And yes, taken to an extreme it does indeed mean that every coin becomes inaccessible given enough time. Welcome to the real world consequences of interacting with systems that are counter to wider societies aims.
I don't think there's good evidence that this is counter to broader society's aims, just that it's counter to the power of the US state (which always wants its power to grow).
In fact history shows that these rules are almost all dictated by a small group of people with little to no public input. Over a hundred years ago none of these laws existed and society survived. 100 years from now I doubt these concepts will be widespread and society will still function well.
If you're really trying to argue that, you should argue that tradfi banks should be unregulated. Then you can get your money-laundering done even more cheaply than inefficient decentralized protocols can manage.
Precisely, I do think tradfi banks should be unregulated, with full knowledge that will enable more efficient "money laundering" for some (of course for many of the consolidated powers that be that suck up power when the small guys are blocked, it's no different at all)
>It makes no sense to say that some organizations are behaving badly, so we should give up trying to regulate all organizations.
Blocking all users of Tornado Cash because of some organizations that behave badly is exactly the kind of logic you're impugning with your statement here. We shouldn't give up on all Tornado Cash transactions because some are bad. You contradict yourself.
That's a strange interpretation of my words. TornadoCash allows DPRK to steal from Americans and use that money. We shouldn't throw our hands up in the air and say there is nothing we can do about it. We should instead prevent anybody from transacting with funds laundered through TornadoCash via regulation. This removes DPRK's profit and affects normal people by some amount approximating 0.
If nobody will accept their laundered coins, how do they profit?
> The American who uses Tornado Cash to firewall their hot wallet from their cold wallet.
That provides no benefit to society and causes plenty of harms. Working as intended.
I don't think there's any evidence sanctioning Tornado Cash closes off laundering options for DPRK. Washing through privacy coins come to mind as an alternative. Very easy for DPRK's government mechanism to learn while being much more a hassle for the average American who barely has time after work/kids/training etc.
>That provides no benefit to society and causes plenty of harms. Working as intended.
Privacy definitely provides benefit to society, including not letting everyone know how much money you have to spend in your cold wallet every time you spend from your hot wallet. In fact I'd argue more violence could ensue if criminals could easily discover who had large cold wallets through lack of privacy, as many would choose to simply go on targetted knee-cap breaking operations until the key is given up.
Those other methods can be shut off too. That isn't an argument to leave known laundering options available.
> Privacy definitely provides benefit to society, including not letting everyone know how much money you have to spend in your cold wallet every time you spend from your hot wallet.
Don't use technologies that have no advantages and only disadvantages. When I spend with my credit card, the merchant doesn't know how much money I have, and my transaction goes through nearly instantly with negligible energy usage.
But that wasn't the argument you made. Now you're moving the goal posts. Sanctioning Tornado cash doesn't remove DPRKs profits as you claimed. I also doubt all methods can be shut off, or that it makes sense to cut off all "US Persons" just because DPRK uses it the way we don't like.
>Don't use technologies that have no advantages and only disadvantages. When I spend with my credit card, the merchant doesn't know how much money I have, and my transaction goes through nearly instantly with negligible energy usage.
When I use my credit card to buy say metal bullion online, I'm charged a huge markup if I pay with credit card. There are times when I don't want to pay the credit card markup and things like cash aren't always easily usable online. I don't even like spending crypto but I've paid for bullion with crypto online merely because it happened to be the lowest fee option for me with fast clearing. You don't know that for everyone crypto always has no advantages in their options.
How is it not? TornadoCash is used for laundering DPRK's ill-gotten gains, so we sanction it. Now anything they sent through TornadoCash is not usable. If anything else is used to launder their gains, we should sanction that too.
> When I use my credit card to buy say metal bullion online, I'm charged a huge markup if I pay with credit card.
Bitcoin does not remove the reason (fraud risk) you are charged that markup. As soon as regulations apply, everything that causes that markup to exist also applies to Bitcoin. On top of that, you have Bitcoin's high transaction costs, and completely public transactions.
You stated we removed their profit by sanctioning Tornado Cash. For one I don't think you have evidence sanctioning Tornado Cash eliminates profits of North Korea. There's also quite a few other ways, and only by moving the goal posts of saying we also shut off all those other ways of gathering profits could they be shut off. Which of course is both arguably infeasible, and not what you said.
>On top of that, you have Bitcoin's high transaction costs, and completely public transactions.
I didn't pay with bitcoin, I paid with LTC where my transaction costs a penny, plus or minus a penny.
>Bitcoin does not remove the reason (fraud risk) you are charged that markup.
That's nice that credit card premiums include fraud protection, but I'm not interested in paying for that with this vendor. It is one I very much trust, and even though I may even benefit from fraud protection I prefer not to have it. The vendor and I am in mutual agreement that I agree to give up my crypto with little chance of recourse, and I trust they will provide me the product. Sure, they may not make good and I may not have any good recourse, but the vendor and I have consensually made that agreement together with our own benefits in mind. In this case no fraud protection is a great benefit for me personally as I don't pay premiums for a service I don't want.
The profit from the crypto that they stole or received as ransom payment. I thought that was very clearly implied.
> I paid with LTC where my transaction costs a penny, plus or minus a penny
That addresses one of the two problems with paying with BTC, remaining worse than tradfi payments.
> That's nice that credit card premiums include fraud protection, but I'm not interested in paying for that with this vendor. It is one I very much trust,
That's nice that you trust the vendor, but fraud costs are about whether vendor trusts you. If you pay them in stolen goods, those will be seized, and the vendor will be out bullion plus transaction costs.
Tornado Cash is not the only way to launder ransom payments, so wrong again.
>That addresses one of the two problems with paying with BTC, remaining worse than tradfi payments.
Worse for some conditions, and not for others.
>That's nice that you trust the vendor, but fraud costs are about whether vendor trusts you. If you pay them in stolen goods, those will be seized, and the vendor will be out bullion plus transaction costs.
The vendor chose to charge me a lower fee for crypto than for credit. Perhaps the vendor failed to charge the appropriate amount to cover their fraud risk, but nevertheless in the transaction I found crypto advantageous. If you think they're wrong, feel free to offer your consulting services to APMEX and your expertise on selling bullion.
Source? Paraphrased from what the other commenter said: Um, no.
Except I'm not because it applies to 'US Persons' which for US citizens applies to them anywhere they are on earth or even on another planet. Also to not be a US citizen requires paying what is for many people a prohibitive exit tax of thousands of dollars to renounce. That is, you can exit society and still run afoul of the law.
False ditchotomy. Remember the mafia? They operated and operate at scale with or without tumblers.
> foreign governments stealing from Americans.
I'm a bit confused as to how you think banning tumblers moves the needle on this... Seems pretty negligible.
Should it be legal to offer, or use, a service that masks the origin and destination of currency transactions from law enforcement who have obtained a proper court order.
Don't kid yourself, the tech/crypto crowd is not anywhere near average sentiment.
It's not moving the goal posts. It's just the real world.
The principle at hand here is if online transactions ought to have a floor on visibility by law enforcement higher than using cash. So there are other versions of the question that would get you different answers.
> Should phone carriers be required to divulge text messages to law enforcement who have obtained a proper court order?
vs.
> Should government workers be allowed to spy on your dick pics?
...said every totalitarian government in history
Let's say your public address is public, all your net worth is there. A tainted account can send a small amount to you, nothing you can do about it. Is your account now tainted as well? If yes then bad actors now have a powerful tool of wealth destruction.
No. Guns and bullets are decentralized, but murder is still illegal. Law enforcement agents can investigate crime committed using crypto just like they can investigate crime committed using any other instrument.
Why would this be expected? Cash is decentralized. That didn't prevent countries from sanctioning things.
Ethereum isn't being sanctioned. Tornado is. If you transact with Tornado, you're in violation of the law. If you don't, you're not, whether you use Ether or not.
> if the government said “we’re now keeping a database of cash serial numbers that are hereby banned” would everyone need to install the “cash checker” app and scan each bill they receive?
Law enforcement has long used marked bills [1]. The cash isn't "cancelled." If you randomly end up with one, you're fine, in the same way that if you unknowingly end up transacting with a wallet that transacted with a wallet that touched Tornado, you're also probably fine. But if your garage has a box of marked bills, or if your wallet did a big transaction with another wallet that does lots of Tornado activity, you're going to be on law enforcement's radar.
It’s that grind which is fatal for mixers, not unlike Tor exit nodes. Nobody _needs_ to use them except money launderers but they depend on benign traffic for concealment. Even most privacy-minded people are going to hesitate if it taints their ability to make transactions with regulated businesses and the less innocent traffic there is, the more likely it is that using one will attract scrutiny, accelerating that feedback loop since most people don’t want to deal with the risk even if they are totally innocent.
The other level to consider: this mentions DPRK. That means all of the intelligence agencies could be involved and that increases the odds that a mixer is compromised or even run by them as a honeypot. Think about how you can decide whether to trust one, and whether the odds are that you’re signing up for additional privacy invasion like the people who’ve used certain messaging systems or VPNs.
Fixed it for you. There's a tendency, particularly in the USA for people to assume that their law is universal
There is a huge difference between what can be done with paper money vs numbers on traceable bank account.
But crypto cannot be physically inspected at international borders. So for the government, just like wire transfers, they want to know the source and recipient of such funds. If there were a service where you could bring a large amount of cash, obfuscate the origin, then wire it to a bunch of bank accounts under criminal control, that would be the definition of money laundering and also cracked down on.
In this case if Coinbase took some BTC that went through Tornado it would be equivalent to taking a wire transfer from a bank known to be laundering money.
https://www.fincen.gov/sites/default/files/shared/fin105_cmi...
>CBP regularly uses cash sniffing dogs for this purpose.
The dogs are just probable cause generating machines. Had one of these dogs "sniff my asshole" and the agents got a warrant for me to forcibly be taken to the hospital to be "internally examined." (and I was sent the bill by the hospital, both ERs they took me to ~60 miles apart even though I never consented to any of it) The dog never alerted. It's just cover so they can get a warrant whenever they want.
Yeah I'm aware it's illegal to not report on the way out, I'm only saying it seems unlikely criminals doing that are going to get caught.
Most people have probably deposited a counterfeit bill and never known it too. Again singular bills are not a problem. They just tell the secret service to keep an eye on that locality and potentially contact businesses that saw the counterfeits come in assuming those businesses didn't flag it themselves.
This database exists, but only banks and police evidence clerks check cash against it.
> Cash itself has never been sanctioned though?
Most countries have a strict limit on the amount of cash you're allowed to carry over the border.
I recall something like that happening when I was younger. This was long ago, in the pre-Internet days, so unfortunately I haven't been able to find anything about it online; this is only my distant recollection.
There was a theft of a large amount of new bank notes, which hadn't yet entered circulation. The government distributed a list of the ranges of bank notes (since the notes were newly printed, they were in large sequential ranges), and every cashier in the whole country (for instance, in supermarkets) had to check every note they received against that list; since the notes in question hadn't entered circulation yet, they could be treated as if they were counterfeit.
(Since as far as I recall this happened back in the hyperinflation days, and the whole currency has been replaced one or more times since then, there is no longer any need to check against that list.)
I’m finding it a little difficult to put into words succinctly but as an example, they’re still going to after e.g. Coinbase: the big guys. They’re not gonna track down every party interacting with any mixer and prosecute because that’s hugely resource intensive. But now when they go after e.g. Coinbase, they have a new tool in their belt. (IMO IANAL.)
To employ in the U.S., you have to report what you paid people to the tax authorities. The employer can employ and do commerce on condition of compliance and the good grace of government recognition. Individuals, in the end can do whatever they want as long as the paper trail is managed by the economic machine.
https://home.treasury.gov/policy-issues/financial-sanctions/...
> As a business accepting Ethereum, how do I know whether my customer has used Tornado Cash in the past?
Why does that matter? You need to make sure you don't break sanctions. You don't have to worry about other people.
Are you not phased at all by the inaneness of it?
It could be that they have enough parallel information that they know who controls these addresses and they're just waiting for someone to violate these new sanctions :)
So they make up a law that will basically force people to chose between losing their life savings or breaking the law. Some people will rightfully ignore the law and recover their money. The OFAC can now arrest those people...
I mean it's not impossible but I find it hard to believe that the OFAC would be that morally bankrupt.
The announcement says they are sanctioning 40 addresses associated with Tornado, can't those addresses be cycled out of commission and a new set be put in place?
That gets harder when the employees start getting arrested, the bank accounts Tornado uses to pay them start getting frozen, domains seized, et cetera, at Tornado and at every identified wallet that transacts with it.
You don’t. You just keep nailing people to touch it. Sanctions make things difficult for someone. Nobody expects them to e.g. poof Pyongyang.
This is much more like a pandemic than a war. In a war you know who your enemy is, you can see them making preparations and organizing forces, and you can counter them with your own moves. In a pandemic, somebody sneezes in Wuhan and 10 million people die. Any attempts to regulate folks who might've touched dirty things just piss people off.
A nobody spinning up their own copy of the contract may have trouble attracting the volume. If this becomes a significant issue, the treasury can expand the sanctioned entity definition to include to any smart contract that uses the code from TC. Or automatically scan for such addresses and update the list of aliases for the sanctioned entity. Or several other approaches.
You don't get it. Everyone says "OFAC may I <transaction info>?" OFAC implements services to take that info, and check it against their list and generate an answer real time. They can also update the list real time, and being centralized, every integrated processor starts giving that new entry the ol' deposit only treatment.
All OFAC needs is a scanner for what might be a hit, they preemptively add it to the list, do further digging in case it's a false positive, and still get the outcome they want. An effective brake on suspicious or possibly sanctioned individuals access to the financial network.
OFAC isn't stupid. They have the architecture of the financial network literally working for them in this case.
Decentralized doesn't mean squat with a fully public data structure that a centalized entity can real time declare chunks of off limits for a sufficiently large swathe of potential endpoints.
There is no penalty to a false positive by OFAC, or any of the service providers it oversees, btw. As that error case is handled by information collection and resubmission by the service provider to OFAC for re-analysis. The deck is stacked pretty much entirely in OFAC's favor.
Exactly this is happening here, and not in a rhetorical way. And the US government have, you know, guns.
You violate sanctions if you transact with a sanctioned entity. It is that simple.
If the NFT owner accepts coins from a sanctioned address, then yes, they have violated sanctions.
You sound like one of those devs who shunned Dropbox because it's just a simple internet backed up folder you could implement with rsync and some python.
The world isn't that simple and if these "simple rules" turn out to be too complex to easily reason about we as a society will just ignore them.
Yes, this could have some complicated implications for compliance with that law. This is why big banks employ thousands of people in their compliance departments. If you're in country [x] and you're transferring money, you have to follow laws on transferring money in country [x].
Now yes, if compliance is hard, observed compliance may be low. This affects many laws on the books, and if it becomes a problem for regulators, they may take further action to improve enforcement, as they did with capital gains on crypto transactions at exchanges.
This has nothing to do with rsync/dropbox.
Road crew like many tornado cash users, they have no "mens rea" intent to aid money launderers, even though they have knowledge it can happen. By your below logic the courts find Tornado Cash user not guilty of "mens rea" money laundering.
>Edit to reply to your edit (why not post a reply?): that's exactly why they have been added to the sanctions list explicitly, rather than prosecuting users for money laundering.
Awesome, roads used by money launderers should be sanctioned as well so "legitimate" users can't use them either, everyone who built them knew they would be used by criminals and so do the people paying the fuel taxes that maintain them so criminals can drive on them. I'm replying this way because I've run out of replies (I can only reply 5 times per 3 hours).
Edit to reply to your edit (why not post a reply?): that's exactly why they have been added to the sanctions list explicitly, rather than prosecuting users for money laundering.