difficult if tumbling is done effectively. If tumbling was reason enough to be suspected of money laundering, so would splitting a $100 at a gas station.
Not necessarily, if the source of the money is legal and you're tumbling it just for privacy reasons, it's not money laundering.
What happens when crypto tumblers run away with the money
Well, of course another will come along!
it seems logical to me a sophisticated syndicate would run their own tumbler. I'd assume there is some kind of OSS wordpress for mixing out there. And I don't think it'd be that hard to get other people to use it to get liquidity (just offer it as a free service).
Presumably the people who use tumblers never transfer such a huge amount of BTC into any one single tumbler, at a time, that would cause the tumbler operator to seriously contemplate pulling an exit scam.
There are projects like Miximus, which is an Eth tumbler with no operator. Participants deposit funds into a smart contract, then when they want to withdraw later, they use zero-knowledge proofs to show that they know one of the private keys without revealing which one.
There's also Zcash, which applies similar logic to all shielded transactions.
Oh that's nice.
Tumble it in small amounts at a time. Maybe the tumbler runs away with a few hundred thousand but you are still left with millions.
You'll have potentially thousands of criminals trying to get their money back? I don't like those odds but if someone wants to try that go ahead.