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Comment by beeboop | Hacker News Reader

Let's be clear - this isn't money laundering. Money laundering is taking illicit funds and making them look legitimately sourced. Tornado Cash does not do this, it is clear that the source is Tornado Cash, and it does nothing to legitimize funds. To spend crypto you still most likely need to convert it to fiat and that fiat money will still be under scrutiny for its source.

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It absolutely is money laundering- which has three phases. Placement, Layering, and Integration.

The Layering phase is when the original source of money is concealed through transactions or bookkeeping tricks.

https://www.investopedia.com/terms/m/moneylaundering.asp

Do you believe that financial or transactional privacy should be illegal? Obfuscation is used for many things not exclusive to money laundering.

"Placement surreptitiously injects the “dirty money” into the legitimate financial system."

Tornado Cash doesn't move the funds between financial systems at all

"Layering conceals the source of the money through a series of transactions and bookkeeping tricks"

The source of the coins is in plain sight - it's clearly from Tornado Cash, and when converted into fiat currency the source is very likely also obvious (some exchange) unless you do some in-person exchange of cash for coins, in which case this has nothing to do with Tornado Cash

"Integration, the now-laundered money is withdrawn from the legitimate account to be used for whatever purposes the criminals have in mind for it"

Again there's no legitimacy for the coins after going through Tornado Cash and the fiat currency is still under scrutiny.

Tornado is absolutely money laundering. You’re moving the coins from a dirty wallet that is being watched by the government to a clean one that has plausible deniability. It’s not the end of the process though, you still need to sell something to the wallet to make it look like you earned the coins legitimately. That’s where NFTs come in.

If you just go dirty wallet -> clean wallet -> exchange it’s trivial to see that the exchange coins came from the dirty wallet. If you mix the coins from the dirty wallet to the clean one there’s no way for the exchange to say the coins came from the dirty wallet, all they know is the coins came from the mixer.

It's maybe not making them look "legitimate" but it's definitely making some funds look a lot less illicit than they are.

Exactly, everyone is missing this. If anything using tornado cash is analogous to converting debit into cash.

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