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Comment by gruez | Hacker News Reader

Isn't this already required, sort of? AFAIK you have to report fiat transfers exceeding $10k. If you're cashing out at an exchange, and you sell $10K of bitcoins and then transfer to your bank account, that transfer would have to be reported. I suppose this requirement would cover crypto-to-crypto trades, but most of the volume aren't on US exchanges so I doubt this would do much.

edit: misunderstood FINCEN requirements, only cash transactions over $10k have to be reported

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Do you also have to report cash transfers of 10k? Wasn't aware of that. I had thought it was just KYC for money banks deal with - not paying someone 11k cash for some construction work, for example.

As far as I know it is cash. If I write a check to ABC construction for $15,000, that is not reportable as it is already traceable.

Apps like venmo and cashapp have a threshold of around $20k/year, where if you exceed it they are required to report your transactions to the IRS.

Doesn’t matter if it’s on a US exchange. If you’re a US person, and you move bitcoin from one wallet to another without cashing anything out, this is potentially a reportable event now. And if you fail to do so, the public ledger has cryptographic proof of your crime.

The specific language in the 2020 US1040 instructions say otherwise:

"A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control." (2020 1040 instructions, pg. 16)

So as long as you "own or control" both wallets, your described transfer would not be a reportable event under the current tax instructions.

Easy peasy. If you don't want to report a transaction, move from personal wallet to joint wallet. Then recipient moves from joint wallet to personal wallet.

If both parties have shared ownership and control of the joint wallet, I think this would get around the reporting requirement.

> Easy peasy.

All these sort of regulations tend to have language disallowing actions made just to avoid the requirement (see, for example, "structuring")

https://xkcd.com/1494/

"Lifehack - you can just take all the luggage off the conveyor belt at the airport and leave with it. They don't check at the door!"

I doubt any court would agree with you on that.

Here's a solution, though I don't know how the IRS views this:

1) Buy "dirty" ETH through a KYC exchange like Coinbase

2) Send to tornado.cash

3) Wait a few days, remove from tornado.cash

4) You now have "clean" ETH uncorrelated with your identity

5) Use one of the many DeFi non-KYC exchanges to get whatever crypto you want

The blockchain trail would just show that you sent to tornado.cash, and nothing after. This could be an interesting problem for US regulatory pariahs.

Whether tornado.cash survives will determine the future of ETH. Is it a free, global exchange network? Or will it cripple under regulatory pressure? As the US continues to debase its currency (and regulatory institutions), it will not go down without a fight.

As we speak, the Attorneys for Manhattan and the State of New York are investigating a high net-worth individual for allegedly engaging in clever ways to avoid taxes and other regulations using activities that are legal when engaged by themselves in good faith, but when used in conjunction with each other in bad faith, may be criminal.

The problem with “gaming” any system involving state-level entities is that they always have the power to retroactively look at your behaviour and declare that there is a pattern that amounts to criminal behaviour, even if none of the actions taken in isolation would be considered criminal.

Give them no behavior to look back on.

Losing your monero wallet in a boating accident is also increasingly common these days

Is it all that different than a company claiming they are a victim of a ransomware attack and they paid the ransom?

Oh no, the hackers got our accounting database encrypted. We can't process your thing for 2 weeks and we paid 80M in crypto for ransom. Can we please get a tax write-off for our embezzlement?

I suspect existing anti-money-laundering law will cover this somehow. Outfoxing governments through technical cleverness rarely (but sometimes!) works in perpetuity.

An example: If any future >$10k transaction can be traced back to a wallet that you control (it wouldn't matter how you got the funds, only that you transferred them), then you'd be on the hook.

But why would you want to take (presumably) clean fiat on your coinbase account, exchange it for crypto, launder it, only to transfer back to your coinbase account? I'd presume anyone doing this is going to use the laundered money for illegal stuff, or at least transferring to some sort of offshore jurisdiction for tax evasion purposes. In both cases it won't be tied back to you.

When The Man gets a warrant to monitor your communications, arrests you, takes all of your electronic devices, and then chats with your friends and colleagues, there is a chance that they might uncover your "hidden" wallet.

Or, in the case that The Man gets a copy of the overseas bank's records with your name on it and a long and credible-looking list of transfers from wallets that match the amounts put into the mixer, it is going to look real suspicious.

Investigators are smart people with many tools at their disposal.

Until the very act of using a mixer is considered money laundering. Which is ironic because you started with clean money.

Or just convert to Monero and back

Dear weeweww32,

During a routine audit of registered exchanges we discovered that you transferred/received $30k of the crypto token Montero.

Under penalty of perjury provide us with documentation as to the destination/source of this funds within 7 business day.

Failing to do so is a felony under the Crypto act of 2022.

Cheerio

The Government

"During a routine audit of registered exchanges". The obvious answer here seems to be "don't use a registered exchange". Might cost a few basis points but nothing to be alarmed about and likely cheaper than taxes.

I might be missing something, but isn't part of the allure of it all being a blockchain the ledger that will, for ever after show that such and such wallet received 30k on a particular date & time - potentially requiring some stitching that would probably be trivial to do if the actual transfer was broken up into a series of smaller transfers?

And if you're using a shared wallet that obscures internal money movements then the feds can still see any entry/exit point activity - they might just be uncertain about what happened to the money in the middle.

I guess if you created a private coin for your nefarious dealings you could keep it really hidden (maybe one tied as a stable coin to a more major coin) - but only so long as you managed to keep the feds from getting a ledger view of the private coin - which would require limiting the spending power of that coin to only parties you strongly trusted which, again, would strongly devalue the coin.

The real world equivalent might be deciding, as a criminal ring, to use gems as a currency to avoid handling USD directly too often - but those gems become worthless apart from their inherent value as soon as trust collapses.

With Monero, no one can see the sender, destination or amount of any transaction.

But people can see the car/house/yacht etc you bought with it.

If you want to actually enjoy your wealth you better find a way to legalize your anonymous money and pay taxes on it.

"I dunno...It just appeared in my crypto Wallet" is not convincing

doesn't that require going through a centralized exchange, or at least going through the trouble of organizing an OTC trade?

There are decentralized exchanges like Bisq

The general term for Tornado.cash is a Bitcoin mixer and it has come and gone through the existence of Bitcoin.

Eg. Monero doesn't leave a trail by default.

Describing tornado.cash as a Bitcoin mixer is not accurate.

Exchanging BTC/ETH for Monero leaves just as much of a trail as using Tornado.cash, unless you use a decentralized P2P exchange.

Oh, from reading the Google seo description i didn't see it was fully on eth and it matched perfectly the description of a Bitcoin/crypto mixer.

Furthermore, it doesn't "mix" by creating lots of transactions and trying to obfuscate the trail--it completely cuts off the trail.

A Bitcoin mixer has no direct link fyi. Which is similar to their seo description.

And if I'm moving between two wallets that I control (be it directly via some software/hardware wallet or indirectly via some exchange)? Does it work the same as it would if I was moving that much USD between two bank accounts under my name? What are the tax implications there?

This is arguably a problem I've been far from rich enough to encounter, so it's a genuine question should that someday change :)

Depending on how the two accounts are linked - yes I believe you still need to report the transfer, however, since it isn't leaving your person (unless it's being transferred between separate representations like a business you wholly own and a personal account) then it isn't subject to taxation.

This reporting primarily exists to make money laundering less efficient by forcing parties that want to keep things out of view of law enforcement to make many relatively small money movements - and 10k is high enough that it doesn't affect normal folks all that often.

Honestly, when it comes to anything involving a bank these transfers are usually automatically reported by the institution.

> Depending on how the two accounts are linked - yes I believe you still need to report the transfer

Pedantic note here - "You" don't have to do anything here, your bank will do the reporting.

That is precisely correct and I think it's a good mention. I made it more clear in other comments after people brought up the burden of having to filling out tax forms constantly. You won't often execute transactions that actually qualify you for this level of reporting and in almost all circumstances the financial institution backing the transaction will actually do the reporting (bank or credit card company). If the payment is cash (which is beyond rare for transactions of this scale) it'll still usually only be required for the vendor to report the transaction.

It’s not a tax implication it’s a money laundering one. Your financial firm will fill out a currency transaction report if you transfer 10k or more between accounts. They will also do it if they believe you are structuring transfers to avoid the 10k number. They also may file a suspicious activity report (sar) if they deem your transactions may constitute money laundering or they may deny transactions that would require them to do so.

> AFAIK you have to report fiat transfers exceeding $10k.

This is false.

You seem to be right. I skimmed wikipedia which said "other payment or transfer" and assumed it covered eletronic transfers as well, but it looks like only cash is covered.

https://verafin.com/wp-content/uploads/2017/01/currency-tran...

>A CTR is only required when a transaction involves cold hard cash, in either paper or coin form. Other forms of payment, such as wire transfers, don’t need to be reported on a CTR.

CTRs are reporting requirements for financial institutions. Individual payments between people in the US don't require reporting.

It is different if you have a business.

I cannot speak for other jurisdictions, but Canada defines something called a “Reporting Entity,” and if you qualify as such, you absolutely have reporting requirements:

https://www.fintrac-canafe.gc.ca/reporting-declaration/info/...

The form you are looking for is Form 8300.

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