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Comment by GeoffreyHull | Hacker News Reader

Despite the snark in the thread title, Sen. Chuck Schumer draws a reasonable conclusion. Bitcoin, despite its various other uses, theoretically can be used for money laundering.

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On Silk Road there are lots of ways to money launder... one of the main ways is that you give someone bitcoins and they give you a "gift" on paypal so that there are no fees.

I think the odds are if Sen. Chuck Schumer can conceive that Bitcoins can be used for money laundering, other folks have thought of the exact same thing.

I.E. it is already being actively used to launder money.

I get the impression that the supply and utility of Bitcoin are both still far too low to be used for serious money laundering.

Laundering isn't particularly difficult anyway. You're probably still just better off buying a bar and pouring vodka down the drain.

uhhh... check your math bro -- as of this moment there are 6,453,450 BTC in existence -- and you can buy them for $18.24 a piece leading to -- 117,710,928M USD -- sure it isn't a billion but it's more than enough to hustle a few hundred k through whenever you want

"Hustling money through" is not exactly laundering. To launder you have to:

#1 get the money into bitcoin. How did you get it there in substantial quantity to begin with? There may be $100m of it in supply but how many people have a hundred k bitcoins they will readily exchange for cash? It has to be cash, if you put the money in a bank it's easily traced and therefore pointless.

#2 get the money out of bitcoin in such a way that you can pay taxes on it. Since you presumably can't buy houses, cars, or jet skis with bitcoin it's not very useful there. Even if you could buy a house or car, you'd still need to file taxes since the government can easily see that you bought a $500k house while claiming 0 income. The whole point of laundering money is to pay taxes on illegally gained cash so you can spend it. (Tax evasion is its own separate crime and industry, and I suspect bitcoin isn't very useful there either.)

So now you have to start a shell business that you can claim made all of those proceeds in bitcoin. It has to be one that doesn't legally require you to KYC (banking industry slang, meaning gather relevant info about the people you do business with) and report to the IRS. Then you have to find people to buy the hundreds of thousands of bitcoins from you.

Far easier to start a bar, buy alcohol, pour it down the drain, and claim you sold it. If I were laundering a few hundred grand a year I wouldn't waste time on bitcoin.

I am wrong, or the dollars should be already laundered before they reach MtGox?

You have to transfer them from a bank account, right?

You are not wrong, unless there's some way to buy bitcoin by cash or some other untraceable means (Western Union?). I think many people are confusing laundering with other things like tax evasion. They're distinctly different.

No, you could buy bitcoins with unlaundered dollars, even with a credit card, and then launder the bitcoins themselves so that when you spend them they can't be traced back to the account you bought them with.

You can do that but it would serve no purpose. If you bought $100k bitcoins on a credit card, now the IRS has a paper trail. They'll want to know where that $100k you paid the credit card bill came from.

Even if you got the money in without being traced and spent them that's not laundering, it's tax evasion.

Ah, I misunderstood what was being proposed.

I would think that online poker players or other gamblers figured this out a while back.

Contrary to popular belief and government propaganda, online poker players aren't any more likely to launder money than you are.

Back to the article, like another poster said, how is a bitcoin-based drug site any different in terms of anonymity than a cash-based one if you have to give your address out at the end anyway?

The winners are highly likely to evade taxes but have no need to launder. Money laundering is unnecessary because online gambling proceeds aren't illegal in most states, and even where they are the Silver Platter doctrine and the fact that AGs don't prosecute customers generally makes it not worth while. I played poker for a living in a state where it is illegal to do so and still just claimed taxes legally (which is unusual for a poker player).

Mailing cash is scary and risky. Using Bitcoin doesn't remove the risk of fraud, but it removes the risk of your payment being lost/intercepted.

any different in terms of anonymity

The idea, in theory, is that the use of BitCoins cannot be tracked by a third party. That is to say, Silk Road, you and your dealer are the only ones who know about the purchase. In theory all three of you do not keep records of the sale, unlike credit card companies, which keep records of EVERYTHING.

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