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Comment by LatteLazy | Hacker News Reader

Anti money laundering is (rightly or wrongly) pretty incompatible with crypto. The question "where did these funds come from" is something no one using crypto can really answer honestly and it's the core question in AML.

I like crypto. I like defacto drug decriminalisation and sanctions busting. But it was never gonna make it past AML.

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What? I have used BTC for years and never had problem answering that honestly. I would argue the opposite, most BTC users are very straightforward investors, they bought BTC, maybe bought something with it along the years, then held the rest, then when the value went up sold some.

Maybe the ones who have something shady going on are just the noisiest?

Its become a whole lot more complicated with DeFi. You might have made your profits from yield farming, lending, airdrops, etc.

Its not simply a matter of “bought low, sold high”.

The issue is a buy and hold investor will get $5k and sit on it. Another user sells $5k's worth every month because he's a small drug dealer. That second user is 1000x more revenue for the exchange because he trades every month. But you can't do business with him unless he tells you exactly what he's doing and who he is and gives you evidence he's getting those bitcoin from legitimate sources. Which he is not. So he really can't do any of that...

You get the same thing in most exchanges: a few percent of users are 80% of revenue. And that's true even when there is no "secondary market" which can only make it worse.

There's a protocol on Ethereum called Aave providing lending/borrowing to banks/institutional investors in separate permissioned pools that comply with AML and kyc regulations.

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