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Comment by max_ | Hacker News Reader

Bitcoin's goal was to help people "get out" of the traditional financial system "not inside it".

Everyone knows where the real money laundering and terrorist financing happens.

It is done by the likes of HSBC, Standard Chartered and other big banks.

This is public knowledge, as we have seen with the Panama papers and most recently the FinCen files.

Our financial institutions are too rotten for you to even assume that the intention of this regulation is altruistic (i.e public benefit).

The tradition of regulation in finance is to perform a kind of scam called "regulator capture"[0].

It is what we have mostly observed to be the goal of complex financial regulations. For it to divert from this would be an exception.

[0]: https://www.investopedia.com/terms/r/regulatory-capture.asp

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> Everyone knows where the real money laundering and terrorist financing happens.

> It is done by the likes of HSBC, Standard Chartered and other big banks.

This used to be the case. And undoubtedly it still goes on. There simply weren’t many other mechanisms to launder money that didn’t involve large banks…until crypto joined the party.

Crypto’s most popular feature is speculation, and its second most popular feature is money laundering/capital control evasion. These two probably encompass well in excess of 99% of typical real world use cases.

There are some things the government can't realistically do. Like taxing oxygen consumption or preventing people thinking things. Or how they have been totally unable to stop tax evasion for thousands of years.

I'd be more than happy if controlling capital joined the list of things government just can't do. I think freely flowing capital is going to be good for everyone. Good luck to the crypto community & I'm sure a big chunk of the world trying to get away from unreasonable US sanctions will agree.

> I think freely flowing capital is going to be good for everyone.

The US and 'west' is already financially liberal, so we can make an observation: it is NOT good for everyone. Capital flows freely, but it flows upwards. Trickle-down economics is proven false. Advocating for more liberal finances also means being okay with leaving people behind and in the shit; the unemployed, the homeless, the working poor, the huge percentage of people who constantly live one paycheck or one medical issue away from bankruptcy, the people who work 16 hours a day at multiple jobs and still can't make ends meet, etc etc etc.

I mean to rephrase your claim, yeah capital / money should flow freely, but egalitarian. The wealth of an individual should benefit all. The richest countries in the world shouldn't have poverty on an individual level. There shouldn't be a case where a handful of people have more money than half the world population.

And I get it, building a space company and launching yourself into space is cool, but that money could also have gone to your employees to lift them out of poverty and insecurity.

I don't buy the theory that someone else being well off makes me badly off. I also don't buy the theory that someone else being badly off should make me feel bad.

Capital controls aren't going to help the unemployed, the homeless, the working poor, the huge percentage of people who constantly live one paycheck or one medical issue away from bankruptcy. Capital controls will make those problems worse; forcing people to make bad decisions with their investments is not the fast track to getting great long term results.

Some form of capital control is necessary for taxation. Without efficient taxation all of the people you mention are going to be extra fucked.

There are capital controls and then there are capital controls - but preventing you from moving all of your money out of the country to avoid taxes is still a control on capital.

> I don't buy the theory that someone else being well off makes me badly off

You mean the theory of...mathematics? More money in one place necessarily means less money in another.

If I sell a product for 100€ but only pay my worker 20€ to make it, I'm becoming rich. If my worker wants to buy that product, it costs them 5x their salary, but only costs me 1.4x. If all my CEO friends do the same for their products, the workers are becoming poor because of us becoming rich.

Now let's stop trying to be rich. Let's lower the margins and sell the product for 40€. Now it's 2x my salary (marginally worse for me), but also only 2x my worker's salary (much better for them). Let's say all of us CEOs do that. By not being rich, we've allowed our workers to be less poor.

You assume economics is a zero sum game. Which I don't think is even remotely proven.

To not make it zero-sum, money would need to either have to be created in a transaction or somehow raise its value. The former clearly doesn't happen and is a terrible idea and the latter doesn't either and even if it did, it would affect both sides (rich an poor) equally (as a ratio, not absolute) and therefore even widen the gap in purchasing power.

Money is literally created every day. It's exceedingly easy in fact.

Yes, but because the amount in circulation goes up, the value of it goes down. And it's not like the money that is created benefits the poor - it just allows rich people to borrow more probably make even more money from their "investments".

There's plenty of things that cannot be completely prevented, and we don't take that to mean that all counter measures are futile and should be dropped.

Examples are basically any kind of crime and violence, traffic accidents, all kinds of things that harm people and societies.

> There are some things the government can't realistically do. Like taxing oxygen consumption or preventing people thinking things.

Ya think ? People are indoctrinated from as soon as they start school. By the time they reach adulthood they are fully institutionalized.

> I'm sure a big chunk of the world trying to get away from unreasonable US sanctions will agree

You might not agree with every use of US financial might, but I do not think that a “big chunk” of the world are affected by US sanctions or that a big chunk disagree with US sanctions that exist. Most of these sanctions are against demonstrably hostile governments. The US isn’t perfect by any means, but cutting off NK, Iran, etc from international banking to extract nuclear compliance is, I think, a good use of sanctions.

By user count (as opposed to volume), ransomware is almost certainly a bigger use case of Bitcoin than money laundering and friends.

Hackers user crypto for ransomware because they can easily launder the ransom payments.

It's the same side of the coin.

Do you have sources to back up this claim?

I would argue its second most popular feature is purchases on dark net markets. This has been a constant theme since bitcoin was first released and I think is always discounted when talking about the currency.

Is there a way to reliably figure out the GDP of dark net markets?

Kinda; if the dark net markets have known wallet addresses it can be looked up and analyzed in the blockchain. Or if the other public addresses are known, transactions can be deducted from them.

The problem is, if you build a new financial system which facilitates criminal activity such as scams, fraud, extortion, money laundering, tax evasion, terrorist financing, etc., it very quickly gets dominated by the types of people who want to perform such activity, or end up performing such activity ("opportunity makes a thief"). So the options are either to become more and more attractive to criminals and help build up their strength so they can take on the traditional financial system more effectively, or to become more like the traditional financial system and try to stamp out such activity. Personally, and I think most rational people would agree, it would be better for society as a whole if we didn't let the scammers, fraudsters, extortionists etc. win. And I know the typical cryptocurrency supporter's response is going to be "well banks and governments are scammers, fraudsters etc.", but while banks and governments may not have a completely spotless record, the fact is that they are on the whole infinitely more trustworthy than the tiny number of unelected and largely anonymous people who own almost all the cryptocurrency wealth.

I'm sure you have a source that shows that Bitcoin/crypto in general is dominated by things like money laundering and terrorist financing, right?

There's always that one person that questions that claim. Just look around. What goods and services can you actually get in exchange for most crypto? Very little. What is the most common thing ransomware and cybercriminals demand as payment? Crypto.

It's not like it's dominated by it - what makes us the largest part of crypto usage is speculative investors and bots. But as for the rest, it's clearly not normal people buying burgers, that's for sure.

Funny, right after 1100 crypto money launderers in China were arrested, nobody wanted any more Tethers. [1] Now my statements are entirely circumstantial, but I strongly suggest you watch this space.

> The public security ministry said that by Wednesday afternoon police had busted more than 170 criminal groups involved in using cryptocurrencies to launder money.

> China’s Payment & Clearing Association said on Wednesday that the number of crimes involving the use of virtual currencies is on the rise.

> Because cryptocurrencies are anonymous, convenient and global in nature, “they have increasingly become an important channel for cross-border money laundering,” the association said in a statement.

Sounds right to me.

[1] https://www.cnbc.com/2021/06/10/china-arrests-over-1100-susp...

> nobody wanted any more Tethers

Can you provide a source on that? I certainly don’t want any Tethers but I know plenty of people that do.

The market is the source. Just look at the market cap chart here, you can see that it's been flat for the past few weeks (after a long period of exponential growth): https://coinmarketcap.com/currencies/tether/

Tether market cap tends to grow during bull runs, and crypto's been pretty flat. I'm skeptical of this argument given that Tether is still trading 1:1 with dollars, and at an extremely high volume..

Volumes on USDT:USD pairs should be taken with extreme skepticism, after all, exchanges have a massive vested interest in the peg remaining fixed and are more than likely just arbitraging/wash trading to keep it there. It's hard to know with any sort of certainty how much actual volume is going back and forth across that pair. It also doesn't represent a redemption in any way vis-a-vis the backing assets so can at best be treated as (with a massive lump of salt) some connection to faith that someone else will accept it at 1:1.

Remember only entities Tether deems as customers are permitted to redeem in the first place, and more than likely only the exchanges are deemed customers. They know they can't redeem anyways so they don't bother even trying. That's my read on it anyways.

Even the volume on a more trusted, US exchange like Kraken is pretty high. The fact remains that you could exchange tens of millions of USDT for USD per day with no issues.

Again, the volumes there mean nothing for all the reasons I said - it's not about trusted or untrusted. Binance has 17,000,000,000 USDT. [1] It is in their interests to support the peg, even if they have to go to Kraken to do it. And arbitrage bots participate, too.

Remember, the most trusted crypto exchange, Coinbase, wash traded 99% of all global Litecoin volume for a few months in 2016/2017. [2] And again, "exchanging" means nothing, because it's not a redemption. And the volume likely means nothing because it's probably just arb trades and wash trades.

95% of all crypto trading volume is fake. [3]

Nothing here is regulated. Take everything you see in crypto with a giant lump of salt.

Tether is a criminal enterprise [4], the fact that USDT is trading at 1:1 is an indication the market is completely untrustworthy, irrational or both - not that Tether is trustworthy. Be careful out there!

[1] https://wallet.tether.to/richlist

[2] https://www.cftc.gov/PressRoom/PressReleases/8369-21

[3] https://www.technologyreview.com/2019/03/26/1206/nearly-all-...

[4] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

I think it's a pretty bold stance that one of the largest US exchanges would be wash trading millions a day in Tether. Need evidence for that. Binance and Bitfinex are a whole different animal.

I'm fully aware (and agree with) all your criticisms of Tether, my point is that if I had tens of millions in USDT (as many real people who aren't affiliated with Tether do) I could easily exchange it for USD.

FWIW I didn't mean to say that Kraken was wash trading USDT per se, but that likely other actors are 'holding the peg' at Kraken too by trading back and forth. Maybe aggressive arbitrage would be a better definition?

I agree you could probably clear 10s of millions via USDT:USD pair, but I'm almost 100% confident you could not actually redeem them.

Sorry if I came across harsh btw, I appreciate your thoughts! Tone doesn't always carry well online and I'm actually a pretty positive person haha.

That would be extremely expensive no? They not only have to buy Tether (using currency they can't print at will) to keep the price up, but also pay significant transaction fees.

Totally agree you wouldn't be able to redeem it, I'm just saying the market seems to think 1 USDT = 1 USD. I honestly can't imagine they could keep that peg through manipulation..it would be astronomically expensive.

A flat price certainly does not mean no more people want to buy it, or even that a significant number of people no longer want to buy it

I think parent was referring to a flat market cap, not a flat price, and given the price is $1 a flat market cap does in this case indicate a lack of demand for further issuance.

Do you have evidence on KYC/AML/CFT being in a state of regulatory capture? I would say they are anything but. Huge expenses for all involved, no standards that would be good enough to just fulfill.

What we have observed is financial institutions failing with respect to KYC/AML/CFT/sanctions etc. (and getting fined for it), but that is not regulatory capture.

Also, I'd argue that since 2008 regulatory capture isn't working so well anymore, with a lot of extra regulation being thrown at the system (some of which being eased now again).

Regulators are incentivized to see dangers everywhere and acting accordingly. The last time they did not see dangers everywhere, it didn't work out so well, either. The counteracting force would come for electorates and policy makers seeing opportunity and progress lost from being overly cautious.

That's very true, but 'dark money for everyone' doesn't necessarily seem like an improvement.

I am in favor of privacy and not having to explain what you choose to do with your own money, but imho the aggregate yield curve of total privacy inverts as you ascend a logarithmic scale.

> Everyone knows where the real money laundering and terrorist financing happens.

> It is done by the likes of HSBC, Standard Chartered and other big banks.

> This is public knowledge, as we have seen with the Panama papers and most recently the FinCen files.

No. This is an observational bias. All we know is that they do that. But the fact that they do that, too, does not logically imply that resorting to them is the only way of money laundering and that BTC is not used for that a) at all b) at a much larger scale.

> It is done by the likes of HSBC, Standard Chartered and other big banks.

And, as it happens, because of the records, it has been discovered and everyone involved is traceable. The system works.

>and everyone involved is traceable. The system works.

The system does not work.

Everyone involved have been discovered by `rouges` like Assange that system holds in jail for either made-up or largely irrelevant accusations, out of the scope of their opus, full soviet style.

Everyone knows the king is naked and just comedians and activists at large (or in jail) has courage to say something about it, which is pretty medieval position for all of us to start with.

You are making a very broad statement and I was able to find this right in the first result from google: “Immigration and Customs Enforcement agents revealed suspect money trails between HSBC's Mexican and United States operations.”

https://www.investopedia.com/stock-analysis/2013/investing-n...

In case of crypto, even the rogues wouldn't be able to do anything.

So where are the consequences?

What do you expect? That I google this for you? Here’s an example: https://www.investopedia.com/stock-analysis/2013/investing-n...

It’s all public knowledge and pretty easy to find.

> Given the bank's size, it appears that it and some of its peers are too big to jail because they are too big to fail.

Instead they got fined for less than 0.1% of their total holdings.

The system doesn’t work. This is not a consequence.

There are no consequences that matter, because the system itself is the problem.

"Getting out" is very fuzzy goal. For my understanding people usually cite two central goals:

1. Stop central bank imposed inflation.

2. Serve the people who are excluded from banking.

If either of those goals can't be reached, it is due to misdesign/inherent flaws of the approach and not governments.

I would like to prove you otherwise with shameless plug of my tweet [1].

[1] https://twitter.com/sergueyz/status/1365041519154061315

The amount of illicit transactioins is higher in bitcoin than in regular cash ($100 bills to be precise). I guess the same is for money laundering - amounts spent in legal transaactions going through current financial institutions will be much higher than money laundering there. And ratio between amounts of legal and possibly money laundering transactions will be higher for regular institutions than for bitcoin.

Precisely because of regulations and their absence.

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