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Comment by jackfoxy | Hacker News Reader

Consider this:

Every Satoshi can be traced back to when it was mined. The IRS now requires Americans and resident aliens filing income tax returns to report on their crypto holdings. Lots (maybe most?) people use exchanges like CoinBase. (Remember, not your keys, not your coins.)

If the government believes (they do not even have to prove) your Satoshis were ever used for illicit transactions, they can legally seize those assets. (Sorry, we don't think you were involved, but these coins are criminals.) To simplify things they just need to show a judge reasonable cause of structuring sometime in the coin's history. That has to be super easy to do. https://www.goldinglawyers.com/structuring-cash-transactions

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> Every Satoshi can be traced back to when it was mined

This is blatantly wrong, do you have a source for that? Transactions can have multiple inputs and multiple outputs; "which satoshi comes from which input" is not a valid question; transactions are about value sums of inputs and outputs.

Is there any reason to think that the taint bit wouldn’t be applied to all outputs from such a transaction, just as a mob money laundering operation didn’t avoid prosecution because some of the income was legitimate?

Most non-techies I know simply buy and sell from an exchange, never touching the real chain. For them, bitcoin is the number on the screen they see when they log in.

Unless the USA imposes the strict FATCA and AML to all global exchanges , forcing countries to act as if exchanges are banks and comply,It would be easy to just use non-American exchanges stay out of trouble.

Sure, your coins are where the government can's touch them. But if you do not comply with the IRS reporting rules and your body is where the government can touch you, watch out.

But you're right. If USG does go down this path of crypto suppression (and this is pure speculation at this point) US based exchanges are vulnerable first.

I imagine nothing like this would unfold without coordination with the EU and five eyes.

Tax enforcement prioritization roughly follows the shape of wealth/income distribution. Focusing on the long-tail isn't impactful, as far as fiscal concerns go.

You'd achieve about the same result tax wise w/ muscular KYC/AML requirements for crypto exchanges/custodians in the US as you would w/ a ban.

Saying "the government can technically do XYZ" is pointless when there is no precedent and it has never been challenged in court. What would the reaction be if the government bust into your home and took your wallet because one of the dollar notes in it was used for a robbery 10 years and hundreds of owners ago?

This this a known issue, not all coins are the same, but I read recently that there is work in progress to use Schnorr signatures that would fix this problem by mixing multiple signatures into a single one.

Structuring doesn't apply to cryptocurrencies and there is no reporting threshold to be avoided yet. There are some proposals to make thresholds. Structuring currently only applies to physical cash passing a boarder or physical cash entering or exiting a financial institution. It does not apply to institution to institution transfers of any type and it doesn't apply to cryptocurrencies at the moment. I’ve had this discussion before, FinCEN is trying to change that.

Because structuring is a criminal law, they would need to show a court a bit more to convict. But before a conviction they could make your life complicated with dumb rationale to a judge for a warrant or seizure notice, and that has nothing to do with cryptocurrency, everyone relies on the government and private persons not making their life complicated.

Yes. This would be new legal territory, but not radically new (IANAL). USG would certainly pick the case and the court to try it in carefully in order to establish the precedent.

Structuring regulations are very clear about physical cash in and out of a licensed financial institution (or avoiding declarations to customs). Most agencies and representatives have made it clear they aren't trying to debilitate bitcoin or bitcoin use. This fanfiction of the government not letting bitcoin be useful as a competitor is a weak argument mostly because the ship has sailed, about a decade ago.

Bitcoin mixers do a pretty good job of obsfucating transaction history and maintaining anonymity.

Smells like money laundering.

It's called financial privacy. Most people don't want all their past and future transactions to be visible to anyone they happen to pay for something.

Damn, you're probably right, even though it would never work that way for a greenback.

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