Is it legal to mix cash in a jar? How is Bitcoin mixing any different? | Hacker News Reader

Is it legal to mix cash in a jar? How is Bitcoin mixing any different?

jpkoning.blogspot.com

103 pointsdmarto113 comments

This is a super common argument strategy "on the internet" (but also at work with people who are too annoying for their own good, including myself). Just stripping away context until suddenly the thing you're saying is fine. People throwing out metaphors and similes as if shuffling around numbers on a hard drive and throwing pieces of metal and paper into a jar are the same thing.

And nobody is really immune to this line of thinking! There are people who scoff at "mixing cash into the jar is not illegal" but will state that "math can't be made illegal" or "you can't copyright numbers". I'm definitely not immune to it.

"can't" in that context is itself a metaphor for "you should not because of the obvious consequences".

Yeah there's definitely a deeper argument there, but I think it still falls into a similar category of ignoring context in many cases.

The "can't" variants often imply that it would cross the Rubicon on some issue. My contention is that usually, the supposed Rubibon has already been crossed ages (often centuries!) ago.

Of course "crossing the Rubicon" itself is a social construct, so at least those arguments can warp reality enough to become self-fulfilling. If everyone is convinced that something is impossible, it becomes very hard to argue that doing it is reasonable.

EDIT: and to be clear, I am not looking to litigate the illegal number issue. I've heard the arguments, this isn't a question of ignorance. It's a question of having different base axioms. I reserve my right to be extremely wrong on this issue to prove a point in an internet discussion

Every so often I read a HN comment that is salient and useful. It changes how I think about an argument and I occasionally use the HN comment as a basis for an argument in real life.

This HN comment is one such comment.

The reality is laws and civil order are an illusion, there’s what gets men with guns sent to your house and what does not.

"And nobody is immune to this line of thinking!"

In some workplaces this "line of thinking" does not even amount to "thinking" let alone legitimate argument.

What is money-laundering. Is it "mixing cash in a jar".

In a February 2019 chat, one compliance employee at Binance wrote that the company needed a banner that said, "Is washing drug money too hard these days? Come to Binance. We got cake for you."

The act of mixing or laundering isn't per se illegal. The issue is government couldn't track illegal activities generated funds used in that mixing. It is the same with encryption, it isnt wrong when you encrypt but government will hunt you down if you export that tech to others. They will also hunt you down if you dont modify you encryption tech to their liking quietly. Even court sided with government in every countries. If you mixing the money in jar with a bunch of crook, and refuse to cooperate with government, they will hunt you down. So the issue isnt really they can't do the mixing. They didnt want to cooperate with government. Hence what we see now is just normal government hunting. Macfee and Bobby Fischer had gone thru this and paid dearly for not cooperating with government - legal or not.

> The act of mixing or laundering isn't per se illegal

Mixing maybe not, but money laundering is, per se, illegal.

What's wrong with "math can't be made illegal"? I think the context for this argument (that I've heard most often) is around e2e encryption, and in that context I agree with it, both from an enforceability and a moral perspective.

You don't even need to go to crypto.

Try opening a joint bank account for you and 10 other strangers you don't know so that you can pool together some digital funds for mixing them up a little and see how the bank feels about that.

There was a fintech that just shutdown that was doing group bank accounts like this, but the name escapes me. Their postmortem was posted here (didn’t raise when raising was easy because they didn’t need the money, and then they lost their banking partner). Firefighters were one of their user stories.

What was the use case for fire fighters? DIY life insurance?

Shared grocery expenses because they live together.

FWIW: an mixed account for shared expenses is 100% legal and definitely not money laundering as long as you do the accounting and can show that it all paid for groceries. People get hung up on the specifics of AML/KYC regulations and tend to forget the context. That's sort of what the linked article is about.

Agreed, I provided more for context that it can be done, within the context you mentioned.

(i take annual mandatory AML/KYC training as part of my fintech dayjob compliance program)

Form an LLC, with you and 10 others as members. Open bank account for the LLC. Now you have your account. Maybe the LLC could be called "A1A Car Wash LLC".

I mean, at this point you’re just reinventing normal, boring money laundering.

And when one of the other members of the said LLC happens to be facing felony charges - chances are you too will find yourself involved in an investigation.

… which is normal and expected, as we all have been taught by our parents not to be getting into cars and banking arrangements with strangers.

But I suspect that the interested parties here want to avoid the inconvenience of facing charges.

File Incorporation papers in Delaware. that’s about as anonymous as it gets.

Yea, that's not going to hold up to a federal investigation.

https://en.m.wikipedia.org/wiki/Community_banking_models

Yea bank AML systems will definitely go off. Especially at big banks. I vaguely recall a comment here where the person(s) even spoke with the branch manager yet accounts were eventually flagged as part of AML. Funds frozen.

You're probably referring to https://news.ycombinator.com/item?id=38150606?

Or just go to the casino and play some blackjack until you lose 1 to 3% and then leave with your mixed money.

Do this frequently enough and they'll start inviting you back with free travel + accommodation.

Falsehoods programmers believe about laundering laws ...

Falsehoods programmers believe about laws and courts usually boil down to incorrectly thinking that it's impossible to prove intent.

Programmers also thing the law is code and the judge a compiler, and if you find a bug you win.

The legal system exists to prevent people from using violence to solve their own problems. A very powerful third party arbitrating helps keep things relatively civil.

If you did find a bug, then society needs to patch it. And that's to desirable outcome.

The undesirable outcome is that someone sends a ninja into your house at 3am to manually patch the bug.

What's much more common than either of those is that the bug isn't fixed and it's no big deal.

For example, there's a widely known bug in the definition of "legal tender". It doesn't vary based on the size of payment to be tendered, so in a sense, you're entitled to pay a $10,000 bill in the form of 250,000 quarters unless you've specifically agreed otherwise. Every once in a while someone tries to exploit this (recently: https://www.nytimes.com/2023/10/30/us/coins-lawsuit-payment-...), but judges can and do simply declare the exploit to be in bad faith and make them knock it off. (As any third party arbitrator would do.)

Surprised you don't have something like this[1], at the federal level:

" ...coins are legal tender for payment of amounts which are limited as follows:

    not exceeding 20c if 1c and/or 2c coins are offered (these coins have been withdrawn from circulation, but are still legal tender);
    not exceeding $5 if any combination of 5c, 10c, 20c and 50c coins are offered; and
    not exceeding 10 times the face value of the coin if $1 or $2 coins are offered.

It's clean, simple, and effective. And an entity can choose to accept the coins anyway if they wanted to, it just doesn't oblige them to accept them.

[1] https://banknotes.rba.gov.au/legal/legal-tender/

Alright, I'll bite, how do you prove intent?

(.. Short of finding a note that 'I OJFord declare that I intend to [do something I'm later accused of] signed [etc.]' I mean .)

You can attempt to show intent to a judge and jury with physical evidence and witness testimony. It just needs to be a better story with better props than the other side can put together!

During the discovery phase of a legal case the court will order inspections, evidence to be produced, depositions, expert reports, etc. Somewhere in there is an arrangement of facts that signifies some kind of intent behind an action.

Ok well yes you can 'prove intent' beyond reasonable doubt - I perhaps wrongly (given the context) took other commenter literally. You can't ever actually prove what a person intended, if they haven't claimed or claim otherwise themselves. But yes you can of course satisfy a judge or jury of peers that something was overwhelmingly likely their intent, and they are just lying about (or not admitting to) it.

> Alright, I'll bite, how do you prove intent?

The same way you prove anything else in a legal case, by sufficient evidence to convince the trier of fact that it is sufficiently likely to be true ("sufficiently likely" depending on the applicable standard of proof, which varies based on the context which creates the need for proof.)

Legal proof (even to criminal conviction standard of proof beyond a reasonable doubt, and even moreso to the standards used for civil liability and other purposes) isn't logical proof.

I can't count the number of times I've been asked to relicense a piece of GPL software I maintain because users think it's "fair use" of the original source I built it from.

Sorry, even if I agree with you, the lawyers for the owners that have proven to be litigious in the past aren't going to stop and consider that line of thought when it's up to a judge and/or jury to decide that and I can't afford the legal bill.

I don't get the analogy.

If I have $100 from an unknown source, and then I put it into the jar and get $100 back out, I still have $100 from an unknown source. I can't say, "well, I got the $100 from the jar." The rules of the jar are you have to put $100 in to get $100 out. So, where did the initial $100 come from? Still unknown!

The point is if you mix cash with the intent to conceal the source, that’s illegal. The law is about intent

Is it illegal in all cases? Or only in cases where the source of my original money was illegal?

If my source of money is inconvenient or embarrassing but legal, it’s not at all obvious to me that tumbling cash is illegal.

The limited research I did suggests it’s illegal iff the source of my original money is not legal.

This is what the article is about. It’s a good read. Very clearly explained.

But the arguments against coin mixers basically claim that if someone wants increased privacy that means they're criminals, and so all coin mixing should be illegal.

If you have $100 in $10 bills from an unknown source and suspect that it might have come from illegal activity, stick it into a jar where 100 people have each put $100, and then pull out $100 at random in an attempt to disconnect from its potentially illegal nature, that is called money laundering.

If you know that your money is legally obtained and put it in the same jar (for privacy purposes, for instance), you probably know that you are facilitating somebody else's money laundering (but are unlikely to be charged for it).

This whole scheme only works if no one knows you put money into the pot. It works for crypto because the receiving account can be created anonymously, disconnecting that account completely from the original source.

If I want to take my completely legitimately obtained money and obfuscate its source by putting it in a pool with people I have no knowledge of or connection to, I don't see why it should be assumed that I believe these people's intent is to launder the proceeds of some sort of illegal activity and not other people like myself. I think it's even more of a stretch to say that I would know that I'm facilitating someone else's money laundering in that case. There are completely legitimate reasons for wanting to obfuscate one's transaction history, just like there are legitimate reasons for wanting to use an email aliasing service, VPN, etc.

What would those legitimate reasons be?

you don’t want people to know you’re into femboys? or really anything else? like you’re seeing a therapist?

I may not want one entity I pay to know every single other entity I pay/paid or received money from, in what amounts, and when.

This could be for personal reasons--perhaps I'm purchasing health-related products/services...or something less high-minded like sex toys--or for professional reasons. I could be running payroll, paying suppliers, etc. and don't want everyone, including my competitors, to have easy access to all my financial activity.

You are only unlikely to be charged for it because the scale is small

Yeah, the key “innovation” of crypto tumblers is that funds end up in a different wallet than they came from. If the tumbler just spat the money back into the wallet the money came from, it wouldn’t be very useful.

But I suspect that as the accuracy of the analogy goes up, so too does the inherent sketchiness to the reader, which is probably not what the author wants.

> If the tumbler just spat the money back into the wallet the money came from, it wouldn’t be very useful.

That's not necessarily true. This coinswap proposal [1] aggregates a set of self-spends (wallet spending a balance back to itself) and in the process obfuscates the transaction graph.

[1] https://forum.grin.mw/t/mimblewimble-coinswap-proposal/8322

That's not the goal. Consider: you have bills with serial numbers known to have been stolen during a bank heist, and you want to exchange those bills with ones that are not known to have been stolen during a bank heist so that the feds don't pick you up for using them. In that case, the jar helps you do so, and that's money laundering. If other non-bank robbers participate in the jar knowing that you are doing this, they could also be charged with money laundering.

The analogy is just to say that you should be allowed to put legally obtained $100 in the mixing jar.

Obviously illegally obtained money is illegally obtained regardless of the number of hoops you go through to hide it.

Scale that to 10 people each putting 10$ in and then each taking 10$ out. Now when police comes they tell they got money from the jar...

the term "money laundering" is the anti-euphemism of "financial privacy". It's a highly successful attack on privacy. It's been drilled into our heads that privacy is bad, and it won't stop there.

No, it's not an attack on privacy, it's an attempt to block criminal activity and funding terrorism. The effect is that you can't have full financial privacy.

I worked on financial and messaging privacy tech and cryptography. I came to the conclusion that there were very few genuine and good reasons for complete anonymity and privacy in finance. This doesn't mean that everything should be completely public, but equally everything being completely hidden is not a desirable state for society either, unless you are a criminal.

There are plenty of genuine reasons. One reason off the top of my head is that you cannot pay bounties to informants for rewards if they give reliable tip-offs. You need full anonymity for that. So crime / terrorist fighting is actually being hampered.

Poor privacy weakens security in general, doesn't matter what type of data it is.

Meanwhile breaking privacy does not stop terrorists or criminals. They always find a way.

again, "money laundering" is really data privacy when you distil the issue, and the term certainly is an anti euphemism, specifically made up to attack privacy.

I would respectfully disagree with most of what you said.

Security and privacy are not the same thing. In some cases, privacy is also a security concern (e.g. criticising the state in repressive regimes) but mostly absolute privacy is not required, only partial privacy. In most cases, a lack of privacy does not massively weaken security.

For the record, I am passionate about privacy. I intensely dislike surveillance capitalism and think that the state should not be able to conduct mass surveillance. Warrants for targeted surveillance should be controlled by the courts.

However, this has to be balanced against real money laundering and other criminal enablement concerns (such as ransomware and other crimes enabled by untraceable payments). Money laundering is simply how organised crime take the proceeds of their activity and legitimise it. It is extremely naive to frame attempts to detect and control this as an attack on privacy, even if this is an undesirable effect of it.

My point is that absolutism in privacy is as bad as absolutism tends to be anywhere else it appears. The real world needs balance. We definitely need privacy, but not absolute privacy at the cost of everything else.

Update: I would just like to respond to your point that these controls have not stopped terrorism or money laundering, and that they will always find a way. I don't disagree with that, but having no control at all over this would enable them to a far greater extent and lower their costs substantially.

You're arguing that we should not have privacy. I am saying that everyone should have privacy 100% of over their data, no matter what data it is, and there is no middle ground. Obviously we won't change each other's views, no matter what we type. However, one thing is certain: The invented term of "money laundering" has been a very successful attack on privacy, and because of the campaign (to protect the children, fight terrorists, cybergangs, bogeyman etc), many people highly agree that loss of privacy good, including you. Privacy is already a lost cause.

The US government was passing AML legislation more than 50 years ago. Mass surveillance wasn't exactly practical back then, so I'm pretty sure those laws were passed as a real attempt to stop criminals rather than to erode the rights of US citizens. So no, I don't think the term money laundering is some thinly veiled cover for privacy violations.

This is sorta like saying the US government introduced the Communications Act of 1934 because they had predicted the internet and wanted to normalize the idea of wiretapping so there would be less friction to introducing mass surveillance 75 years later.

The US government does do a lot of horrible things that violate the rights of its citizens, but they also really don't like organized crime and terrorism. Not everything is an explicit attack on privacy.

> Only one last criteria is lacking. Chris and the other strangers must participate in a "knowing" way. They must be aware that the property involved is criminally-derived.

Another way of saying that is that the only missing criteria is an actual crime. All activity that doesn’t involve crime is non-criminal, so it’s a bit of a leap to imply that something is borderline criminal because one minor detail is absent, with that minor detail being the presence of an actual crime.

Am i right to think that preventing cash mixing is a big reason states/governments in general dislike casinos and even at-home games of poker?

I tend to think of money less as personal property or some commodity and more as a piece of software we're licensed to use; ie, the money issuers write the rules for what can be done with these bearer bonds, else you're breaking the agreement with jail as a consequence

Seems like there's a word or two missing in the opening sentence

thanks

s/started/states

Venmo won't let you take out more than 4999.99 in a single swoop. I frequently have $10k+ in there. I suppose I'm technically "structuring" when I withdraw, but there's no other way for me to get the money out and I haven't gotten in trouble yet. If I do get in trouble, I'll post here and hopefully Venmo will have figured out how to withdraw more.

If you're doing it because of a hard cap on the withdrawal amount it's not structuring. You have to be doing it with the specific intent to avoid required reporting.

Right. I agree. That's how I'm saying it's similar to the OP: it's the intent that makes it one or the other.

You don't have to be doing anything wrong. You only need to appear suspicious to a compliance algorithm and you're suddenly unbanked with no explanation or recourse.

Today's banks are over-compliant and won't care to dig into your intent.

See: https://www.nytimes.com/2023/11/05/business/banks-accounts-c...

  "Oh, what a tangled web we weave,/ When first we practise to deceive!"

https://en.wikipedia.org/wiki/Marmion_(poem)

IANAL but Intent matters, not just for this, but for lots of things

Yes, knowledge and intent are both written into the relevant law.

Cash is just one of those freedoms things big government hates. Through money-laundering laws, gov gets to stick its nose into ALL of our lives to treat us all as the potential criminals they know we are. The latest thing their ever-tightening regulations do is to threaten our bank accounts based on mere suspicious behavior.

Who do you think makes the cash? And you are aware it all has serial numbers and at times with things like bank robberies they use those to track it down.

Proper cash is a source of freedom. It doesn't even have serial numbers. It has weight and defined properties, but they took all that away from us quite a while ago. Until recently, the paper with numbers and faces on it still served as a fairly usable facsimile, but the powers-that-be continue to take those "privileges" away from us, the undeserved underfolk. Just wait until CBDCs are thrust upon us - that'll take care of the last vestiges of freedom that cash currency, and previously real money, had given us.

They have changed the concept of money, a natural right, into a constructed privilege.

Jeez, if he’s not careful, he’s going to wind up doing an unregistered securities offering before this is all over.

Who is JP Koning? I have never seen this blog before and he has a lot of interesting posts.

I wish only lawyers could comment on this topic. /monkey's paw curls one finger/

Seems to me that, as much as one might wish otherwise, Bitcoin is not the same as cash.

It’s illegal when you provide it as a financial service and don’t follow KYC.

https://xkcd.com/1494/

Relevant xkcd:

https://xkcd.com/1494/

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Oh god.

I'm so sick of these cryptocurrency people thinking they have invented something new and clever, where it's just centuries old fraud and money laundering, with some math on top.

You can't just "declare" that the algorithm you just made up isn't money laundering, by the power granted to you from having written the procedure down, after having thought about things de novo, with zero actual knowledge of finance and the law.

This isn't about cryptocurrency, it's about 'mixing services' for cryptocurrency.

Off-topic:

Cryptocurrency is / was 'new and clever' in that it combined a bunch of existing technologies into something that previously did not exist.

Something "new" about cryptocurrency is that it's a currency that lies outside the control of any government. No commentary on whether that's a good thing or a bad thing, but in my mind it's undoubtedly 'new and clever' (in full knowledge that most of the world would rate that as arguable).

> it's a currency that lies outside the control of any government

and yet, most gov't that want to ban it has done so. So is it really outside their control?

They may ban it, but are they doing, or can they do, anything to enforce said ban?

If enforcement isn't possible, can it be considered controlled?

China has 'banned' Bitcoin n times. That in itself tells me how well, or otherwise, it can be controlled.

Monero is crypto-non-grata in many countries. That just means obtaining it requires visiting slightly dirtier and slightly darker alleyways.

So just like every other crime, then?

Depends how it's banned.

Some countries block exchanges within their jurisdiction from offering Monero, for example, but it can still get obtained via other means. Peer to peer, offshore exchanges, decentralised exchanges.

Owning it isn't a crime.

> Owning it isn't a crime.

Not sure if you meant "in general". Whatever the government decides is a crime, is a crime.

Slavery is banned. You can't own people. For some crimes countries like having extraterritorial jurisdiction, too. E.g. FGM "tourism" and child sexual exploitation. It's not just warcrimes that are extraterritorial.

I'm not equating these, certainly not morally. I'm saying that saying "outside the control of government" and "can't be banned" is either false, or applies to any other crime too.

And if it applies to all laws, then that's basically the sovereign citizen theory of laws; people getting the legal consequences for their actions all while saying "you can't do this", where "they" demonstrably can.

> This isn't about cryptocurrency, it's about 'mixing services' for cryptocurrency.

It's the "services" based on cryptocurrency and blockchain that I'm talking about, that are claimed to be clever but actually just reinvented illegal stuff. Not sure why you think a semantic debate is the best attack against me.

> Cryptocurrency is / was 'new and clever'

I said "cryptocurrency people invented something new and clever", not the invention of cryptocurrency itself.

Cryptocurrency is a neat idea, that has yet to have a legal application where it's better than the alternative. But I'm talking about all the other nonsense. The worst being "land registry on the blockchain".

> Something "new" about cryptocurrency is that it's a currency that lies outside the control of any government.

It's not. It's outside the control of monetary policy, sure, but the government can definitely throw you in jail for whatever arbitrary laws they make. So anything and everything can be controlled by the government.

Madoff got away with with it his ponzi scheme for a long time. The government didn't find out. And yet ponzi schemes are not outside the control of governments.

If cryptocurrency were made illegal world wide tomorrow, then it would join stuff like CSAM and drunk driving. Control is not an all or nothing deal.

You're missing the point of the analogy.

They are not defending money laundering, they are defending coin mixing of legitimately obtained money, because many people want to outlaw coin mixing outright.

I don't think I am.

They don't think they're defending money laundering because they don't realize that what they just "invented" is money laundering.

The analogy doesn't make sense, since the difference between the mixer and the jar is not the place that the "money" is mixed, but more like the difference between sex and rape. It doesn't matter in which room the act took place.

It's missing the point, just like saying you thought you were relying on free speech when you signed a contract and then didn't hold up your part of the deal.

If the money is legitimately obtained there is no money laundering happening, by definition.

It's just a mechanism to increase the privacy of the user.

Sure. And I would have no problem with that. Probably neither would the law.

But if you want to use a mixer to increase your privacy, then you are sophisticated enough to realize that you're an active participant in other people's moneylaundering.

The analogy with the jar would be more complete if you know that one of the people putting money into the jar happens to put in fresh sequentially numbered bills. A reasonable person can easily deduce that they are therefore becoming part of a criminal act.

If a friend of yours asked to mix their pile of money with yours, because theirs is all sequentially numbered, would you do it? Would you admit that you're probably helping them commit a crime, if you do?

Legal commentators on SBF have said that part of the reason his defense was weak is that even if he didn't know about the fraud, it was so blatantly obvious that fraud was happening and he continued taking further actions enabling the fraud, that would make him legally liable for the fraud even if that story is true.

So if even one person is found to have been paid in crypto for a contract killing then the whole pool of crypto is afterward tainted?

Am I following this correctly?

No, there were two other criteria listed

You're exactly right - tainted, because the contract killer's money becomes clean (laundered) at the expense of the rest of the money.

Now, as to whether everyone who had money in that pool will be found guilty by "Big Bad Government", which I think is what distresses you - the answer is no. There are additional criteria, as the article mentions.

Sort of. If one person has been paid in crypto for a contract killing and other participants either know that they are facilitating the laundering of illegally-obtained money or suspect as such, then they are culpable.

I haven't really been paying much attention to the mixer thing and I'm not an expert, but the gist is that if you build a big cash blender with the explicit purpose of masking the origin of money, then you are very clearly and willfully facilitating money laundering. If you participate in this money blender, then you are probably assisting in money laundering. The whole thing is shady by nature.

> if you build a big cash blender with the explicit purpose of masking the origin of money, then you are very clearly and willfully facilitating money laundering.

Or you want to increase your privacy, maybe you don't want your employer to know where you spend your salary, or how much you are able to save.

The illegal thing is breaking the traversible chain of provenance of funds. All money transmitters by law MUST keep those records as a condition of being licensed to engage in the business of money transferance on the behalf of a third party.

If you came into possession of a money transmission framework, and you ran accounts for someone else without doing KYC, or integrating with OFAC, and were found to have transacted in a way that facilitated illegal activity or sanctions violation, you are now strictly liable for those violations.

If you wish to participate in the act of moving money, you must make law enforcement's job tractable. It is a pre-requisite of the business vertical in the United States.

In brass tacks plain, layman english:

The United States Financial System is a grafted on appendage of Law Enforcement. Every legal department in a financial services company is responsible for setting up a dedicated division responsible for facilitating an integration with Law Enforcement.

Is that clear?

I'm not making any judgements as to whether it should be that way, mind, just telling it how it is.

Mixers were never practically legal in any way shape or form. They just weren't explicitly stated by the name "Mixer" as being illegal by statute or Administrative dicta.

Not a lawyer, just been part of implementing and auditing my fair share of systems.

No, it's step one. There are two more steps to take. One more is taken: the conceal step. Now the question, do the others know whether the crypto is from a contract killing. To quote the article:

> Chris and the other participants suspect the possibility that dirty money is entering the jar, but they don't do due diligence, then they could be found guilty of money laundering.

Say, Chris finds themselves in front of judge and jury for money laundering. An expert for the prosecutor might be able to convince the jury the ratio of criminals among crypto mixers users are so high they should have done due diligence. Which, of course, you can't do if the mixer works properly. This convincing will be immensely helped by the OFAC putting mixer addresses on the SDN list.

Thus, the only way to make sure you stay on the straight and narrow is to not use crypto mixers.

Maybe I’m missing more information about laundering laws, but I don’t see how this legal argument concerning actual US dollars applies to a ethereal digital currency.

Could a digital currency not be considered "property involved in a financial transaction [that] represents the proceeds of some form of unlawful activity" ?

There is precedent for police to imagine that All currency is related to illegal activity, presumably under the shaky grounds of "otherwise you'd use a bank" [0]

But if the blockchain clearly has some dark blotches on it, then in the eyes of the police ( perhaps not completely the law ) it confirms that the pot is tainted. So, I would say in this legal environment, it would be very difficult to have both trust in the mechanics of a digital currency and also status beyond reproach of "involved in... unlawful activity"

[0] https://www.msn.com/en-us/news/us/flying-with-cash-law-enfor...

contrary to what many people believe, there’s nothing special about digital currency that makes things less illegal than they are with traditional US currency

If it didn’t apply then you could buy Monopoly money from a third party called let’s say Mether, mix it in a jar, and sell Monopoly money back to Mether.

If a law is defeated by something as simple as that, what’s the point of having the law? It’s like saying if you commit crimes wearing gloves you get to walk because there are no fingerprints.

Wrong. Mixing money can be done for non-criminal reasons. In your gloved example, you're doing it to commit crime.

It's not illegal to wear gloves to prevent leaving fingerprints, if you are smart enough not to leave other clues you might get away with it. Please use this information only for good.

It would work the same if you were transferring other non-currency assets as well and trying to mask that it was illegally obtained. Stolen goods get sold all the time.

  - I'd like to buy some contraband
  - Sure that'll be $100
  - AHAHAHA I am a cop who witnessed your transaction you are both under arrest

  - I'd like to buy some contraband
  - Sure that'll be $crypto100
  - AAUGHH I am still a cop but now I am helpless to interfere
  - YES...HA HA HA...YES!

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