EU draft proposes identity requirement for cryptocurrency transactions | Hacker News Reader

EU draft proposes identity requirement for cryptocurrency transactions

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77 pointsmalermeister77 comments

> The reason: They want to prevent money laundering and terrorist financing.

> Criticism comes from the Pirate Party. “A complete ban on anonymous payments would not have any appreciable reducing effects on crime, but it would deprive innocent citizens of their financial freedom. For example, to collect donations, opposition figures like Alexej Navalny are increasingly dependent on anonymous donations in virtual currencies around the world,” says Patrick Breyer, MEP for the Pirate Party Germany and member of the LIBE committee.

The critique is 100% on the money. This will not stop criminals, at all. They will continue to use privacy coins such as Monero which are entirely untraceable by design. The only people hit by this are legitimate business or causes who offer crypto payments, or grey area businesses such as cannabis shops. The timing coinciding with the Emergency Act in Canada, feels like this is likely about suppression of undesirable political groups.

„At all“ is a bold statement and probably wrong one. Even if you use Monero to pay for a large drugs delivery, you will need to convert that money to buy something from the legal sector of economy. Money laundering becomes much more complicated thing, because the exchange becomes both a bottleneck for criminals and a breadcrumb for law enforcement.

For example that New York City couple that bungled the off ramp.

> The only people hit by this are legitimate business or causes who offer crypto payments

It wouldn't affect as many businesses as you think. My bank (a large bank which is partly state-owned since the financial crisis) would refuse me banking service immediately if I accepted payments in cryptocurrency, and it is not the only bank to do so. (Not that it remotely bothers me that this is the case.)

> This will not stop criminals, at all.

Laws don't stop criminals at all, but we still have them and we still try to enforce them.

> They will continue to use privacy coins such as Monero

In the end you need an off-ramp where you convert Monero into actual currency and that's where you get fucked.

Frankly speaking, the $5 wrench XKCD comes to mind. There is no conspiracy here, except that we want to keep society functional and not be disrupted by tools that mostly cater to criminals.

This just rehashing the "if you've done nothing wrong you have nothing to hide" fallacy

None of the digital payments were anonymous, but still private.

You don't need anonymity to have privacy.

Before you downvote, really think about this for a moment. Because you'll realise that almost none of your payments are anonymous, unless you pay cash (while being recorded).

I disagree, privacy without anonymity isn't really privacy at all, it's little more than trusting that the other party is going to be nice to you (which backfires extremely often, eg porn site or dating site payments are "private" until they mess up their security and everything is out in the open).

"True" privacy requires anonymity and the fact that existing systems have been terrible on that end isn't much justification for banning systems that do have proper privacy.

First, I do use cash..kind of weird to act like cash is an edge case. Second, how is your information private if an intermediary or intermediaries knows what you bought, when, and for how much? In some hypothetical world where PayPal, Mastercard, or Visa didn't immediately turn around a blab to everyone in sight what I just did, fine, but that's not remotely the world we live in.

I like the ideas behind taler.

» GNU Taler is an open protocol for an electronic payment system with a free software reference implementation. GNU Taler offers secure, fast and easy payment processing using well understood cryptographic techniques. GNU Taler allows customers to remain anonymous, while ensuring that merchants can be held accountable by governments. Hence, GNU Taler is compatible with anti-money-laundering (AML) and know-your-customer (KYC) regulation, as well as data protection regulation (such as GDPR).

https://docs.taler.net/taler-merchant-api-tutorial.html

Is there a Wordpress plugin?

This is especially terrifying when combined with governments freezing people out of the financial system (with no prospect of appeal) as has happened in Canada, along with the decreasing popularity, and prospective elimination of cash (as seems most common in China and the Nordic countries).

https://www.cbc.ca/news/politics/emergencies-act-banks-ottaw...

I wrote about the topic of slow possible cryptocurrency death in the context of Estonia and their upcoming laws. Although banning of cryptocurrencies might not be an explicit goal, regulation, either by bureacratic regulators, lack of undestanding from senior politicians and citizens, kneejerk reactions, overreaching policing and spooks (Canada), protect the kids folks, conservatives fearing porn payments, general decline of democracy and freedom of speech and pissed off traditional bankers might cause it:

https://capitalgram.com/posts/estonia-cryptocurrency-ban/

The only way to stop the slippery slope towards the political ban is for voters to start caring about the topic.

Also FATF guidelines to not require zero threshold, but propose $1000. This is completely self made rule by weak minded EU members of parliaments who try to score votes from concerned (senior) citizens

https://mobile.twitter.com/moo9000/status/149138626637794508...

https://mobile.twitter.com/moo9000/status/146645551511920640...

Zero reporting threshold for transactions is not practical or desirable.

I have a different more nuanced take on this. I've commented earlier, but I'll repeat myself here:

-----

Currency is only as good as the government that mediates its exchange.

If mediating that exchange incurs costs, then the government will take steps to either stop mediating those exchanges (ex: China - where all crypto exchanges are illegal by default, so the legal system can no longer be used to offset the cost of those exchanges at cost to itself) or it will bring that currency under control so that it can make those costs predictable and acceptable (ex: The US - where crypto is getting "all the bad bits" added back through legislation)

Which means the original intent of crypto only works in this honeymoon period (which I actually think ended not too long after the silk road went down) where it happens to get treated as an asset by a government that hasn't yet found out that they're essentially mediating exchanges in a foreign currency for free (not something most governments want to do).

The theory a decade ago was that cryptocurrency would develop an native economy of sorts: you could buy and sell things directly in crypto, and there would be markets for that. Maybe not markets for everything! But at least enough that it would start to erode the need for fiat ramps. That hasn't really happened yet, despite the fact that we now have various permissionless stablecoins to tackle the volatility problems. Maybe it never will.

Frankly speaking, I don't support this fight.

There is absolutely no good reasons for electronic payments to be anonymous. They never were and they should not be.

I understand it serves (yes here we go) crime, oh sure. But this is not a hill to die on.

This is not about a lack of understanding or FUD. This is about not letting crime happen.

There is no problem to be solved here.

I think that fight makes sense, not to win it but to make sure the bills they pass are sensible.

Like there should be a non-small burden to de-anonymize things.

Mainly to reduce misuse potential.

As a nitpick, cryptocurrency payments are pseudonymous, not anonymous. The current AML system is good enough and prevents cryptocurrency crime as efficiently as they prevent other crime. Also this is not about preventing crime, this is about setting a reporting requirement to an inpractical limit of zero euros. Nobody is going to do crime with 10 EUR PornHub or gay condom purchases.

What would you consider an accetable reporting requirement for all of your transactions?

Funny, everytime governments remove people's freedoms they do it for "security", even though most of these things aren't actually making us more secure.

Governments gonna govern. Fewer freedoms thanks to laws and regulation that hide behind CSAM, AML, CFT, pushed in the last two years while activist groups were less likely to assemble and protest.

Somehow the EU is good when it promotes GDPR but bad when it touches crypto?

I even think when considering GDPR the EU went too far. It ruinned website experience with all those cookies garbages.

Dumb politicians who never did anything else than politics creating popular laws just to look like they're actually doing something.

GDPR is not only cookies. It's also new data practices, audits and fines, happening as we speak.

I am not a crypto fan, but it's becoming more and more clear to me that crypto is the battleground for governments versus people. To survive and function, governments need the ability to levy taxes. This means that income needs to be tied to identity, and it needs to be accessible by the government. But cryptocurrency generally does not support those things, and in fact consider the resistance to them a feature, not a bug.

If a hypothetical world existed where an ungovernable cryptocurrency took over all forms of transactions, what is the plan to pay taxes? I'm not a huge fan of taxes either, but I think most of us can agree that we need some taxes.

That world already existed, it was every civilization that used currency before the electronic payment system. The only caveat was that it had to be exchanged in person. Governments levied taxes on goods at points they could easily view and control, e.g. tariffs on imports and exports, taxes on goods produced by businesses that couldn't hide, and on landowners, which also can't hide how much land they own.

Ridiculous. I can make anonymous payments with cash. This is a good example of regulations going too far.

There are limits to your ability to do so that are non-obvious, and the lack of those limits in the crypto space is a problem.

For example, you might be able to make a large payment in cash, but it will be difficult -- theoretically [0] -- for someone to bank that payment in one go without triggering money-laundering concern in their bank.

And unless you hoard cash outside a bank, you would similarly trigger notification rules at your own bank.

None of these systems are perfect, which is precisely why governments are uneasy about an automated system that could be even better at evading those rules.

[0] https://www.theguardian.com/business/2021/dec/13/natwest-fin...

That is not an argument against cryptocurrency though. The bank is going to equally ask you the source of the income/funds. If the fund comes from an exchange, it came through an exchange -- there is paperwork. You have to declare any losses or gains from the currency or commodity exchange (depending on the country) to your tax agency. If you go in a back alley and change it somehow with cash you still need to declare the profit or loss for taxes. You of course could skip that but you could equally tax evade with cash or art and it would be less traceable.

I don't buy any of this. They just don't want to say politically that cryptocurrency makes it harder for them to seize assets or apply bank controls.

People in countries with uncertain futures or bank controls do hoard cash as is well known. And the banking system is known for assisting getting money to notorious and less than stellar organizations.

https://news.ycombinator.com/item?id=17202827 https://news.ycombinator.com/item?id=19983153 (read first comments) https://news.ycombinator.com/item?id=12346437

(Just from a quick look at hackernews archives for expediency.)

> The bank is going to equally ask you the source of the income/funds.

Those would be be the banks that cryptocurrency true believers think they are going to be replacing entirely, though, right?

It needs an entirely new legal framework.

At any rate -- my (business) bank won't ask me the source of cryptocurrency funds. They will see that they are cryptocurrency funds and then permanently close my bank account.

>Those would be be the banks that cryptocurrency true believers think they are going to be replacing entirely, though, right?

I am not sure how to answer here, as I am not sure what people want at times. I think I have the same question as you. Banks, like some other financial entities, unsurprisingly are more complicated than the average enthusiast wants to admit.

>It needs an entirely new legal framework.

I can't disagree there. I think we ideally want a different legal framework with or without decentralized currencies. The incentives are not aligned however (in my opinion). The illicit activities are too good and too profitable.

> They will see that they are cryptocurrency funds and then permanently close my bank account.

If I may ask could you communicate to me (discreetly or here), which region has that approach? In the USA and (some of) EU to my knowledge and experience that is not the case. You tell them where the money is from and they are happy. I hope that is not an impolite of a question.

Except you can't easily or risklessly transport meaningful amounts of cash.

You can't easily deposit or spend significant amounts of cash without raising flags everywhere.

Anonymous payments are critical to society. We’re already surveilled from every possible angle, total surveillance isn’t too far away. Many of these technologies are not well understood by the general public and of course their proprietors will never admit to any wrongdoing.

Our freedoms are eroding by the week. Many people here on HN right now probably don’t know what life was like prior to the Patriot Act.

I just want to be left alone, to think and behave freely, including the ability to share my ideas without fear of reprisal.

The freedom to send absolutely anonymous payments comes with the cost of people using said freedom to extort people in an untraceable manner, and fund illicit activities that harm society such as terrorism. Every freedom comes with a cost, but usually the freedom to do such an act greatly outweighs the cost.

I am interested in why we should live with the cost of this? What are the real benefits to society? Not just hypothetical ones, but what are real uses of paying someone completely anonymously that have the benefit of outweighing the real harms we have already seen?

The real benefits to society are absolutely tremendous.

Extrapolate just a few more years of this trajectory and any protest or political candidate that isn’t endorsed by the ruling class will be impossible to fund or donate to.

You can see it happening right before our eyes with the “Freedom Convoy” and the shutdown of donations and now freezing of bank accounts.

When you can walk up to your political opponents and simply switch off their campaign financing you no longer have a functional democracy.

I guess if you don’t like democracy then you could be totally fine with this trade-off?

But when you drive up to innocent citizens and switch off their city, do you have a functional democracy? Or is this the new way the US understands exporting democracy?

I see no correlation between ability to track and oppressiveness of regimes. Scandinavian countries are great at tracking their people and very much not oppressive for example.

> I just want to be left alone, to think and behave freely, including the ability to share my ideas without fear of reprisal.

That requires the government to behave nicely, as long as the government would attack you if they knew about these things you would have to live in fear regardless if they tracked you or not. Freedom doesn't come from hiding things from the government, it comes from ensuring that your government isn't behaving like shit, as otherwise you will always dread the government finding out about your stuff. A person who has to hide what he does from the government isn't free, he is basically a refugee in his own country.

I’m more afraid of my radical peers than the government.

However, the government is made up of my peers. I come to terms with this by reminding myself how insignificant I am, and I’m not worth harassing.

I’m not going to give an example but I hold a few unpopular beliefs. There are people who would like to see me die because of them.

This is no way to live.

> are great at tracking their people and very much not oppressive for example.

But they will put you in a cage with criminals as soon as you make some transaction they don't approve of.

With enough tracking it's a lot easier to enforce rules making being oppressive a lot easier.

The EU is becoming increasingly hostile towards cash as well (e.g. no more 200/500 euro bills, bank ATMs are disappearing, ban on 3000+ euro cash payments).

You think they aren't itching to ban cash too?

In a sense, time will.

In Canada, they withdrew the 500, 100 bills. This was 40 years ago, approx.

Now, the biggest bill, the 100, is more like a 20 was back then. Eventually, the 100 will be like a 5, then 1, and so on.

One day, you'll need a wheelbarrow of 100s, to pay your rent with cash, for example.

In this way, all transactions will slowly shift to electronic, and trackable.

The same is true of cash deposits, in Canada. Decades ago, a law was passed, and anything suspicious, or over 10k deposited, in cash, must be reported.

10k was a lot back then, when you could buy a house for less than 50k. Now isn't really.

Which means that over time, more and more cash users get tracked, and reported, by default.

yeah, cashless society is a terrifying phrase

Cash has scaling issues that creates pain points for illegal activities. Crypto does not.

And cryptocurrencies have huge scaling issues cashing out!

It is very hard to make anonymous payments in cash to third world countries and that is the problem they care about. There are all sort of checks and controls and costs associated with moving physical money between countries.

The real reason why, is making anon donation from anywhere, via in cash, which means so e level of physical exchange.

Canada went banana, because crypto was used for the protests. Had it been cash, it would be harder to donate from 1000s of miles away.

I think this is all about foreign influence, or at least, the scared perception of it being easier.

Imagine, your enemies funding the scariest parts of your soceity, an all anonymously, and from the comfort of 100% remote.

This is the fear, I think.

Banning crypto can't stop that. They can easily mail you diamonds in a letter. Pretty much undetectable.

You can see successful crypto actions in the chain. You can't tell if mailed cash arrived for real.

Anyhow, fear need not be rational.

Paynents with cash above a certain sum are also restricted in some legislations. In Italy they are illegal above a couple thousand euros, for example.

I feel like you want this to be "you can make anon physically so I should be able to digitally" when what would actually happen is new KYC requirements that cash transactions require scanning someone's government id.

Many countries have already made that more painful that by eliminating large bills.

> eliminating large bills

Surely you mean eliminating large denomination banknotes?

I'd argue that cryptocurrency payments to anonymous receivers should not be irrevocable. If you want to send money anonymously, that's OK. But, to prevent fraud, receivers must be either known, or subject to clawback.

That could be done with a smart contract. When you buy something with a cryptocurrency, the funds go into lockup for, say, 30 days. With no action by either party, funds are released to the seller after 30 days. If the buyer wants to dispute the transaction, they can trigger an arbitration hold by sending a message to the smart contract. The seller can then give up anonymity and go to arbitration or court, or abandon the transaction.

How can a consumer possibly understand smart contracts to the point where they even know if there's any protection? It would be wiser to assume that the payment has gone into a black hole.

You could make a site that provides the nice UI and charges a fee.

There's a startup idea. The crypto answer to PayPal.

Paying someone else to eat a risk is the time honored way. I've already got PayPal. What ultimately makes transactions reversible with regular money is that a person can manually override the ledger.

If you choose to send money to an anonymous wallet for goods or services that have not yet been delivered, that's on you. The government can't eliminate stupidity with legislation.

It will be fascinating to see how regulation deals with trying to regulate anonymous cryptocurrency payments. It leads to innocent people suffering from bitcoin's lack of fungibility; this is already happening. I don't know how it will turn out in the end. I believe it is one of the most important issues of our time, given that physical cash seems to be in danger of being phased out and several countries are working on Central Bank Digital Currency in some form.

It is not so simple as "ban Monero". People can swap trustlessly from Monero to BTC. There are 'privacy features' on other chains too, like CoinJoin on bitcoin. Making these activities illegal means there are coins with acceptable history, and tainted coins that have been used for anonymous transactions.

Businesses can use subscriptions to blockchain analysis companies to check if funds are acceptable or tained, then choose to reject payments if necessary. People doing peer-to-peer payments cannot do this, they can't check other peer's coins are tainted. Even if chain analysis software was publicly available, you need access to valuable, sensitive data from exchanges and merchants etc updated on the fly. If "criminals" have access to the chain analysis results then it also helps them to find a way to evade it.

The bitcoin whitepaper is titled 'A Peer-to-Peer Electronic Cash System' but it really doesn't work for that.

Interesting example case where an innocent user suffered because they ended up with coins that someone else mixed: https://old.reddit.com/r/blockfi/comments/skxiei/blockfi_hor...

I think this hacker news post may yet again be a lesson for a lot of crypto fans that there are a ton of laws and regulations in place about money for very good reason.

There really is no conspiracy here.

The real problem is that crypto is a solution in search of a legal problem, and it hasn't found one yet. Unfortunately, it did find a lot of 'illegal problems'...

Yes, I'm making that argument again, but there's nothing more to it than this, as I see it.

> For example, to collect donations, opposition figures like Alexej Navalny are increasingly dependent on anonymous donations in virtual currencies around the world,” says Patrick Breyer, MEP for the Pirate Party Germany and member of the LIBE committee.

Those donations are going to be useless soon, because Russia is going to forbid payments via crypto inside the country and regulate investments in crypto.

Why not just ban anonymous payments period then. That’s weird.

Seems like this isn’t about anonymous payments at all?

They are already kinda banned.

Once payments are above a certain amount contact information must be collected as far as I know.

No bank transactions are anonymous.

Smaller money payments are anonymous, but mainly due to physical limitations creating enough hassle so that it can't be abused too much (without also braking the law). As well as historic reasons.

But did you ever consider that every bank note has a unique id which is tracked by banks when you pay in money (and I think) retrieve it?

Furthermore the EU as since basically it's creation slowly working on de-anonymizing payments wit the purpose of fighting crime and money laundering.

It's pretty much a straight forward continuation of pre-bitcoin invention policies.

That would require first eliminating bills and coins, a task I fear isn't very far down the road.

Nor are bills and coins nearly as anonymous as most people believe.

There's a reason every Euro note and US dollar comes stamped with a serial number...

Other forms of electronic payments already aren't anonymous.

Because if you are a politician who bans the crypto you won’t be ever elected again. Thus, you do it sneaky way.

The disconnect with reality is quite astounding. Do you actually believe that the majority interest right now lies with crypto? 'Normal' people have heard about it but have never in their life used crypto for a payment.

Cryptocurrency regulation is being discussed in the US, in the EU, in Russia.

50% millenials hold crypto in the US https://cointelegraph.com/news/low-millennial-financial-well...

Top cryptocurrency users are in Vietnam, Pakistan, Ukraine and India https://blog.chainalysis.com/reports/2021-global-crypto-adop...

While cryptocurrencies may not matter for you, or people around you that you identify as normal, based on the facts the topic matters a lot for lawmakers, politicians and large audiences you may not know.

50% of millenials is not 50% of the voting public. And yes, regulation is being discussed, that's what this article is all about. For pretty good reasons, the whole idea that there would be a forever unregulated way to transfer vast sums of money instantly is a pipe dream at best.

The article is about setting the reporting threshold to zero, not to some meaningful number that would prevent crime. What would be a comfortable purchase amount for you that you would like to have someone else to read your receipts?

For the perspective, the FAFT recommendation is $1000.

That reporting threshold is a direct consequence of tricks like mixers and other anonymizers. It is a neat tech trick but it is also just another form of smurfing / structuring.

Do you think there could better ways to automate smurfing detection that setting the reporting threshold to zero?

As far as I know, digital payments were never anonymous, so there was nothing to ban in the first place.

Bad title. It’s requiring de-anonymisation for crypto transactions. Not banning crypto.

We've changed the title to one that uses representative language from the first paragraph.

Submitted title was "EU wants to completely ban anonymous payments with cryptocurrency assets".

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