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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.

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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.

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

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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