Say it with me:
"Bitcoin is not, and never was, anonymous."
"Bitcoin is not, and never was, anonymous."
The WHOLE PREMISE of it was that it is an OPEN LEDGER...!
I'm not sure how this persistent myth of it being a way to secretly make payments got around and stuck so well... maybe the "crypto" in the name?
That in itself does not equate to lack of anonymity. Just have a look at Zcash[0] or Monero[1].
In general, the idea that openness and anonymity are in conflict with each other has not been true for at least 40 years. There's entire field of mathematics dedicated to solving this problem known as secure multi-party computation.
My point is: dunk on Bitcoin all you want. Just don't drag the general idea of permissionless, open ledgers into this mud fight.
Bitcoin is an open ledger. It was never designed for hiding transactions. I'm also not saying thats a bad thing. it just is what it is, and yes I hold some btc (albeit not much, just enough to experience it mostly)
Monero is better.
/edit 2: I should also clarify that I never cashed out my casino's BTC in this manner. That obviously wouldn't make sense because anything that touched a casino wallet would be traceable to that nexus. I only used it to bring extra spending cash and rent money to countries where it was hard or expensive to transfer USD through banks.
Never has anything even remotely untoward happen.
Just sit, have a beer, wait for confirmations to happen, and be on your way.
FWIW, we Jews (speaking for my family) mostly think the Rothschilds were pretty smart for working out the same type of system by placing a brother in each European capital and banking to kings, keeping a ledger instead of moving physical gold whenever possible. It seems obvious now, but it was "moving fast and breaking things" in the 18th Century.
You trade in cash, in person, probably in a public place. Say that Alice then gets in trouble for the drug dealing they also do (or maybe the government just pings her for not doing KYC and being licensed to do financial transactions), it could be years later. The authorities seize Alice's computers and subpoena "localbitcoins", or the whatsapp/telegram/signal chat that you had to organise the meetup. They might even have a list of addresses that Alice used for transactions at this point. Alice may or may not have had good OpSec, Bob doesn't know.
From that there a myrriad options to identify Bob and Bob's addresses.
In your example you don't use an exchange, but that's not the only method of identifying Bob. Mass survelliance and metadata gathering noticed 100 phones within the location and timeframe Bob and Alice were supposed to meet. Bob had to take a phone to do the actual transfer of bitcoin (or any altcoin), so just leaving it at home wouldn't work. They also know the amount Alice transferred to Bob and the rough timeframe that it was completed and put into the ledger. Bob was also seen drawing out roughly the right amount from the ATM an hour before the meeting. Of the 100 phones, most haven't drawn out that much money recently.
So they can correlate a set of phones with a set of addresses. Even if Bob is not completely unmasked at this point. He has the money in but has to get the money out as well. Bob wanted as you say, to move money across the border. In order to do that Bob must cross the border[0] and meet with Charlie to do the reverse of the transfer. Only a handful of those 100 phones crossed borders shortly after meeting with Alice.
As soon as the money in that address moves again the cross reference with the locations of the tagged phones and discover that they know Charlie because he's done a KYC with an exchange and installed their app (even if he doesn't use that address for the transaction). They ask Charlie some pointed questions about whether he is following KYC procedures in his financial dealing and he caves and gives up the chat logs confirming your meeting, or maybe they just install NSO spyware on his phone and watch to find all the other people Charlie is dealing with.
So...
In a perfectly isolated one off instance maybe that's pseudonymous. In any real world transaction it's extremely unlikely that a state can't use it's resources to unmask the participants. In a one shot, the rules might be one way, but in multi-shot there are always factors that will serve to unmask the participants, and in reality you have to do those transactions over and over until you slip up and just combine them with a KYC exchange account and it doesn't even require that level of effort on the part of the state. OpSec is hard, as they say.
[0]: there is an alternative where only the bitcoin transaction crosses the border in return for something of value, either physical or digital, both have alternative paths that can be tracked in similar ways.
Get Bitcoin from crime
Wash into monero?
Pray the tumbler is legit?
Wash back into Bitcoin
Now what? Bitcoins from tumblers are suspect everywhere with kyc requirements.
Sell off books to a Russian oligarch or North Korea I guess?
Those are probably run by the FBI. It seems like a no brained for the government to try to run such services given the wealth of information they would provide.
https://www.reuters.com/legal/government/la-is-investigating...
I think pocketing any unlockable crypto-wallets you found along the way would cross the line. You could stick them into civil forfeiture and use the resulting cash to upgrade your department-owned car though.
Breonna Taylor (2020) - Louisville, Kentucky: Police officers entered the wrong apartment using a no-knock warrant, which led to the fatal shooting of Breonna Taylor, an emergency medical technician.
Eurie Stamps Sr. (2011) - Framingham, Massachusetts: Police raided the wrong apartment, and during the operation, an officer's gun "accidentally discharged," killing Eurie Stamps Sr., a 68-year-old grandfather.
As many have mentioned above, civil forfeiture cases for carrying cash are rare, but devastating to people who are originally from countries/cultures that don't trust banks or police.
And of course "swatting" such as https://www.courthousenews.com/texas-woman-sentenced-for-swa...
I suspect anyone that was an early adopter of crypto is somewhat considered crime adjacent because so much of the early usage was silk road.
For a while after MtGox was hacked I used BTC-e (yes, I lost money in MtGox). It was later discovered(alleged?) that the operators of BTC-e were involved in laundering money for the MtGox hack[0]. I guess my very presence in that case would be considered crime adjacent.
Then you end up like the guy asking for advice on how to sue his banks for freezing the accounts that he'd been using to run his Monero to UKP gateway.
Cash out after selling your subjective value art.
As always, you can definitely get away with this for smaller amounts, but if you go big and/or repeat it for a long time, this has all the potential to come back to you.
This story from about a year ago also showed how that worked with investigators tracing it link by link:
https://www.wired.com/story/tracers-in-the-dark-welcome-to-v...
Maybe you own a car. In 10 years time a green authoritarian communist group starts to suspect anybody who owned a car, you are sent to a re-education facility.
Maybe you are environmentally conscious and bought solar panels. In ten years time an anti environmental fascist group comes to power. You are disappeared.
You make some negative comments about AI at a dinner party. The host has an Alexa home automation system. In ten years time when government is run by AI. You are assigned to sewer cleaning duty, a tragic accident happens.
Summarizing: It's not a really strong argument.
However, if you are doing things that can get you arrested today; That's another story, then you should be paranoid and not use bitcoin. Maybe Monero instead? Although, that's not watertight either.
Honestly, I feel uneasy when I know there is any active microphone recording.
Surely they are atleast building some user profile from keywords.
As computations get cheaper, commercial mass surveillance will get really bad.
There's no real alternative. You rely on the secrets technology we currently have, knowing it might not be future-proof for your entire lifetime, or you don't use secrets technology at all (and I guess live in fear of all possible futures?)
The value of breaking my communication now compared with in 10 years time is far higher too. My bank will have destroyed the records of my dealings in a decades time for example.
Bitcoin’s ledger is specifically designed to be kept forever though. You don’t need to target me today in the how if future payoff
Crypto projects like Monero (XMR) do not have this flaw, as deducing the identities of parties from the public ledger is computationally prohibitive.
This article is not the investigative epiphany that it thinks it is
Anonymity is solved with a L2 protocol like Lightning, or an anonymous currency like Monero, although it has shortcomings that Bitcoin doesn't have.
The WSJ on the other hand…
Does any of this stuff actually help bypass KYC requirements for legal offramps in developed countries?
[1]Sorry for the very colloquial term, I don't know a better one. I mean people who care about cryptocurrencies only as a speculative "investment".
Mixers on Bitcoin are usually centralized and operated by a person, so they get (and have been) cracked way more easily
It also amounts to a general criminalization of financial privacy.
So hopefully the legal challenge succeeds.
That last part is potentially defensible – bankers aren't charged just because a criminal stores money in a checking account – except that each KYC law not followed is not only its own offense but also a chance for prosecutors to argue that the decision not to do so was intentional and the operators knew their service was predominantly used by criminals. That's going to be an interesting case with potentially significant implications for the entire field.
To generalize, every user of a privacy protocol increases the protocol's anonymity set, and thus its utility to all users.
In other words, Tornado Cash shares this property with every other privacy protocol.
2. The guy who wrote the Tornado Cash code operated no aspect of the Tornado Cash smart contract. That operates entirely autonomously. It's code, deployed to a massively distributed blockchain, that any one can use to encrypt their transaction.
Your belief expressed in #2 is at odds with the charges specifically saying he profited from money laundering activity. We’ll see when that goes to court exactly what that meant and whether there’s evidence suggesting that he knew where those fees were coming from.
In any case, what is being criticized in this particular thread is OFAC prohibiting all Americans from using Tornado Cash code. This is unprecedented, and clearly outside OFAC's statutory powers to sanction "entities".
Despite the US Treasury's claims, Tornado Cash is not in any way an entity, as it is not controlled by any party. It is simply code, running autonomously on a massively distributed blockchain. When someone uses it, they are using zero knowledge proofs to encrypt their transactions. The fact that this act of encryption adds their activity to the same anonymity pool as criminal activity is no more an argument for banning this encryption protocol as it is for banning any other encryption protocol.
However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it? That's not covered by the first amendment, and I sincerely urge you to not try to find that out in the hard way.
Who is "running" the code?
The US government, to this date, has not made an argument that the developers of Tornado Cash, who have deployed the code to the Network, have committed a crime; at least one of them seems to be living in the US.
Nor has the government made an argument that operators of Ethereum nodes are committing a crime; they might also be considered to be running the code.
What the government has done is, through sanctions, instituted restrictions on Americans interacting financially with the smart contract. This has nothing to do with "running code"; this is operating under the assumption that the Tornado Cash smart contracts are an entity that is party to financial transactions.
Whether they have the power to sanctions non-entities like a smart contract is what the suit intends to find out.
[0] https://www.trustnodes.com/2022/12/14/70-of-the-ethereum-net...
It does not; these sanctions only apply to US Persons. Secondary sanctions mean that the Treasury can additional designate non US-Persons for breaches of the primary sanctions, but that is a heavy-handed tool and unlikely to happen to people who merely use Tornado Cash; regardless, no law was broken by such a person.
Lebanese man extradited from Morocco for violating sanctions on himself (!): see ruling justifying this on https://casetext.com/case/united-states-v-tajideen-1
It is trivial for the government to say that you directly or indirectly used some service operated by American company and therefore you are subject to American jurisdiction. Yes it’s unlikely to happen to any small time Tornado Cash user.
waits ten minutes
waits ten minutes
waits ten minutes
waits ten minutes
waits ten minutes
waits ten minutes
secure.
The blockchain is anonymous enough, it's just that all transactions are public (forever) and conversion to real money requires identity.