The Bond villain compliance strategy | Hacker News Reader

The Bond villain compliance strategy

bitsaboutmoney.com

552 pointstakinola428 comments

Here's the list of SEC crypto enforcement actions.[1] They start about two or three cases a month. 30 cases so far this year. At first, they focused on the out and out scams. Then, they shut down the ICO industry by sending out letters asking why each ICO wasn't registered as a security. Then they went after some of the NFT guys. They went after some paid influencers. Now they're going after the bigger exchanges. Plus, along the way, the usual out and out scams: "fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods including sports cars, watches, and a 555-carat black diamond..."

The SEC's position is simple: the same rules apply to crypto as to other financial products. After FTX, nobody is seriously opposing that any more. The "crypto is special" argument is dead. The scams are not even original - the scams are Ponzi schemes, pump and dump, front-running, insider trading, and just plain stealing customer assets. All of those were known before 1900. The crypto crowd isn't really that innovative.

[1] https://www.sec.gov/spotlight/cybersecurity-enforcement-acti...

There are over 1.8 million crypto tokens. If the SEC is going to shut down the industry, they’ll need to at least start shutting down more projects per month than are starting up.

Where's the tax dollars to pay for this?

If the fines are high enough, seems like it could be self-financing.

Usually this kind of enforcement attempts to reimburse victims, or failing that, goes to general funds. Anything else is a moral hazard for enforcement (eg, USA local police confiscations)

Are you trying to say USA local police confiscations don’t exist at large scale?

No, I'm saying that they are an example of moral hazard.

Sure, but one that continues to exist after decades of being used no? It’s an example of folks not caring about that hazard and doing it anyway.

So? That doesn't mean the feds should do it too.

The local seizures are run under a Federal program. [https://www.justice.gov/afp/types-federal-forfeiture] [https://www.forfeiture.gov/]

That is why it is so prevalent everywhere in the US.

The feds use it too, extensively.

Okay - worse than I thought.

That's a fair point. From the point of view of the taxpayer, though, it's still a net positive.

According to the article:

To make this palatable to the American public, those whistleblower rewards are not courtesy of the taxpayer; they’re courtesy of money seized from previous Bond villains. A portion of Binance’s settlement(s) will go to pay the whistleblowers at the next Bond villain. It’s a circle of life.

> Where's the tax dollars to pay for this?

You're kidding right? The US government is one of the biggest holder of Bitcoin. They seized insane amount of Bitcoins. And the US is a country where capital gains are taxed. The US government is making a shitload of money when cryptocurrencies go up.

You cannot have it both ways: if you tax your citizens on their capital gains made on crypto, then you prosecute the scammers like SBF when they prey on US citizens.

I don't disagree, but you're arguing that the government gives a greater share of its tax receipts to the SEC. This is a question for Congress, not the agency. The usual assertion of "let's spend more money on x" results in the obvious question "instead of what?".

OP was suggesting that the SEC ramp up the rate of actions, which will need funding (at least, initially). I don't see Congress doing that?

The SEC is largely self-funded by fees on banks, no need for tax dollars.

A government mandated fee is an excise tax, they are essentially the same thing.

The SEC is largely self-funded via fees charged to financial institutions. Funding increased enforcement of crypto entities doesn’t have to require more tax revenue.

Do any of them reach even 1% of Binance's size? If crypto stays a bunch of niche projects that only enthusiasts invest in, isn't that the SEC's goal accomplished? I can't imagine they would care about a coin that doesn't attract either a lot of retail customers or big financial institutions.

Binance value comes from servicing those niche projects - it’s an exchange. As long as those niche projects exist, new projects will emerge to service demand. What will change is design; future exchanges will be less regulatable. Already dexes are waiting in the wings; UNI has been in a price uptrend due to these decisions.

A smarter strategy would be to do what the US Justice dept is doing; co-opt the biggest players, install plants, and cut down any upstarts. Government enforced monopolies have worked for hundreds of years as an effective way to control industries.

All of that's assuming that demand will continue. What this will do is remove crypto from the mainstream. And without paid celebrity endorsements, where will the new dumb money inflow come from? And if that dries up, how will the mining rigs pay their electricity bills?

A lot of people use crypto for utility, which is why it doesn’t go to zero in bear markets. Not everyone needs or wants crypto tokens, but those that do form the base of the ecosystem. You can call it dumb money if you want to be elitist, but it’s the same so called dumb as any consumer activity.

If you start an ICO, you are harmless until you get someone to buy into your token. For the SEC, you are harmless until you collect "millions" of dollars. Otherwise, you are just another one of these small scams that are happening all the time regardless of it using crypto or not.

Unless they do a complete and total eradication program, that will just create a selective environment for tokens that are able to avoid SEC fines. What you’re saying does seem to be the SEC strategy, and it is probably the profit maximizing strategy in the short term. It also requires the least effort; rule making that allowed for regular fee collection instead of sporadic ones might be profitable in the long term, but it would be a complex activity the SEC might not be capable of.

Remains the question: Why was it allowed to even live a little, when for the first dimes, it was clear it was a scheme that necessitated illegal actions at every step?

What’s illegal step is mining crypto on your gpu?

Nothing illegal about proof of work.

No, but there should be a ban on proof of waste.

Waste? Better forget about crypto then. Even at its peak it didn't even amount to 1% of global energy consumption. Maybe you should suggest putting a ban on trading with China instead.

1% of global energy consumption is outrageous.

More like 0.5%. A literal drop of water into the ocean of western wastefulness.

My only objection to it is the fact all that energy is being poured into obsolete technology like bitcoin. I wouldn't even mind if Monero used even more energy. That energy is buying us something: a true cryptocurrency.

> More like 0.5%. A literal drop of water into the ocean of western wastefulness.

If we accept the analogy, 0.5% of the oceans is 5 100 000 km³, which is quite a bit more than "a literal drop": https://www.wolframalpha.com/input?i=0.5%25+of+the+volume+of...

A tiny fraction of the world’s total population use or benefit from cryptocurrencies, but it consumes “just” 0.5% of world energy consumption.

This is self-evidently insane.

Maybe they should start using the currency as well?

What the fuck are you talking about? You want to consume all the energy generated, just for currency? You think people will stop creating new coins? You think using the worlds energy to generate random numbers is a form of freedom?

I want to ask rhetorically if you are out of your mind but, like I said, it’s self evident.

> What the fuck are you talking about?

Cryptocurrencies and the relative irrelevance of the energy consumption associated with them.

> just for currency?

Not just any currency, one that guarantees privacy and anonymity.

> You think using the worlds energy to generate random numbers is a form of freedom?

I don't see anyone complaining about the energy that gets poured into processors every single day to make them generate random numbers that are then used as secret keys in cryptography just so that users can securely shitpost on social media. All those advertisers are making a killing so all this activity must be moral, right?

You can't attack another user like this, regardless of how wrong they are or you feel they are. It's not what this site is for, and destroys what it is for.

We have to ban accounts that do it repeatedly, so if you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules, we'd appreciate it.

Right, so we increase our entire planetary energy needs by several orders of magnitude so that everyone can use crypto….

So that anyone and everyone can have private, anonymous, censorship-resistant, global, cheap, instant financial transactions.

It’s not worth the energy. You know it’s not, you’re just trolling.

China does useful stuff; their energy consumption is going up because they have over a billion people who e.g. want AC units in a tropical heatwave. They're building literally more renewables than any other country in the world and still aren't keeping up with demand. If we permanently switched off all those power plants then tens/hundreds of millions would die.

In contrast, switching off all crypto farms would be a free reduction in emissions, and indirectly save lives.

Cheap consumer goods for entire western nations. Truly the peak of usefulness.

Tell me what they should stop producing. Most of what they make is just boring every day stuff that we need to live comfortably. Do you like using knives and forks? What about cookware? A toy for your 2 year old so they can have some fun? Useless shit right?

> Tell me what they should stop producing.

The consumer electronics people use to post environmentalist takes with. That'd be a good start.

OP didn't say China was the most "productive" state in the planet, instead that they do at least produce despite being seen as an obfuscator.

The "maker" sphere in China is analagous to that in EU/US, the people are waiting for societal change.

Amen to that.

Of course, just as most of yesterday's crypto experts are today's AI experts, the main wastage seems to be moving towards LLMs these days.

Yeah, let's get a ban on video games (waste) and video game achievements (proof of waste.)

This part takes the least to claim the worst isn’t here. Akin to saying Al Capone was “just doing dishes” when he was arrested, why would you.

There are various illegal parts: Creating a currency for example. But even if one can walk around the definition of a currency, exchanging it for dollars is most probably questionable: You give banknotes to someone in exchange for a token which you don’t know how it was obtained. In most cases, it is facilitating drug exchange and hitmen, so, unless one can prove where a Bitcoin comes from, I’m surprised it is even legal to exchange it for tender money.

The whole thing should have been sued from the start.

> Creating a currency

Shouldn't be illegal.

> exchanging it for dollars

Shouldn't be illegal.

> You give banknotes to someone in exchange for a token which you don’t know how it was obtained.

It doesn't matter how it was obtained.

> In most cases, it is facilitating drug exchange and hitmen

Oh... Just like USD then.

Why don't you go after them for those crimes? Without coopting us into your warrantless global surveillance network?

> unless one can prove where a Bitcoin comes from

That it is even possible to prove that is actually a failure of bitcoin's design. Thankfully Monero fixed it. Money should be fungible. There should be no dirty/clean bit attached to coins.

There's a huge difference between physically transporting a large amount of cash and disposing of it usefully without being detected versus electronically moving it around the world and exchanging it for fiat currency entirely anonymously.

Here's a clue: one of those is hard to do and massively increases your risk of being caught, and the other actually enables further criminal activity which would not otherwise be easily possible.

So no, not just like USD.

And yet every criminal out there seems to be using USD. Funny how that works. Maybe we should ban USD too.

Well, if you want to actually spend your ill gotten gains, you pretty much need it in fiat currency. I don't see the point you are making.

The original purpose of cryptocurrency was to replace fiat by getting everyone to use it for their transactions. People would be pricing things in bitcoin or monero instead of USD.

Well, yeah, that was the original idea. Didn't work out like that though.

Yes. That's the point. The fact it didn't work out like that, and turned into stonks line go up instead, is the tragedy of cryptocurrency.

> > Creating a currency

> Shouldn't be illegal.

This is exactly where the bullshit should stop. Creating currencies should be the sole privilege of sovereign governments.

Bullshit? It's the government currencies that are bullshit. You're replying to someone who lives in a country that actually went through several currencies. They became so worthless they had to be replaced. If you search "Brazil" here on HN you'll find the top post is about how "fake money" saved my country. They essentially tricked everyone into believing this time was going to be different. I'm sorry but I don't believe these people for a second. And neither should you or anyone else.

> In most cases, it is facilitating drug exchange and hitmen

Except this isn’t even remotely true? Less than 1% or so of transactions are even remotely linked to crime?

Unless you're stealing electricity or computing of course.

I think this quote of the prosecutor in Bankman-Frieds' case summarizes it well: "The crypto industry might be new, the players like Sam Bankman-Fried may be new, but this kind of fraud is as old as time and we have no patience for it".

Note though that the fraud that the prosecutor addresses here doesn’t have anything to do with crypto per se. As in, it’s not about securities laws, or even AML stuff.

The fraud that scam bank man fraud got sentenced for was plain old theft. Taking customers assets (mainly crypto assets) and using it as his personal piggy bank.

That's literally what the prosecutor said.

> Note though that the fraud that the prosecutor addresses here doesn’t have anything to do with crypto per se. As in, it’s not about securities laws, or even AML stuff.

That's playing pretty tight with definitions to push "crypto" out of the picture.

SEC's press releases was "SEC Charges Samuel Bankman-Fried with Defrauding Investors in Crypto Asset Trading Platform FTX". https://www.sec.gov/news/press-release/2022-219

The release said "crypto" ten times.

Truth be told, the FTX case isn't even a cryptocurrency case. The Bankman essentially ran an unregulated bank. People deposited money into it and he just took it. He pretty much robbed his depositors.

It's ironic. Cryptocurrency was supposed to put an end to guys like that by ending the need for banks.

Well put. Following that line of thought I’d say that by now crypto has shown that you can never trust a system, in the end you have to trust the people behind it. I find people to be more trustworthy when they go to jail if they do wrong.

Cryptocurrency was meant to reduce the number of people you need to trust to an absolute minimum. Ideally, the only people you'd have to trust would be world class cryptographers.

The whole problem here is people reinvented the entire financial system on top of it. Exchanges are really just banks in disguise. They do fractional reserve banking, they offer cryptocurrency loans, they even have savings accounts.

There are permissionless and trustless exchanges like uniswap

I apologize, in my post I meant to say centralized exchanges.

How do I get real money out of uniswap?

Ultimately there has to be an off-ramp, or it's no different from an ingame currency.

> Ultimately there has to be an off-ramp

Not if people start using the cryptocurrency to actually pay for stuff. That's the point of money, after all.

It’s been 15 years and nobody still uses cryptocurrency to pay for stuff. And as you say, that’s the point of money.

So maybe, just maybe crypto is actually not very good as money, which is why people have been increasingly desperate to invent new stories to keep someone paying real money for crypto (digital gold, NFTs, etc.)

I paid for something with crypto just two days ago. I don't do many transactions with crypto, because most of the time it's easier to just use my cards, but on occasion it's handy.

Frankly, it works well, but it's not user-friendly for non-technical users still.

So basically unless the existing financial system gets really broken, it’s not worth using?

It's been worth using for me when I've used it, just not very often.

I would contend that being friendly for non-technical users is a necessary condition to consider it working well. It clearly works, nobody is saying it doesn't.

Plenty of things works well only for people with niche knowledge.

And plenty of people take a far more negative view of crypto.

‘Niche money for nerds’ doesn’t sound like a world changing concept.

I'm writing this post over a VPN subscription I bought using BTC, paid from my wallet. It was as painless as putting in credit card details.

You are not addressing the point. There's a wold of difference between usable for something, and it being a good use case. You can go shopping in a monster truck, but that doesn't mean it's a good general use case for monster trucks in society.

Why is it a bad use case? It was literally as convenient as any credit/debit card transaction.

Because when it comes to fraud, myself and the average person tend to have a lot of protection against fraudulent actors.

“caveat emptor” is a very poor society wide model.

I've gotten paid for services via Monero. It works surprisingly well. Just start using it.

And what did you do with that Monero after you received it?

Tried to find stuff to buy with it. Didn't find anything, sadly. I want people to start using it because then I can pay them with crypto too.

Most people don't use cryptocurrency to pay for stuff, but back when I lived in Cambridge there was a nice pub where you could buy your pizza with it, and last week here in Berlin I passed a Subway[0] that let you pay for your sandwich in BTC. Or at least it said it did, BTC by itself is a terrible idea[1].

[0] And a subway. Except the subway was elevated and the "proper" railway was submerged (but not covered): https://www.google.com/maps/search/S%2BU+Schönhauser+Allee+(...

[1] And to shortcut the conversation: Alice: *something about payment layers*, Bob: *how payment layers destroy the one thing BTC actually does provide*

Once you start buying goods and services in the real world, then the whole “trustless” part of crypto becomes useless.

How is crypto going to ensure the landscaper actually cuts my grass. I have to have some measure of trust and there has to be infrastructure to resolve disputes and try to make people whole. Once you have that, you are in many ways back at fiat currency.

Which is why central back digital currencies will be / are a thing.

I've also argued that we already have workable digital currency for regular consumer transactions. I pay my landscaper with Zelle. Who cares that it's denominated in dollars? Point is I can already move money practically wherever I want with the click of a button. And that money is already accepted by everyone I transact with.

Crypto is a solution looking for a problem. And money laundering/crime ended up being the problem they ended up solving. I'm enjoying watching this space slowly grind down / burn to the ground. Good riddance to a level of evil where the perps joke about the fact they're making money helping criminals "they're here for the crime" etc. 18 months is too little time in prison.

Zelle is among the worst, yuck

That maybe, but my bank offers it and so I've used it because it was there, and I have had no problems with it. Which is all I need. It worked without a seconds thought

That's more than crypto offers me.

> How is crypto going to ensure the landscaper actually cuts my grass.

Same way cash ensured that. People generally don't pay until the service is done.

You can have cryptocurrency or you can have wildly manipulated assets in an attempt to become rich at the expense of everyone else who didn’t get in first. It’s a stampede toward number two by literally everyone I’ve encounter over the past decade who plays crypto markets.

P2P exchanges like Bisq use escrow and verification methods with dispute resolution for on/off ramp. There are other options as well for secure decentralize offramps, but bisq is much larger than any other protocol.

And why can’t bisq play games and be bribed to release things out of escrow or just steal escrowed funds and run?

Because it’s a p2p open source protocol. If you’re interested in the details of how it works, rtfm.

Ah, so someone can trick it into doing all the above (via bug or code push) and no one is 'on the hook', since no individual is responsible for everything?

And escrow isn't really escrow (in the sense of independently verified), but honor based? At least based on the FAQ.

Since things like 'USD arrived in a bank account' can't be verified by a third party.

So, seriously - what's the point?

The point is self custody. Even if a trade were to fail (it’s more difficult than you might think) the funds stay in you custody before and after the trade. That’s different from a cex where you’re trusting someone to hold all your assets. Someone like SBF could not do a similar fraud, even if such a party existed within bisq.

Regarding code, there have been attempts by people to take over p2p protocols before. Most famous was Justin Suns takeover of Steem. Since all the code was open source, most of the community forked the code over to Hive successfully. If a malicious actor tried something similar with Bisq, the community would just fork an older version of the code.

More fundamentally, these protocols work because people are incentivized to make them work. It’s quite different than the vc crypto with the big marketing budgets that most people hear about; most of those are just traditional finance reskinning itself.

Ethereum DAO hack? Hello?

You just moved the cheese to the escrow agent.

There is no agent. Funds are held in a 2 of 2 multisig wallet, with the sole key holders being the trading partners.

Sure, but that doesn't mean you have to hold your money at the off-ramp. Just pass through briefly and you minimize your exposure to centralized actors.

>The whole problem here is people reinvented the entire financial system on top of it

The whole problem is that some of what they do adds value, because it turns out the banking industry as a whole has some valuable functions that people need.

Yeah, but ideally all of those features should be "native" features of the cryptosystem, such that they're all just as zero-trust as the core stuff the cryptosystem does with its gas currency.

The problem is that developers see "this cryptosystem supports smart contracts" and interpret it as "this is a Turing-machine substrate which I can use to deploy effectively centralized / trust-us infrastructure, but then turn around and market it as being decentralized and zero-trust."

If a cryptosystem supports "smart contracts", ideally they should be restricted to only to serve as an interface for extending the deployed cryptosystem with additional decentralized / zero-trust features. Sadly, it's impossible to have a compiler determine whether your code is decentralized / zero-trust.

Well, the financial system exists because it provides services that are desired. From what I understand there's really no way to offer those same services purely in the blockchain, except for some imitations that have their own equally big problems.

In essence, all a financial system functionally provides is a set of buffers/caches so that individual or company lives can overcome some bumps quickly at the expense of promise to refill the buffer + some extra later.

Not really. The complexity can’t simply be reduced to a computer science metaphor.

Other the to exchange fiat for crypto, I’m not quite sure why people keep their cryptocurrencies on these exchanges. They proven time and time again that they’re usually a scam.

I mean, this article suggests that Binance isn’t a scam, rather it has a perfectly sound business model that is illegal and immoral.

Often it's a desire to be able to quickly run a trade or arb play.

Because you can't gamble if your money isn't in the casino.

Because, as it turns out, using cryptocurrency as currency is too expensive. The exchanges let you "trade" and then settle themselves in way fewer transactions, so you don't have to pay nearly as much in fees.

It's the same reason we keep our money in banks instead of everyone owning a Fed terminal and requesting ACH pulls.

The thing is... I honestly am not smart enough to trust the cryptography! I guess at a high level I could make some sense of it but there is no way I could fully evaluate any crypto as safe or not.

I think there is great irony in the fact that probably 90% of the people involved in crypto don't understand the math behind the systems they trust so much. They could swear these systems are more trustworthy than traditional banks cause decentralization, smart contracts, cryptography, etc. But all of these are just abstract concepts for them in which they just chose to place their trust, because of vibes or smth.

Also because some of the code was supposed to be open source I guess ? Trust the code ?

The code is not the system, the code is not the network, the code (and the coins) themselves have zero value. Much like money itself is valueless. You can't eat the money, you can't build anything with money. It's the interface between money and real objects that gives money said value. The digital coins wanted to cheat that connection to fungibility with real life objects.

People put money into FTX to buy and sell cryptocurrencies.

FTX appropriated assets for a hedge fund that bought and sold cryptocurrencies.

Why did they think they could run an exchange without complying with the laws for those? It was for cryptocurrencies.

There are few if any "crypto cases" in the sense of cases about breaking laws specific to cryptocurrencies. There are very few of those laws.

There are an awful lot of "crypto cases" in the sense of companies focused on cryptocurrencies breaking laws that long predate cryptocurrency. That is and should be affecting general perception of "cryptocurrency".

Crypto could have been special. Sadly it turned into stocks instead and people reinvented the entire financial system on top of it. I don't even mind their attempts to regulate this stuff anymore. Exchanges are literally banks.

They should stop just short of regulating the underlying cryptocurrencies themselves. Just treat these institutions like they're banks.

> Crypto could have been special. Sadly it turned into stocks

This is the libertarian version of "true communism has never been tried". Of course people wanted to reinvent the financial system, it was profitable to do so.

Not really. True cryptocurrencies were tried. They even work. Monero is the truest cryptocurrency, it's what bitcoin should have been since the beginning and it already works.

The tragedy is nobody's actually using it because everyone's too busy feeding their money into literal banks and speculating with it.

It's as much of a tragedy that people don't use Monero as people who go walking down the street and don't stop to look under every rock. They could do it, but not sure the point.

>The tragedy is nobody's actually using it because everyone's too busy feeding their money into literal banks and speculating with it.

To borrow a phrase: Nice idea, wrong species.

Once very large financial interests (those capable of destabilising international trade, funding transnational smuggling operations, or --gulp!-- financing war) are attracted to an opportunity, the game is way beyond the scope of inconsequential small-scale adopters. The latter will be wistful about their dashed hopes.

The libertarian ideology, like many others, is at best an extraordinarily naive interpretation of the individual and the world.

"Libertarians are like house cats: absolutely convinced of their fierce independence while utterly dependent on a system they don't appreciate or understand."

> They should stop just short of regulating the underlying cryptocurrencies themselves.

The problem with not regulating a currency at all, is that it implies a permission for someone to print it at will. Cryptocurrency is no exception to this scenario; you are asked to trust the developers (technocracy) and node operators (50%+1 attack and all the usual power dynamics of the rich having more say than the majority) to not do it. The most important question you must ask yourself is, how long will the interests of that elite continue to align with yours (if they ever did).

The dream of a decentralized, community-run, grassroots infrastructure died sometime around the first GPU PoC - Satoshi themselves expressed discontent, saying GPUs would trivially out-mine the common man.

Communities can self-regulate because they run on trust; it's extremely difficult to build trust in a system designed around distrusting every single one of your peers.

> The problem with not regulating a currency at all, is that it implies a permission for someone to print it at will.

Not a problem. This is determined by code in ways everyone can see and understand. It's actually better than governments printing money whenever they feel like it.

The economic impact of money printing is actually minimal. Most inflation is actually generated by fractional reserve banking and their loans which is already something exchanges do. BTC maxis don't seem to grasp this fact.

> you are asked to trust the developers (technocracy)

You are asked to trust code. Either way I'm actually OK with this. I actually trust them a whole lot more than the communists in charge of my country's economy right now.

> node operators (50%+1 attack and all the usual power dynamics of the rich having more say than the majority)

The only problem with this is it turned out cryptocurrency mining is not actually as decentralized as it was supposed to be. It should have been one CPU one vote but it turned into massive operations involving custom hardware.

New cryptocurrencies need technology to fix that problem. Monero uses ASIC resistant proof of work algorithms to mitigate it.

> The dream of a decentralized, community-run, grassroots infrastructure died sometime around the first GPU PoC - Satoshi themselves expressed discontent, saying GPUs would trivially out-mine the common man.

Exactly. That's the true tragedy of cryptocurrencies.

> This is determined by code in ways everyone can see and understand.

That's just a slightly more wordy way of saying "technocracy". An overwhelming majority of people in the world (including cryptocurrency enthusiasts) are incapable of following through a fizzbuzz program, let alone an SHA256 implementation, and the hash algorithm is barely the tiniest building block.

> Monero uses ASIC resistant proof of work algorithms to mitigate it.

Proof of waste stopped being sexy the moment we realized the environmental impact, and continuing to defend it on any "practical" merits is shortsighted at best.

> Exactly. That's the true tragedy of cryptocurrencies.

With all of your doubling down on technocracy, I find it odd that you defend a concept that, by design, began falling apart as soon as it started gaining traction. The original idea was noble, but it was almost meant to be perverted. What we should have done was to get back to the drawing board: how can we build distributed/decentralized infrastructure that actually helps people.

> An overwhelming majority of people in the world (including cryptocurrency enthusiasts) are incapable of following through a fizzbuzz program, let alone an SHA256 implementation, and the hash algorithm is barely the tiniest building block.

So? It's still more open than traditional finance. You can actually see how it works if you try. Unlike some central bank's political machinations at some abstract far away place. We need exactly one guarantee: that nobody can change how the system works to benefit themselves.

Besides... The overwhelming majority of people do not even understand the nature of money itself. They do not understand fractional reserve banking. Most people think inflation is caused by the government printing money. Somehow that's not an argument against having money.

> Proof of waste stopped being sexy the moment we realized the environmental impact

Not this nonsense again. Even at the peak of the last bullrun, it didn't even amount to 1% of global energy consumption.

> The original idea was noble, but it was almost meant to be perverted.

I agree it was a noble idea and that it failed. I disagree that it was "meant" to be perverted.

> What we should have done was to get back to the drawing board: how can we build distributed/decentralized infrastructure that actually helps people.

Agree. At this moment in time, I think Monero is closest to that ideal. I am not opposed to even better and more decentralized technology. Ethereum's zero knowledge proofs are very interesting.

> [...] it didn't even amount to 1% of global energy consumption.

When you put it in these terms, we should also just de-regulate fuel, plumbing, and electronics, because the combined lead poisoning won't kill as much as 1% of the population.

No. When I put it in these terms, it means I expect you to prioritize far more impactful targets for regulation than cryptocurrencies. Trading with China should be number one in your list. As should be every other modern western comfort and privilege.

To me you all seen plenty happy to buy made in China computers to post your environmentalist takes with and it makes it really hard to take any of it seriously. Maybe after the world is done taking care of the truly impactful stuff we can revisit this proof of work debate.

> As should be every other modern western comfort and privilege.

Seems to me like gambling, speculation, and proof of waste all perfectly fit the definition of "comfort and privilege".

> Maybe after the world is done taking care of the truly impactful stuff we can revisit this proof of work debate.

It's crazy how much we can agree on!

The only problem is, PoW is considered harmful even by the larger crypto community, to the point where alternatives were not only considered, but also implemented (e.g. PoS). I'm more than willing to reconsider PoW's merits at a later time (as you suggest), under the condition that all ongoing PoW schemes are paused until we're done dealing with these more important things. I think it's a perfectly reasonable compromise.

> The only problem is, PoW is considered harmful even by the larger crypto community, to the point where alternatives were not only considered, but also implemented (e.g. PoS).

I have nothing against proof of stake, I think it's fine but inherently less decentralized than proof of work. The whole idea was that anyone with a computer could participate and be rewarded for contributing to the decentralization of the network. In order to actually participate in ETH proof of stake validation, you need to own 32 ETH. That excludes vast amounts of people including myself.

It's a tradeoff and I'm not entirely sure it's worth it. Compared to the current status quo of huge centralized BTC mining operations it certainly looks attractive. There are better proof of work implementations though like Monero which better guarantee 1 CPU = 1 vote. I'm not ready to write it off yet.

> I think it's a perfectly reasonable compromise.

I don't accept that compromise.

Relativity. Trade with China generates a lot of wasteful byproducts, at a lot of benefit to society.

Proof of work generates not as much wasteful byproducts, but far more relative to its current utility. Not its potential or idealized utility, but for what it gives now.

The cost-benefit on those two examples are at vastly different sides of the spectrum.

And your argument that because of that, we can't take claims about proof of work seriously doesn't hold muster. We can still do things about it. Just like we can still do something about the fountains at the Kardashian homes just being fresh running water (they were annoyed about the cleaning process, so had the bright idea to just install a drain and have the fountains be an open tap, so one of their homes was using 1/2 million gallons a month of water).

Ironically, to you, that's a drop in the ocean and we should let them do it because it doesn't move the needle.

I am trying to find a source for your claims about the fountain but nothing comes up in the first few pages of a search. The results that do come up mention their extreme overuse of water during the droughts of 2022, but nothing as extreme as your anecdote.

> You can actually see how it works if you try. Unlike some central bank's political machinations

You can also see how those work, it's just that they're boring.

https://www.ecb.europa.eu/press/govcdec/mopo/html/index.en.h...

> They do not understand fractional reserve banking

Entertainingly the crypto people managed to immediately re-invent it, in several different forms, because it turns out to be inextricable from the concept of credit.

I oppose the very idea of credit. None of that should have been reinvented.

I'm sorry, but what?

Credit has pretty much existed in humans decided to settle down and plant crops. What exactly are you planning to replace the last 10,000 years with?

> Even at the peak of the last bullrun, it didn't even amount to 1% of global energy consumption.

Getting close to 1% of global electricity consumption to do a piddling quantity of transactions is a massive amount of waste. This is, like, 5 orders of magnitude or worse less efficient than normal banking networks, or about the same usage as all televisions.

I don't care about the energy usage as long as it buys us private global government-free currency. If that "inefficiency" is the price I pay it gladly. My only objection is the fact this energy is being poured into obsolete technology like BTC which doesn't provide us privacy. It should be going into Monero instead.

TBH Helium was the only crypto I saw and actually started trying to get into.[0]

Proof of Coverage was an interesting form of POW, and had the advantage of doing something -potentially- useful with relatively low power consumption. [1]

[0] - Life things happened alongside delays on getting the actual 'miner' so... IDK where it is now. oops.

[1] - The odd question I never quite got far enough in the setup to ask myself was whether this was, in and of itself, a bizarre side-step around reselling internet services.

Most of crypto trading is on centralized exchanges.

What made crypto big was making trading approachable to the common man, mostly through sophisticated loan systems.

It's a classic blockchain fallacy that a 51% attack allows you to print the underlying crypto at will.

As for the developers, they could write code to print a billion bitcoins if they wanted to, but for it to take effect everyone's gotta agree to run it.

The attackers could mint new coins under a new process and then force everyone to transition over by trading old for new.

Holdouts will find that old-coin transactions never succeed, and will have no other choice except to walk away in financial ruin.

It's not entirely clear to me what you mean by "regime", but it seems most likely to me that if forced with a choice of two hard-forks:

1) Removing the attacker directly (PoS) / changing the hashing algorithm to remove the attacker (PoW)

2) Submitting to the whims of the attacker

it would be a no-brainer to just remove the attacker. Embracing an attacker-controlled chain seems like a strictly worse option than removing the attacker, no matter how messy. It seems like a choice between disruption or certain ruin.

An attacker at that scale would certainly understand this game theory, and realize that if they attack, after some potentially very messy shake-out and serious temporary disruption, they will soon have no influence over the chain anymore.

No, it straight up doesn't work as a money, outside of very niche use cases like crime and evading the state.

Most people have no use for that, or speculation upon that, and just want a money that's simple, easy, fast, and reliable.

A decade after bitcoin, no-one but crooks and when-moon fanboys use it. Contrast that with AI: the moment it hit the retail market every man and his dog is using it for everything.

> it straight up doesn't work as a money

I've gotten paid for services via Monero.

> money that's simple, easy, fast, and reliable

That was my exact experience with Monero.

Ever tried to set up a Stripe account for GitHub Sponsors? I literally had to open a new bank account for that. With cryptocurrency, you just generate a private key in your wallet app.

> A decade after bitcoin, no-one but crooks and when-moon fanboys use it.

Yeah, that's kind of my point. It's tragic. I don't understand it.

You're a techie - everyone else views the complexity and unreliability of computers as "computers are a necessary evil" rather than "oh this is an interesting challenge!".

To the layman, a single unfamiliar word or concept equals "my money will disappear".

Even among techies there's no adoption. Just look at this site.

Shopify takes payments in USDC (Coinbase’s stable coin that’s pegged to USD). They use Solana Pay to do it, and the fees are considerably lower than traditional banking alternatives.

https://solanapay.com/

> people reinvented the entire financial system on top of it

That's the goal, to remove intermediaries and trust.

There are permissionless and trustless application, but HN likes to use centralized scams like FTX to dunk on crypto and feel smug.

It'd be like me pointing to bernie madoff and saying "see, I told you all of the stock market was a scam!"

Okay but what percentage of the total value transacted in crypto happens on centralized exchanges? If I had to guess, probably something like nearly all of it.

You are talking about a fringe minority or crypto transactions. everyone else is talking about the reality on the ground.

Nothing soured my (already negative) opinion of Crypto as much as regular conversations with a Crypto VC. Every time we spoke they were either sceptical or very excited about something that, to me, was obviously a trivial example of 1 or more classic scams. Whether or not they were excited about it didn't seem to track with the scamminess.

That’s sort of general problem with people regardless of industry who’ve drunk the startup coolaid … wrong way around, let’s say. The point of innovation is not to reinvent the wheel. Saying you are startuppy does not excuse you from actually learning about the field. One could even radically propose knowledge of field helps to find innovations. What one should avoid is saying ’no’ just because such a thing does not exist yet. If the thing exists, has a name like ’Big Bad Mistake’, you should at least acknowledge it. (Yeah yeah, rockets were impossible and Musk beat them but that happened via respect of existing art and extending it, not completely ignoring it).

When I did my second startup and first to get proper VC funding, we were young and stupid and got talked into changing strategy because the VC, while not going for an actual scam, was very clearly thinking we could win a game of musical chairs that necessarily would end badly - this was a the height of the dot-com boom, and they wanted us to chase signups over revenue because per-user valuations were way out of whack with what there was any reasonable hope of earning from users who had signed up for a free service.

Their hope was we could exit before the music stopped (we didn't; we survived, barely, thanks to mostly sheer luck of having closed our B-round weeks before the bubble burst, and managed to pivot and survive with massive cuts). We still hoped we could make it profitable without that, but there was no way we could generate enough revenue to justify the exit we were hoping for, but the proportion of our budget that went to marketing certainly made achieving profitability much harder.

Which is to say that VC's often chase very high-risk ways of getting growth even in cases where they know it's just a question of time before valuations will collapse, because most of them are in the business of producing returns, not sustainable companies, and many of them are "dumb money". It's a tough business. I spend a few years in one, analysing the track records of other funds among other things, and I saw so much stupidity in that dataset.

> Which is to say that VC's often chase very high-risk ways of getting growth even in cases where they know it's just a question of time before valuations will collapse, because most of them are in the business of producing returns, not sustainable companies, and many of them are "dumb money". It's a tough business. I spend a few years in one, analysing the track records of other funds among other things, and I saw so much stupidity in that dataset.

This is a highly logical approach by VCs simply due to their business model of only needing one hit out of hundreds to make a positive return. Reading a recent article called Why You Shouldn't Join YC [0] was quite illuminating with regards to this fact. It is the ergodicity that kills most startups, which is exactly what VCs capitalize on. Personally, most of the counterarguments in the HN thread do not move me, of course a startup might pivot but they need not do it based on the VCs' insistence.

[0] https://news.ycombinator.com/item?id=37869760

What soured my opinion was everyone and their dog trying to explain to me how they were going to get rich with bitcoin and NFTs.

And this was when I was actively employed developing crypto finance instruments! Like, I have warned people not to buy the thing I have built because they did not understand it.

It is/was a great playground for modeling different instruments imo, but people don't want to treat it like the back alley casino it is.

> The SEC's position is simple: the same rules apply to crypto as to other financial products.

If you only reference the SEC's own press releases, you are going to miss the nuance here.

The SEC on its own doesn't get to decide when and how existing securities law applies to cryptocurrencies. Absent a settlement, any action undertaken by the SEC must be decided by a federal court.

Importantly, the SEC has been losing in court. For instance, the SEC, which had been blocking a spot Bitcoin ETF, was told in unequivocal terms by the DC Court of Appeals that its reasons for not allowing the ETF to issue were completely unsound. More pertinent to the question of enforcement: another federal court recently found that exchange-traded Ripple XRP tokens are not securities, with the implication that the SEC does not have jurisdiction to regulate the trading of Ripple XRP tokens on exchanges. If you extrapolate this finding to other cryptocurrencies, the SEC cases against Kraken and Coinbase are on shaky ground.

The fact that the SEC can list so many victories on its website is more a function of how costly it is to fight the SEC in court, rather than being a function of whether the SEC is right in all of its assertions.

There have been too many cases of fraud in the crypto industry, and it's good that the SEC has pursued enforcement against them. There are cases, however, where SEC has gone too far, and continues to go too far—especially in light of the fact that the SEC refuses to set forth clear criteria as to which crypto tokens it considers securities, and which crypto tokens it does not consider securities.

Now that the SEC is going after larger players, we are starting so see more cases actually go to court. If the trend continues, one or more of these cases will end up before the Supreme Court, and we will find out what the actual law is in the United States with regards to which crypto tokens are securities and which ones are not, and whether the SEC does in fact have any jurisdiction at all over the crypto exchanges.

You should not be surprised if after everything is said and done—after we have a Supreme Court opinion—crypto is in fact a special case under US securities law, at least with regards to some tokens.

You should also not be surprised if some of the cases in the list that you reference lose their legal support once the law is clarified by the Supreme Court. In hindsight, some of these SEC enforcement actions may be seen as unfair and unjust.

> the SEC refuses to set forth clear criteria as to which crypto tokens it considers securities, and which crypto tokens it does not consider securities.

Here you go: "A security is a fungible, negotiable financial instrument that represents some type of financial value"

It's not the responsible of enforcement agencies to educate people as to what crimes are. This is like pleading ignorance.

> Here you go: "A security is a fungible, negotiable financial instrument that represents some type of financial value"

Is that your own definition? Luckily, the SEC is constrained by laws passed by Congress and by Supreme Court precedent—both of which run counter to your definition—and doesn't have the same flexibility that ordinary citizens do when articulating policy.

OK:

(1) The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

OK, so how, under this definition, does Ethereum qualify as a security? XRP?

Based on the definition of an investment contract by the Howey test in cases of secondary sale?

By answering in the form of a question you seem to be implying that the answer is obvious.

But the judge in the SEC v. Ripple case found that exchange-traded XRP tokens are not securities; even if you think she is wrong, the fact that she disagrees with the SEC (and with you) is evidence that the answer is in fact not obvious.

With regards to whether Ethereum is a security, even the SEC is unsure. When asked under oath before Congress, the SEC Chair has repeatedly refused to give a direct answer. The commission has also avoided naming Ethereum as a security in any of its crypto exchange lawsuits, while it does name direct Ethereum competitors. If it were obviously a security, why would they name other tokens but not Ethereum?

And what about Bitcoin? The SEC has said unequivocally that it is not a security, but they refuse to say what specifically distinguishes Bitcoin from other tokens. Bitcoin cannot be one-of-a-kind in this regard—what would it take for another token to fall in the same category as Bitcoin?

Clearly, some tokens are not securities! If you cannot specify clear criteria to distinguish between security tokens and non-security tokens, you don't have a valid definition.

That’s actually not exactly what the decision in the Ripple case says: it says that certain types of transactions are not securities transactions, but some are. On the balance, the decision is probably reasonably regarded as a loss for the SEC I agree.

The uncertainty about how legislation should be interpreted in the case of novel facts is a fundamental aspect of the business of law and the courts and is not special to cryptocurrency; nor does it indicate special victimization of cryptocurrency practitioners.

When do facts stop being novel? There are hundreds of millions of crypto users worldwide, and more than a trillion dollars in value at stake. Cryptocurrencies have been around for more than a decade, and only in the past few years has the SEC begun to assert broad authority across the whole category.

Whether or not the crypto industry is victimized or not has nothing to do with my point, which is simply that the SEC has avoided clarifying the difference between security tokens and non-security tokens, while at the same time undertaking aggressive enforcement actions that depend entirely on where that line is drawn. I imagine that you and I agree on this?

> That’s actually not exactly what the decision in the Ripple case says: it says that certain types of transactions are not securities transactions, but some are.

Thank you for pointing that out. I added the qualifier exchange traded when referring to XRP in an attempt to highlight that distinction, but my terminology was imprecise.

As you note, the court identified the transaction as the proper level of analysis, and found that whether or not participants entered into an investment contract depended on the nature of the transaction, not the token.

Implicit in this mode of analysis is that the XRP token is never itself a security; rather, securities laws are implicated when the XRP token is part of an investment contract, where the investment contract is itself a security, but the underlying asset is not.

A court has already ruled that XRP does not pass the howey test. If it is an investment contract, who are the parties to the contract?

Way, way too broad. Even arcade machine coins or gambling chips fall under that definition. Do you expect everyone who operates an arcade or casino to seek SEC approval?

Where did you get that definition? It seems to be trivially false because it includes all sorts of classic non-security commodity contracts like corn, oil, etc. And stocks are not negotiable yet they are securities, so the definition seems to fail on that front too.

Imo completely valid for the SEC to file lawsuits for a broad spectrum. All of this crypto stuff is a point where both "knowns" and "unknowns" regarding law interpretations/rules meet.

So essentially them losing sometimes makes it clearer what is allowed, whether the SEC is actually responsible or not.

Does it have to go to SCOTUS for the powerful precedent to be set?

I would imagine the SEC will be keen to avoid a country-wide precedent should they lose in district courts.

Excellent comment btw. It’s the 201-level analysis vs the 101 that we see in the media of SEC shutting down crypto etc

> the SEC refuses to set forth clear criteria as to which crypto tokens it considers securities, and which crypto tokens it does not consider securities

This is a PR soundbite. Coinbase has milked this one quite extensively. "Woe is us, we're trying to do the right thing but the SEC won't tell us what to do!"

It's not actually accurate.

And when the people responsible for writing become Coinbase's lawyers, not their marketing team, and the rubber hits the road in court, Coinbase says no such thing. This is the actual crux of their complaint, in their own words:

> for many tokens, registering is not possible due to effort involved, or not economically viable.

Coinbase doesn't like the cost of having to register securities for the shitcoin du jour - there's no money to be made.

But the SEC isn't obligated to make a profitable business model for Coinbase.

But it sounds far better to get the crypto club and libertarians up in arms about unhelpful government organizations.

Where has the SEC stated whether they consider the second largest cryptocurrency, Ethereum, to be a security or not (and thus under their jurisdiction or not)?

If "missing criteria" is nothing but a PR soundbite, perhaps I missed where the SEC shared that criteria.

The last I recall is that the SEC considered all crypto to be a security. And Coinbase is absolutely aware of it. In fact, in the previous sentences to my quote, in their court filing, they are aware, but disagree:

> We disagree that the majority of digital assets are securities.

And you seem to miss my point.

Not once in Coinbase's lawsuit did they actually say "We'd love to comply, we just don't know how to".

In fact what they did say was that they knew how to comply, "but the cost and effort makes it not profitable for us".

But because of their PR everyone is latching on to this spin of "we'd love to follow regulation, but we don't know how and no-one will tell us!"

So why didn't they say that in court?

> The last I recall is that the SEC considered all crypto to be a security.

That's not true. "US regulators including the SEC agree that Bitcoin, which is by far the largest digital asset, isn't a security."

https://www.washingtonpost.com/business/2023/06/09/why-crypt...

The big unanswered question is whether they consider Ethereum to be one.

> Not once in Coinbase's lawsuit did they actually say "We'd love to comply, we just don't know how to".

They seem to say that pretty explicitly on Page 14 of their Wells submission.

https://assets.ctfassets.net/c5bd0wqjc7v0/2pW56ln6rPJ7koLHlu...

> In fact what they did say was that they knew how to comply, "but the cost and effort makes it not profitable for us".

I don't see anywhere where they said that.

> So why didn't they say that in court?

They did say that in court.

"For years, Coinbase has voluntarily submitted to regulation by multiple overlapping regulatory bodies, has adhered to the public and limited formal guidance from the SEC, senior SEC Staff, and the courts about the application of securities law to its industry, and has begged the SEC for guidance about how it thinks the federal securities laws map onto the digital asset industry as the SEC’s actions reflected an escalating but undisclosed change in its own view of its authority."

https://storage.courtlistener.com/recap/gov.uscourts.nysd.59...

The SEC does not consider Bitcoin to be a security because there is no issuer. Etherium is currently a maybe because of the change to proof of stake. Miners are competitors, but stakers all want the price to go up. So there's a common enterprise.

Let's be realistic here: The US supreme court always tells us what the law is, every time, regardless of how clear the law's writing is, and how the court had rules in the past. The same can happen in lower courts, as federal circuits come back with head-scratching rulings whenever it suits the judge's aesthetic preferences. Judge shopping is quite popular in expensive cases for good reasons.

So we shouldn't be surprised when anything changes, ever, given how much activism we are seeing in courts today. So the question is, how much do the people that actually decide what a law means really like cryptocurrencies? I suspect the only good chance most of those companies have is rely on the court's dislike for government agencies, regardless of what laws say. But as far as I am aware, the good friends of the court tend to be very involved in old banking, and thus they aren't fond of crypto companies either.

So maybe those companies should start lobbying Harlan Crow and his circle of friends.

The SEC doesn't set the legal standard for what is or is not a security. The courts do, based on the statutes passed by Congress.

Here's a guide they published: https://www.sec.gov/corpfin/framework-investment-contract-an... It summarizes the law.

The SEC obviously will not be publishing a release saying it won't enforce the law according to criteria written to suit cryptocurrency promoters. Its key public mission is investor protection.

The SEC's public mission also includes maintaining fair, orderly, and efficient markets, and facilitating capital formation. Both would be well served by an explanation as to how the SEC distinguishes between security tokens and non-security tokens.

Did you read the guide I linked to above? From its first paragraph:

> In this guidance, we provide a framework for analyzing whether a digital asset has the characteristics of one particular type of security – an "investment contract."[4] Both the Commission and the federal courts frequently use the "investment contract" analysis to determine whether unique or novel instruments or arrangements, such as digital assets, are securities subject to the federal securities laws.

I am quite aware of what the document says. It's just that it hasn't been updated since April 2019, and today more clarity is needed.

https://news.ycombinator.com/item?id=38414770

> another federal court recently found that exchange-traded Ripple XRP tokens are not securities

You mean this case?[1]

No, that's not what the court decided. The setup with Ripple was that institutional investors bought tokens directly from Ripple, and then resold them on an open market. The court ruled that resale of the tokens on the open market did not violate the Howey test because Ripple was not a party to that transaction. But the initial sale to institutional investors is still being litigated. Whether the resale by the institutional investors is a regulated event hasn't been litigated yet.

So this is a token-laundering scheme that may have worked. Or not; the remaining parts of the case go to trial on April 23, 2024.

[1] https://www.nysd.uscourts.gov/sites/default/files/2023-07/SE...

Did you read the document you linked to?

"...the Court concludes that Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts"

It is not only third party sales that were deemed not to be investment contracts—it was all programmatic sales. As I said, the federal court found that exchange-traded Ripple XRP tokens are not securities.

Also, you should know that the SEC has dropped the remaining charges that were to be tried in April. The next step in the litigation is an appeal of the summary judgement.

"Fools, as it has long been said, are indeed separated, soon or eventually, from their money. So, alas, are those who, responding to a general mood of optimism, are captured by a sense of their own financial acumen. Thus it has been for centuries; thus in the long future it will also be." - John Kenneth Galbraith

Source: https://www.goodreads.com/quotes/10115990-fools-as-it-has-lo...

As always, new technology is neutral, but the latency between a new technology appearing and the attention of the law breeds scams that are completely mundane.

So, the underlying issue is the wrong people are scamming money from the poors.

I base this entirely on the trackrecord of the SEC and the market.

Now, to wait for someone to argue that PFOF and Dark Pool trading is "fair".

In case anyone wants to read the US Treasury announcement:

https://home.treasury.gov/news/press-releases/jy1925

""" ...Binance willfully failed to report well over 100,000 suspicious transactions that it processed as a result of its deficient controls, including transactions involving terrorist organizations, ransomware, child sexual exploitation material, frauds, and scams.

Terrorist Financing. Binance failed to report to FinCEN transactions associated with terrorist groups including Al Qaeda, the Islamic State of Iraq and Syria (ISIS), Hamas’ Al-Qassam Brigades, and Palestinian Islamic Jihad (PIJ).

Ransomware. Despite being one of the largest receivers of ransomware proceeds, and transacting in millions of dollars of ransomware proceeds from attacks involving at least 24 different strains of ransomware, Binance failed to report these transactions.

Child Sexual Abuse Materials. Binance never reported transactions with websites devoted to selling child sexual abuse materials, including Dark Scandals.

Darknet Markets, Scams, and Other Illicit Activity. Despite sending and receiving virtual assets proceeds from large-scale hacks, account takeovers, and darknet markets dealing in illegal narcotics, counterfeit and fraud-related goods and services, as well as other illegal contraband, Binance never reported any such transactions. """

> transactions involving terrorist organizations, ransomware, child sexual exploitation material, frauds, and scams

These justifications.

They left out copyright infractions. I bought a car service manual and the seller wanted to be paid using Binance.

The ability of people to freely exchange a store of value is something governments don't like. They want the power to veto transactions and declare people or entire countries impossible to trade with.

Welcome to society.

I will note governments also want to do the same to any communication between two individuals (not just communication about an economic transaction). Do you have the same attitude to that?

Yes, indeed, societies fight over this, too, because it isn't just governments acting in a vacuum.

I don't think it's that nefarious. They just want to tax every transaction, which is what they were doing before crypto.

Vetoing and shutting down people and countries is a side effect, not the intended effect, of knowing all transactions.

Whereas on the classical side of wealth, gorillions are held by anonymous layers of legal bodies that allow quick shifting of assets out of taxation and circumvent eg. weapon embargos.

Its the messiness the article speaks about and it mostly works for the few and not the many.

It would be helpful for us to realize that it is that what goverments do like, aka sustain, because the existing power structures rely on it. I am not sure whether "tinking about the many" was ever a serious part of bro cultulture.

I don’t think anyone has squared the circle on absolute freedom versus nation destabilizing terrorism and child abuse. You seem to have just said, eh, oopsie doopsie.

Why is it always child abuse.... I'm so glad the fertility rate is dropping so maybe ill finally get a breath of fresh air and we can do away with some of these scare tactics once there's none left to abuse.

That is the best part about extinction, we don’t have to hear disingenuous political justifications anymore.

for good reason

Well for the USA perspective i guess but for others like me who believes in Alqasam brigades and Palestine moujahedeen i don't like how USA try to tell me what i should think of them or not to try to finance them.

Yikes!

Case in point? The US has every incentive to shut down businesses that want to facilitate the continued existence of these organizations.

Case of point that USA serve it own interest and is not always right and i shouldn't bound by it evil point of view. so i have the right to finance the good guys who try to survive against a terrorist nation for example.

Fully agreed. No one should be able to stop me from sending money to ISIS.

Back in time Algerian rebels were considers terrorists just go back and read new york times and see how they were depicted, after they got their freedom now they're considered the good guys who fought the evil french colonizers.

This, but not sarcastically.

Governments are not and cannot be the ultimate moral arbiters.

You are so ignorant of the world that I feel sad for you

Is it a bad thing? Would the world be better if no sanctions, no anti money laundering rules, no financial regulations could be applied by governments?

Generally yes. The nuanced view: People who can handle freedom responsibly so (just like having a driver's license) should be allowed to do so. The rest can be protected from their own stupidity by big brother if they want to. Essentially both options must be available in a truly civilized society.

This is stupefyingly naive. Do you think sanctions and anti-money laundering laws are intended to catch irresponsible people?

> People who can handle freedom responsibly

Odd, that measuring stick of responsibly you use almost sound like a set of laws?

Libertarians when they are on the upswing "No set of rules should be able to bind me.

Libertarians on the downswing "Kill all those that cheated me using the full power of the state!"

Archimedes wishes he had a crowbar that could do the heavy lifting that "freely" is doing in that sentence.

People should have the human right to use their money anonymously in ways that they want, as an abstraction of cash, as an abstraction of human value.

And when crimes totalling hundreds of billions happen, who will you call?

Better call Saul!

This is some delusional, misinformed, crypto bro kool aid type propaganda lol

Justify to me where my rights should end on the spectrum of trading someone a piece of fruit for another piece of fruit, or giving him precious metals for it, or giving him fiat, or giving him electronic dollars, or giving him monero.

please pick the point on that line where my rights should end and I should be submitted to bureaucracy, KYC, etc.

No one interferes with your ability to exchange money for fruit. However, exchanging money for a hitman's services, financing terrorists, selling illegal substances, etc are very much curtailed and for good reason. Society has determined you don't have the right to exchange money for those purposes. If you want that right, you have to change the society (by ballot or revolution, as may be applicable to your situation).

You fail to see what the problem is here. The problem is freedom eroding banking laws that do peer into my fruit transactions. They should be first challenged in the courts. Calling for violence isn't legal either, doesn't mean we support the state peering into all my emails.

You have a valid point but when there are conflicting interests, regulations are typically designed to act on the pivot point where they are likely to be effective, have a concentrated set of targets and create minimal harm.

In the case of finance, it is easier and more effective to delegate the bankers to keep tabs on who is moving (large sums of) money around and refuse service to anyone that seems suspicious. With regards to email providers, no similar nexus exists.

You can best believe that if email providers were registered and licensed and the issue of people using email to commit crimes were sufficiently pronounced, having them scan all emails for suspicious activity would be seriously considered (and there would be a good argument for it).

And I'm not going to support the inevitable law that has a LLM scan all of my digital communication either. no matter how they wrap it up in a bow of public safety. The world is safer every year, yet somehow there's more and more scary reasons why the state should have its boot on my face.

People like you will never be happy in life. If this utopia that you crave was ever made, you’d want to change things back when you see the reality.

You rights should end where you try to not pay taxes of your trade.

There are many point where that right ends.

One is when you knowingly become a broker that sits between the two parties.

Heh, I always love the rugged individualists in this kind of thread pretending they are some kind of island, no asteroid floating free of gravity in space. Where as real life down here on earth represents a huge number of social contracts that we commonly agree to without realizing they even exist.

It's quite simple actually, when you are using a currency, you are not actually using "your own money/dollars", but you're actually using an amount of value that is abstract, but the value of that abstraction is actually shared by all the currency holders concurrently.

The value that your currency holds while you own it is based on the current market rate and is inherently tied to everyone of the currency owners. (It is true that yes, other commodities also work via market forces, but they're inherently different as they aren't abstractions and have inherent value to them.)

To not get into the weeds, your rights end when your actions start to affect other people, so limitations on how currency can be used are put in place. Using a shared currency is a type of social contract that you bind yourself when using it. Society has over the years observed how shared currencies work and set limits on the freedom of use to limit abuse.

And to drive the point home, governments have seen that cryptocurrencies are used for abuse, so they're making steps that limit your rights to exchange their currency directly to crypto to inherently decouple their currencies value from their currency.

To get around this, you'll have to convince your employer to pay you in commodities and you to sell your physical items via cryptocurrency. Like how traditional currencies were originally designed to do. The market for exchanging physical goods or other services set the rate for a currency. But unfortunately the inherent unregulated nature of crypto made it ripe for abuse, also the unregulated and rampant speculation of the value made it infeasible to use as a traditional currency.

TL;DR: Currency is a type of social contract, your rights end when your actions start to affect other people negatively.

Also, an important sidenote, that is unintuitive and very hard to internalize: When quantifiably making profit via speculation, someone else is strictly losing value. This can be a major contributor for inflation.

Serious question: why?

Why should we have the inalienable right to exchange goods and services, no matter what the goods and services are?

Why is that an important tenet of a prosperous and free society? It hasn’t ever been one, and we’ve done well so far.

Because privacy is important for freedom.

Privacy is different than anonymity.

In this context, what would be the difference between those?

Perhaps because of individual sovereignty, which I believe is the basis of our rights in liberal democracy.

We have given up some of that sovereignty in order to live in a govt. We should ask if giving up the right to free exchange is necessary for the functioning of our society.

Your absolute rights end when they encounter another person.

As society, we've decided peoples individual rights can/should be curtailed when they harm others. We will never agree on definition of "harm". But, certainly money can be used for harm. From I pay someone to kill you, to I donate money to group government has labeled "terrorist", to we made profit polluting environment, etc.

Yes words can be used for harm too, and there's very strict rules for how the government can regulate and investigate speech. I'm saying the same should be true for money.

What if the money was stolen? Or obtained in some other illegal way?

I really appreciated the deep insightful analysis wrapped in an excellent metaphor.

The article's viewpoint relies on accepting AML regulations and financial surveillance as beneficial. In my view, CZ is not a villain; he ran a popular business without defrauding customers. There were no victims. His wrongdoing lies in not taking his "police" role seriously enough. As per AML regulations, he had a duty to investigate customers and de-platform those that he considered criminal, all without due process of course. However, he chose not to strictly adhere to this role. Yes he broke laws, unethical laws that do more harm than good. I don't know to what degree CZ was motivated by personal gain vs principle but I don't believe he deserves the "Bond villain" label.

I think the “Bond villain” label is more to point towards the way of doing the operation. Which is pretty fitting imo, from the point of view of being everywhere and nowhere at the same time.

I think people dismiss how much AML regulations are directly linked to preventing crime from being efficient. There’s a reason that scammers ask for gift cards, and it’s not “just” because of traceability reasons (mules have always been a thing)

Countries have varying levels of fraud and organized scams, and I think stuff like AML compliance flows play a bigger part than people appreciate

Yes, and one could argue that banning end to end encryption and doing preventive monitoring of all communications would render crime even less efficient.

I think it’s just natural that in a democratic society people fall on different parts of the spectrum when it comes to thinking of what the correct trade-off should be.

Recently Lyn Alden posted how her wire transfer to her family in Egypt to cover some mortgage payments got blocked. I mean, if a celebrity (in some circles) with known family ties to Egypt experiences this, what chances do we mere mortals have?

Making a 10k payment to an African country basically lands you in AML red “don’t do business with” lists. And sure enough, maybe most people doing this are financing terrorists, what do I know. But I think there’s a meaningful debate to be had here.

This argument did it for me.

> banning e2ee would render crime evem less efficient

Yeah, don't care if criminals use something that helps us all protect ourselves and reveal or be vulnerable only to disclose that which we CHOOSE. Like, the real choose, not Apple's "choose" what we want or you can't use everything

Can't have it both ways

So you...agree...right?

No, you can't say you want encryption even if bad guys use it but then say crypto is bad because bad guys use it

That is nowhere near what I was saying, I'm saying that this is the quote that resonated most with me because it tries to take away yet another thing that protects us all, not just criminals, businesses, and criminal_businesses

In case you're referring to the Apple thing—umm, ya they can. They have the NoDataCollected checkmark designation in the AppStore's Privacy Nutrition Labels. Anything they make is offefed/made 3rd party also and is therefore evidence they could have collected no data but consciously choose to design things in such a was that they are being disingenuous when they say they only collect the absolute minimum amount of data required for functionality

We don't dismiss it. We know it makes life hard for criminals. We just don't care. It's still the financial arm of warrantless global surveillance. It's the government working around its due process restrictions by getting private corporations to do the dirty work. As such, it should absolutely be opposed and resisted on principle.

The USA was literally founded upon principles like these. Look how far from the ideal it's fallen. If you're gonna sacrifice freedom for security, might as well go all the way and become a fascist state.

I'd call the alternative (unlimited wealth and power for the criminal organizations because the government can't touch it) a far worse outcome. It's always about moves and countermoves.

There's no such thing as the perfect system. So we have to settle for something that at least works most of the time.

It's a politico-technological arms race. Government makes laws, people make technology that gets around the laws. With every iteration, they need to increase their tyranny to maintain the same amount of control over the people. The result is either an uncontrollable population or a totalitarian state.

The only question is: how much tyranny are you willing to tolerate before the government becomes worse than the criminals you want to stop?

That’s not really the case. The government mostly just makes one law that says “hey, bank, it’s your responsibility to know your customer and their source of wealth and God forbid you can’t when we come asking”.

I wonder what proportion of all Americans have actually had any kind of material interaction with KYC/AML. My guess is it’s approximately none of them.

> I wonder what proportion of all Americans have actually had any kind of material interaction with KYC/AML.

Impossible to know since it's illegal to tell someone they're the subject of such extrajudicial investigations. Even knowing about the existence of such laws makes them assume you're a money launderer because of your "technical knowledge".

https://news.ycombinator.com/item?id=38180477

The alternative is to require a warrant, which has so far been a pretty good system.

Also AML is very ineffective despite massive surveillance. It harms consumers more than terrorists

https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...

This is because a lot of compliance is not optimised for maximum benefit (capture terrorists) but is just a tick boxing exercise.

There is also abuse. India is also using AML laws (forced by American led FATF) to crack down political opponents and human rights activists, as per Amnesty

https://www.amnesty.org/en/latest/news/2023/11/india-stop-ab...

> There is also abuse. India is also using AML laws (forced by American led FATF) to crack down political opponents and human rights activists, as per Amnesty

Similar situation here in Brazil. Former president got fined, people started donating money to him to nullify the fine and government started "auditing" those donors. They literally weaponized this AML/KYC bullshit into political persecution.

Of course. That’s an expected outcome if everyone just works within the system according to their incentives.

When it comes to the US, the country literally would not exist if the British had anything close to the modern governments’ abilities to control the money flows.

As in, the revolutionary period Patriot movement would’ve just been AML-ed to death.

Sure, AML might be beneficial if it had no cost. It does make crime slightly more inefficient. However, AML has a massive cost. It makes legal transactions inefficient as well. Billions of people are unbanked and underbanked, in large part thanks to AML. It forces money transmitters to carry out what amounts to extrajudicial punishment on people and industries deemed "at risk". The estimated global cost of compliance amounts to hundreds of billions of dollars annually. Imagine if all those wasted resources instead went to chasing terrorists & human traffickers for those actual crimes.

Here is on the cost of AML

https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...

We could also make traffic accidents go zero by putting a police at every crossroads.

People are not dumb, at least when it costs this much. AML exists for a reason, which I believe is collecting intel for three letter agencies to ensure USA’s continued dominance over the rest of the world.

The Bank Secrecy Act, under which he was charged, is of extremely dubious constitutionality (https://www.coincenter.org/broad-ambiguous-or-delegated-cons...), and it certainly violates the spirit of the Bill of Rights.

> it certainly violates the spirit of the Bill of Rights.

Sadly the list of acts that violate the spirit of the BIll of Rights is really, really long.

More than 200 years of Supreme Court decisions show there's no one "the spirit" of the constitution we can consult via Ouija Board on Capitol Hill. There are many, and they often disagree.

Fortunately, we have institutions where they can duke it out. And where we can fight about what the decisions mean.

Also Binance and Mr Zhao were not found guilty helping or funding terrorists, only breaking anti-money laundering laws. Despite years of investigation DoJ did not find definitive evidence that Binance would have helped criminals or terrorists, only evade sanctions.

In the case of HSBC, when there was more direct evidence of serving Mexican drug cartels, no one did jail time https://www.democracynow.org/2012/12/13/matt_taibbi_after_la...

>"... a popular business without defrauding customers. There were no victims"

I believe it's been proven that Binance traded against its customers and manipulated token prices on its platform. That kind of thing is completely forbidden in the world of traditional stock exchanges and brokers.

That makes Binance customers victims of their manipulations. When Binance made profits from trading on its own platform, it came from the pockets of its customers.

Crypto exchanges are less like stock exchanges and more like casinos where the house is guaranteed to win in the long run in bets made by customers. Maybe that's the deal that Binance's happy customers signed up for, but I don't think regular retail investors could be expected to understand that's how it works.

> I believe it's been proven that Binance traded against its customers and manipulated token prices on its platform.

Can you cite this? I'd like to read more about it.

> Crypto exchanges are less like stock exchanges and more like casinos where the house is guaranteed to win in the long run in bets made by customers.

I agree. Binance skims so much money from every transaction it's not even funny. Truth is a company in their position doesn't even need to run a dishonest operation in order amass vast amounts of money. They just need to let it happen.

> Maybe that's the deal that Binance's happy customers signed up for, but I don't think regular retail investors could be expected to understand that's how it works.

Well it sure as hell wasn't for lack of warning. I've told people not to get into the shitcoin casino. To their faces. They still got into it. I simply don't have a lot of sympathy for these people when they get liquidated.

How are stock exchanges not also guaranteed to win in the long run due to the bets of their customers?

That's the entire business of both types of exchanges, collect fees on every trade that the users make (besides some newer stuff like the robinhood model).

> His wrongdoing lies in not taking his "police" role seriously enough.

I'm absolutely incredulous at this statement.

> There were no victims.

"Terrorist Financing. Binance failed to report to FinCEN transactions associated with terrorist groups including Al Qaeda, the Islamic State of Iraq and Syria (ISIS), Hamas’ Al-Qassam Brigades, and Palestinian Islamic Jihad (PIJ).

Child Sexual Abuse Materials. Binance never reported transactions with websites devoted to selling child sexual abuse materials, including Dark Scandals."

The problem with this line of reasoning by itself, is that it justifies some policies we like but also other policies we don't like. (For example, almost no one wants background checks or KYC laws for buying a computer.) Assuming we're not cartoonish totalitarians, we counterbalance the concept of indirect victimhood with some other concept of privacy or liberty or something. But that's where all the hardest questions come up.

Finance is in a somewhat unique place in that we hold them responsible for their customers. If a bank doesn't ask any questions and as a consequence provides service to known terrorists that's against their perceived (and codified) obligations. Yet the we allow anyone to ride the subway, to get a telephone connection, or to have their home hooked up to electricity. If your internet provider terminated your contract because you download files from Syria or regularly upload large files and trigger their risk analysis that would be seen as outrageous. Yet that is exactly what we expect of finance companies.

The US government also issues cash.

Cash does facilitate crimes. Yet we consider that a cost or a bug, one we're willing to accept in exchange for its benefits. Cash itself is clearly a neutral tool, yet even it is regulated if transactions exceed certain thresholds.

You say it’s a unique place, but here’s the thing: it actually undergirds all of those other services.

Telephones/internet/elecricity are quite hard to regularly get without access to the traditional banking system. Possible, yes, but very annoying. Which is the point.

Some would argue it is only because of the security of the banking system that these other utilities are allowed to be “””free”””.

I think if you want to sell chemicals, explosives, or guns, you're going to have to keep records on your customers, and may have to do some level of vetting before the sale, depending on the product and jurisdiction within the US.

> Finance is in a somewhat unique place in that we hold them responsible for their customers. If a bank doesn't ask any questions and as a consequence provides service to known terrorists that's against their perceived (and codified) obligations.

Is this really unique? Because afaik, if you were “just a taxi driver doing their job and not asking questions”, you could easily end up being charged as a getaway driver.

"Terrorist Financing, Ransomware and Child Sexual Abuse Materials": none of those crimes were committed by Binance. And I bet those actual criminals all used cash or WhatsApp at some point. Maybe even McDonald.

I'm pretty sure "Bond Villain" is primarily intended as a pun.

> The article's viewpoint relies on accepting AML regulations and financial surveillance as beneficial.

You might want to check the last section of the article:

> We are a nation of laws. I’d support reforming some of them; a lot of the AML/KYC regulatory apparatus harms individuals who have done no wrong. Much is not well-calibrated in terms of societal costs versus occasionally facilitating a Bond villain’s self-immolation.

> However, in the interim, one cannot simply gleefully ignore the laws because the opportunity to do so allows you to become wealthy beyond the dreams of avarice. [...] I do not know if we’ll ever have a world with this scale of crypto businesses without the crime. The crime was the product.

The crime is the product because that's what's left after the media makes it sound like everyone using crypto is either an idiot or a criminal, so most businesses avoid it because they don't want to be labeled as either.

There's "morally OK", and then there's "love your neighbor". If a road is used to traffic an ambulance saving a life and also a kidnapper, the hands-off road builder is "morally OK". But, in the world we really want to live in, if the road builder has some reasonable means to disallow road usage for kidnappers (excuse the hypothetical), they, in love of the victim, should.

There's no reasonable way to stop criminals from using fiat currency or cryptocurrency. It's all a costly security theater.

I wonder if someone could create a blockchain currency that is much more transparent than fiat; one that criminals would hate.

I know this will read like I am a luddite, but hear me out.

I would love to consider crypto as a type of medium of exchange. Unfortunately, as soon as crypto came out, I saw governments of many nations moving into it in some way, shape, or form. They gave it two options, either government has full control over time or eradication, with a few outliers. The US SEC was vacillating on how to deal with crypto for quite some time, and they are not alone. Is it property or legal tender, both, or neither? Now they have planted their stake.

Cash is a tangible and disconnected way for payment for goods and services. Disconnected, as in the government (mostly) does not have instantaneous method to cripple the existence of cash. It requires significantly more interaction than just disable, for our example a government run, centralized crypto exchange (lest we forget, however you feel about politics, when governments froze or seized banked assets).

1. fear of the government wiping out all crypto assets in an instance because one disagrees with them, or more likely by an accident or hackers.

2. no transactions can be conducted if there is no electricity or device to conduct the exchange of crypto. There are many nations where power outages are scheduled as a matter of fact, or worse, power on times are scheduled. The dependence on a device is a bit more acceptable but the cost between a paper clip that holds the paper cash versus a cellular phone is still enormous.

> no transactions can be conducted if there is no electricity or device to conduct the exchange of crypto

Same is true for fiat. Vast majority of transaction volume happens in computers these days.

More than once, I have mentioned to someone that the vast majority of the $$ they have in the bank, do not actually physically exist anywhere, and seen otherwise intelligent people look surprised and horrified.

On the other hand, if that cash suddenly fails to appear, your physical dollars most likely won't work anymore, either (it might fail to appear for you for various reasons, but in that case, whether there was physical backing at any point is quite irrelevant).

2) you can issue some kind of physical money then periodically settle crypto. It’s not all or nothing.

Author: "Someone needs to write an East Asian studies paper on how Tokyo became Switzerland for Asian crypto enthusiasts due to a combination of governance, network connectivity, latency, and geopolitical risk. I nominate anyone other than me."

Done:

"Tokyo: Asia's Crypto Haven. Unraveling the Swiss Connection in Governance and Technology"

https://instabooks.ai/products/dce8add9-2d5c-ecdf-860a-38bb3...

Feel free to fact check it

Superb writing, "Binance operated in many jurisdictions. The U.K.: kicked out. France: under investigation. Germany, the Netherlands, etc, etc, they required non-teams of non-employees at non-headquarters to keep track of all the places they weren’t registered doing their non-crimes."

I think the writer overstates the power of the global finance institution, whatever it is. If someone would decide to make all banking transactions publicly readable and persistent forever, other people would just create an alternative global finance institution. There is no omnipotence "allowing" shenanigans to happen.

Man the anti-crypto news piles on like clockwork as the bull begins anew.

Crypto is finance without borders. It is literally the cypherpunk dream come alive - money issued on computers, censorable by no one, existing only as numbers. You could ban crypto with every government on earth and it would be severely reduced in price, but it would not die - it would just delay its inevitability. This is because cryptocurrency is an ideology - one of anti-state money, pro freedom, decentralized, empowering individuals. A circular economy of crypto does exist - it’s small vs. the speculation, but people do receive crypto and spend crypto without ever cashing out to fiat. As that economy grows, there is no longer anything the state can do to stop it.

But the state won’t stop crypto. That time has passed. Some in power saw the threat, but mostly the elites called it “rat poison squared” and laughed at it. Now crypto is so big you have major Republican presidential candidates issuing pro-crypto policy platforms and senators and powerful representatives defending it in committee hearings. It’s all over.

The real solution is to out compete crypto. Why do people like it? How can state currency do better? If you can’t solve that puzzle, then you aren’t going to defeat it.

Replace "crypto" with "drugs" and your message will remain basically the same.

> A circular economy of crypto does exist - it’s small vs. the speculation, but people do receive crypto and spend crypto without ever cashing out to fiat.

Can you provide examples that do not involve extortion or drugs?

Servers, VPNs, software engineers that work in the crypto space. You can get a flavor at https://kycnot.me/

So... Not just crime, but also the digital infrastructure that facilitates it.

Criminals also eat, drink and drive cars.

Why would paying for food in crypto be OK but digital infrastructure not?

Do you think privacy is undeserved for one but not the other?

Should all transactions be public / visible by the state?

Transactions in most crypto are even more visible to the state than in normal banking, because they're in an uneditable public database that never loses history.

Crypto tumblers are a thing, and they make the public history unreadable. Bank transactions aren't public, but the government can get access, and stuff like money laundering is easier to detect than with crypto.

Monero is also a thing.

> Crypto tumblers are a thing, and they make the public history unreadable.

That simply means they're illegal, not that we have to put up with them. Cf Tornado Cash, anyone who's running one is a money launderer.

Yes

I’ll go further. All transactions should be public, especially those by government, all politicians, and anyone in a position of authority over others.

If any of those people or businesses are located in the US or similar countries, they're either selling some of that crypto for taxes or just not reporting it.

Once people start receiving the scary and confusing 1099s next year from using Venmo et al. from Bidens new policy, crypto may seem preferable to some people. Pro taxists often underestimate the fear common people have of tax authorities.

There's no difference in taxation between the two and not much difference in how easily the government can see how you used them.

Most of these 1099s are going out to people who owe little or no tax on the transactions, such as people who split restaurant bills worth more than $600 over the course of a year.

No, it doesn't apply to family and friends payments.

https://help.venmo.com/hc/en-us/articles/4407389460499-2023-...

In crypto of course you have to do all that bookkeeping yourself.

Well i live in shitty country where trying to transfer USD or EUR is very dangereous and could get you a prison time and not that amount you think of, it just we want to buy things from Amazon. thanks to binance and other ways we could transfer money and buy things from out of borders.

Are there any factual assertions that you disagree with in the piece? Otherwise this seems to be more anti-Binance than crypto itself (although the author's viewpoint on crypto is clear).

I am extremely deep in this space since nearly the beginning. My take on Binance is it started like many YOLO exchanges back in the 2017 boom but pioneered the exchange token model. They had very good customer service and onboarded nearly everyone. The model was FAFO with the understanding they would pay a fine later.

If the US government had the nuts they would have shut it down. They didn’t, and CZ probably won’t get any jail just like Bitmex’s Arthur Hayes. If they do put him in jail it’s a pittance vs. his massive equity stake and wealth.

As an addendum, the Tether Truthers assumed that when the US government was done sifting through their subpoenas, the Truth about Tether would be revealed and it would collapse. Just like with the NY AG, didn’t happen won’t happen - Tether is backed at this point after 8 quarters of high interest rates.

I was way, way more worried about crypto 2 years ago than I am now. The bad actors are being shaken out, the SEC mostly lost vs. Ripple, and the US and the world itself is yo-yoing back to conservative government after a period of progressive governments. All of this bodes well for crypto and its anti-state ethos.

"Crypto is finance without borders" is not a positive statement. Borders are important for security. Especially because states have varying degrees of ill-intent towards each other's citizens.

But more important than borders is jurisdiction of regulators. At least a significant portion of crimes are also evil. Lack of regulation really helps those evil things happen. Generally financial regulation is one of the more effective forms of crime prevention.

There's certainly regulation so stupid it almost reaches malice. There's probably regulation that is intentionally malicious. That needs to be solved, but solving it by saying 'only regulation as the cryptocurrencies currently allow' throws out way too much regulation. It lets too many evil things all of a sudden happen.

> Especially because states have varying degrees of ill-intent towards each other's citizens.

I think the major risk crypto people see is not other states, but their own state.

> At least a significant portion of crimes are also evil.

Likewise, a portion of non-crimes is evil. For example money printing. And it's huge, we're talking trillions.

The same trillions that can't be traced once they enter the Pentagon.

Generally, there seems to no longer be a moral authority the state wields, crimes and evil decoupled a long time ago, and people now see that they can choose who fleeces them and how.

Borders are important for the security of governments, and very little else. A reminder that passports and mandatory travel restrictions outside of a few countries didn't come into existence till WWI.

Border enforcement by governments as a whole has caused more death and human suffering than literally any other action by any nation state in the world.

The single issue is that real world has borders in the form of nation-state borders and barriers (regulations) to the money transfer between entities. Crypto does not, and this leads to a conflict.

I am personally all in for a no-borders real world as long as there are no states which don’t believe in my ideology. But such a thing is utopia and doesn’t exist yet.

State currencies are outcompeting crypto, including by considering it an asset denominated in said state currencies.

Who did the art? That image is so cool. I don't see any attribution. (I assume someone like patio11 is paying a graphic artist to create art for his blog.)

In the alt text, but it is DALL-E.

Woah, that is crazy that DALL-E is so good now.

It’s interesting how the market’s reaction to this was basically - nothingburger, tick tock, next block.

I’m no fan of Binance, but to label them as Bond villains while spending zero effort on trying to understand the ideology behind cryptocurrencies (at least, what was supposed to be the ideology) and why being a distributed business without a physical address is desirable from that point of view – and not just because they’re evil greedy people (of which Binance may still be) – makes this essay not very interesting. It would have been a much better piece had the author attempted to understand the decentralization ideology and then squared that with the apparently very real crimes so widespread in crypto.

Edit: found the essay that this link reminded me of: a comparison of Jason Bourne to James Bond, from a societal perspective. A good piece to read after this original link.

https://exple.tive.org/blarg/2015/09/20/bourne-aesthetic/

Have you considered that the author did try to understand the underlying ideology? It seems pretty accurate to me.

Well, I can’t read his mind, but considering that he didn’t mention anything about it, I think we can assume that he hasn’t.

Even if he did, my criticism was about the essay, not the guy himself.

> He has long been adjacent to money and power, but craves more.

> They have no passport and fly no flags; these concepts are thoroughly beneath them.

Yeah, this is not an intellectually honest characterization of libertarian and anti-authoritarian ideology. I'd be very, very surprised if Patrick didn't actually understand that.

I am describing actual literal appears-in-the-movies James Bond villains with these sentences, not anyone you know or any real-world political ideology. The way you would know this is to have read the previous two sentences: "James Bond films have a certain formula to them. It is more interesting when seen from the perspective of the villain."

> “being a distributed business without a physical address is desirable from that point of view”

Everybody agrees that CZ owns a majority of Binance (around 70% I believe). How does that square with the idea that it’s a “distributed business”? Its ownership is more centralized than Meta’s.

There’s no legal system on this planet that recognizes the notion of a company that’s 70% owned by someone but doesn’t have a physical address. It’s just nonsense that was meant to keep regulators from catching up. But it’s over. The DOJ now has full oversight of Binance, CZ has pleaded guilty, and he may still end up doing jail time.

Geographical distribution and ownership distribution are not the same thing.

There’s no legal system on this planet that recognizes the notion of a company that’s 70% owned by someone but doesn’t have a physical address.

Yes, and so consider the possibility that some people see this as a problem to be solved and not an unchanging fact of reality.

Again, there is a huge rich new field of discussion about this stuff [1] and so I find the lack of curiosity by the author to be very uninteresting. You don’t have to agree with these ideas but to ignore them entirely is intellectually flawed, especially when it’s the supposed reason for these actions in the first place.

1. See the Network State stuff. https://www.youtube.com/live/x-GfuIFkB_Y?si=t1r96klba69rwTtx

A corporation that's able to do business globally but is not domiciled anywhere is analogous to a person who can travel anywhere but doesn't have any citizenship or a passport.

The latter sounds obviously like a fantasy — it's simply not how any of this works. What makes anyone think the former is feasible?

So do those people want an individual to be able to incorporate, declare their corporation distributed and then not have to obey any country's laws?

Yes, and so consider the possibility that some people see this as a problem to be solved and not an unchanging fact of reality.

Sure but there are a significant number of people who feel the same way about government generally, or the ban on perpetual motion machines.

You don't need to dig into the ideology of crypto to make the argument that Binance's business was essentially money laundering and sanctions avoidance. But if you do, you'll have no trouble finding people arguing that ducking state financial regulations is a huge and core utility of crypto (let sex workers get paid, buy drugs, etc). You can disagree with the regime, Patrick does and so do I, but it doesn't change the fact that the whole thing was just crime, crime everywhere.

Yes well that’s why I think it is a nuanced topic. Decentralization is appealing to a lot of people, including myself, but it also obviously has a ton of negative outcomes as well.

Acknowledging this and exploring the complexity is interesting; calling everyone evil Bond villains is childish and at the ethical level of a Marvel movie.

I think he called CZ an evil bond villain, not everyone.

Proponents of decentralization should be heralding Binance's demise, as it represents the strongest force for centralization in the crypto world.

Also yeah OP is basically about CZ and Binance, not all crypto people everywhere.

I'm keen on decentralised cryptocurrencies, particularly ethereum, and I am fairly pleased about Binance's problems. What I'd like to see succeed is easy to use wallet apps running on an ethereum zk L2 with low transaction costs, social recovery, account abstraction, stable coins, and most transactions happening peer to peer on decentralised exchanges.

Centralised exchanges are not about cryptocurrency or decentralisation or democratising access, or innovating money to be programmable, they're just about finding yet another source of risk for people to play with in exactly the same ways we've been playing with risk in tradfi for millenia. Pretty boring.

Still, I assume that Binance's woes are at least partly because of an antipathy towards all forms of finance not controlled by the current system, and so the fact that they are taking down Binance probably doesn't augur well for the chances of my preferred outcome succeeding either.

Yeah I mean, I think I'm a little in the same boat as you. I think they're cool too. I do think there are uses (anti-spam, authentication of ownership/authenticity), though I think any use needs the transactions/sec number to go way up, but that seems doable.

I'm actually a little bitter that this stuff got rolled up with "real" money. It twisted the essence of distributed ledgers/contracts/computing and infested it with grifters. Like you, I worry that this entanglement will take down decentralization with it, though I hope it doesn't.

The bit about Jason Bourne and James Bond is quoted from https://www.metafilter.com/93504/You-carry-a-00-number-it-me..., and the rest of that exple.tive.org link is irrelevant other stuff (don't bother).

We all understand it, we've read about it since 2012.

We just rightfully understand that at least the exchange level, it's not about that. It's about money laundering and making billions.

In most jurisdictions businesses must have a physical address, in fact it is a requirement to incorporate.

This is no government conspiracy against "my freedom", this is to offer a level of protection and allow service of legal documents.

Binance has always looked very shaddy and not to be touched with a bargepole.

The author is a pragmatist and simply thinks it ain’t gonna happen.

The author, patio11, has been writing about crypto since at least 2018 and is thoroughly familiar with "the ideology behind cryptocurrencies".

https://www.kalzumeus.com/tweetstorms/1032033115408031744

I agree that the author could’ve done more to make the case for the other side. Where I have some firsthand knowledge, I find eg his suggestion that Binance and FTX divided up markets based on US geopolitical affiliation implausible and unconvincing.

Nonetheless, it’s fair to wonder if crypto has meaningfully lived up to any of its promises and why it has been hard to point to examples of value creation in crypto in a way that would make sense to an average person

Difficult to not think about other Tech CEOs when reading this, and most very rich people that did not inherit the money to start with. If you look IMO they all have in common that they have at least once done something morally questionable/ illegal, usually at their beginnings. The ability then is that they have manage to mantain themselves out of the reprimands, or had made enough money that they could buy themselves out of it. Name one and i promised i find something.

Doesn't the same apply to everyone though? "Show me the man and I'll show you the crime"

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

It does sound pretty totalitarian but i guess there must be a difference (at least karmically) between stealing food to give to your family and profiting in the millions with election manipulation. And anyway what is the point in defending billionaire narcissist CEOs?

Alexandra Elbakyan powers a big chunk of the worlds knowledge archiving almost singlehandedly. A tiny group of ringleaders powers who knows how much torrenting. The evidence I've seen so far is that coordinating a global blockade on anything tech is too expensive to manage. And getting more so as this more reliable alternative to the traditional banking system grows.

The economics here are not on the side of governments. The enforcement costs are high. The costs to individuals in acquiring and using crypto are low. The benefits of running a monetary system that bypasses the high costs of the global regulatory state are extremely high (in some sense, the outrageous costs of running the bitcoin network represents the implied drag of regulation). Even if being imprisoned is an inevitable result, there are a lot of people where the intervening high life of running a huge crypto exchange must be attractive.

The times are exciting. Unless we see capital controls the likes of which have never been tried (a possibility, the authoritarians must be stewing over crypto) might find these apparent victories by the regulator as Pyrrhic. Unlike most financial assets, once I've bought a cryptocurrency the only option they have is to come to my house and seize it. That isn't a feasible option at scale.

Crypto doesn't need to be enforced out of existence, it already cannot compete with other money, so it remains a niche thing. Enforcing things on niches is easy to some extent (or rather not even needed).

regulators don't have problem with crypto, they have problem with Crypto.

more seriously, there's zero problem with the technology. you can send money to anyone you want using a complicated game of crypto whisper phone, but everyone in the chain has to file tax returns or whatever is required in the jurisdictions along the path.

patio's piece opens with the insight that Crypto companies want to be eveywhere while being nowhere.

if Crypto wants to really be everywhere, then they can do what all big tech (and non-tech) inter-multi-continental conglomerate does, open branch offices, do the frustrating work of finding local regulation experts, navigating the immense labyrinth of global vs local realpolitik, etc.

they should/could have started with registering the fucking tokens.

it makes zero sense that they contested this, because they already do KYC for their own fucking anti-fraud purposes.

https://en.wikipedia.org/wiki/Regulation_A#Testing_The_Water...

I don't care about Binance or CZ or even crypto but it was worthwhile wading through the article just to learn this:

"The U.S.’s point of view on the matter, elucidated at length in any indictment for financial crimes, is that if you have ever touched an electronic dollar, that dollar passed through New York, and therefore you’ve consented to the jurisdiction of the United States. Dollarization is very intentionally wielded like a club to accomplish the U.S.’s goals."

So wait, does this mean that if an exchange is far outside of the US jurisdiction, it can be subject to the US laws simply by trading in dollars?

How is that even remotely legal?

The US military and the US as a large market you want to trade with make it legal.

Why wouldn’t it be? The exclusive purpose of crypto is to circumvent existing regulation for financial transfers. The US government would obviously not be so rosy about that idea, nor would it recognize the “sovereignty” of crypto such that its laws would not apply.

Because I was under the impression that once you buy certain currency, you're allowed to do with it whatever you want. Certainly if you're outside of the jurisdiction of the entity that issues said currency.

Cash yes (it's just another physical token), but bank account / "electronic" dollars are ultimately backed by US bank accounts under US jurisdiction.

It's completely legal under the law called 'might is right'.

Forget about exchanges. If a random business anywhere in the world buys a product from a factory in a neighbouring country and settles in dollars, this applies.

Another phrasing I like is 'Bigger Army Diplomacy', from CGPGrey

You can’t have real dollars without a US bank account.

sure you can. if you and your friends start to issue dollar IOUs to each other, it's as real as the ones you get from a US bank when you get a mortgage.

the problem is you can't access global liquidity pools easily with the former. and if you're a B2C company and want to sell to US customers, then the US claims jurisdiction.

Your friends IOU's are just IOU's, the bank's IOU's are legal tender.

That's the difference.

hypothetically if folks in Argentina start to use dollars in their banks and only touch physical dollars (as the interface between US and Argentinian money circulation) they are still using real dollars without touching US accounts.

their banks can form their own interbank exchange, they can even make a central bank that does "open market operations" (can buy and sell things on this exchange from pure air - like the NY Fed's trading desk which is basically the executive manifestation of the FOMC), but of course it'll have a mighty hard time to get price stability. not to mention that the US wouldn't be happy

> Your users and counterparties understand it to be a lie the entire time, of course.

I'm not sure users feel that way. Maybe users just believe they live in a free world and do nothing wrong by buying $100 USD of Solana or Shiba coins.

The evil, evil, evil person, outside of government's reach, who sneakily installed the crypto.com app (oh, the horror!): surely he needs to be send to some re-education camp to be taught the merits of the state and why we need less options and more state?

> We are a nation of laws. I’d support reforming some of them; a lot of the AML/KYC regulatory apparatus harms individuals who have done no wrong

Yup. It is insane. It is the bane of my existence. I'm not a drug dealer, I'm not selling firearms, I'm not kidnapping kids to sell their organs, I'm not funding terrorism. Leave me the FUCK alone.

> However, in the interim, one cannot simply gleefully ignore the laws because the opportunity to do so allows you to become wealthy beyond the dreams of avarice.

But is it unthinkable, for state lovers, to imagine a world where people would be free to decide if they buy or not cryptocurrencies?

I know it's a very ugly word: freedom. But shouldn't people have more of it and not less?

Freedom isn't the only goal of society. It's in tension with other things like security, privacy, and so on.

Libertarians are dumbasses because they wilfully ignore this.

Libertarians are just anarchists with extra steps.

I agree with you politically and spiritually.

However, Patrick Mackenzie is a person of the highest calibre (see, e.g., this: https://worksinprogress.co/issue/the-story-of-vaccinateca/).

There is a need for laws, and there is a need for laws that respect freedom. As of 2023, the details of how a freedom-respecting social system would work have only been scantily developed.

If men like patio11 aren't convinced by the pro-freedom case, why would anyone else be?

The libertarian movement has supported many bad actors. Cryptography has supported many evil acts. Libertarianism is not bad and cryptography is not evil; but no-one serious will follow us until we clean up our act.

(It's not enough to say that the current system is bad or worse. The current system is terrible. But we should be aiming to set things right, not simply tweak things on the margin.)

I don't have problem with KYC/AML, I have problem with the lack of consumer protection, with their shitty websites, security theater app and processes, their inability to do proper risk and compliance checking/monitoring/reporting respectfully.

Strange opaque "post hoc" enforcement (when you are allowed to transfer money in, but not out) should be illegal without probable cause and "habeas corpus", etc.

I'm deeply disappointed that this isn't the strict bylaws, policy, and procedure documents for SPECTRE and its affiliates and controlled entities. I wanted to read the Henchman Code of Conduct, Infiltration Response and Prevention Procedure, and Workplace Health and Safety Guidelines for a shadowy, criminal org.

> I wanted to read the Henchman Code of Conduct

Rule 1. Die fast, die often.

And break things

The International Brotherhood of Henchsters union will negotiate better henching health and safety policies on behalf of all goons, thugs, hired thugs, minions, and of course henchpeople.

We all know that henching is an inherently risky job. Fighting some of the world's most tuxedo clad Scottish sociopaths is often dangerous, but that doesn't mean we can't reduce unnecessary risks.

Risks that cause lost productivity on your Doomstar project through avoidable injuries, recruitment delays, and the difficulty of removing tangled bodies from the drill you're using to get to the Earth's core.

We demand:

1. Adequate hand-rails on ledges, bridges, and _especially_ around piranha tanks, snake pits, etc.

2. Murder as a punishment for failing your boss "for the last time" now requires two written warnings beforehand.

3. Volcano bases must have adequate fire and lava escapes.

Old but obligatory link, the Evil Overlord List:

http://www.eviloverlord.com/lists/overlord.html

38) If I absolutely must ride into battle, I will certainly not ride at the forefront of my Legions of Terror, nor will I seek out my opposite number among his army.

This one makes no sense, surely evil overlords are invulnerable during the battle charge.

45) I will make sure I have a clear understanding of who is responsible for what in my organization. For example, if my general screws up I will not draw my weapon, point it at him, say "And here is the price for failure," then suddenly turn and kill some random underling.

This one is hilarious I didn't understand the direction until the last word.

Check out Marvel's MODOK show. It explores the banalities like this that arise when a corporation buys out your evil lab, and how poorly a Narcissistic supervillain handles being subjugated by a power greater than himself.

I like “slow database enthusiasts”.

> We had all the technology required to CC regulators on every banking transaction years before slow database enthusiasts decided all transactions would eventually be publicly readable and persisted forever. We simply chose not to implement it. It would have been quite expensive and infringed on the privacy of many ordinary people and firms.

This is about crypto and Binance. It's a little too long IMHO -- the last paragraph says it all, and plainly enough:

> I do not know if we’ll ever have a world with this scale of crypto businesses without the crime. The crime was the product. An opportunity to transform global financial infrastructure was greatly overstated and has not come to pass. I do not expect this to change.

Can any financial system exist without financial crimes? Just look at HSBC. Nearly all of Binance's failures also happened at HSBC which continues to operate within the law simply by paying fines as the cost of business every so often.

The big difference between crypto and regular finance isn't the crimes; it's that finance has other uses than crime, and crypto doesn't.

The transfer of value is pretty nice. International transfers via crypto are often cheaper than wire fees. Domestic transfers can be faster via cryptocurrency depending on where you are at. ACH is painfully slow. SEPA is a a bit better. That being said there is a tradeoff. You lose clawback mechanisms in favor of independence and control.

The financial sevices industry considers fraud as a feature.

Just in moderation

But the product was gambling and funvestment (buy funky pictures, silly named coins/tokens), the crime was doing it unregistered. (And it's not like the constant whack-a-mole evasion did not cost them anything.)

Right now these serious claims (that the main product was money laundering for ISIS et al.) are unsubstantiated.

The thing that amazes me about these people/companies - why do they think they can escape the reach of U.S government? It is the most powerful and vicious entity there is, if they want to get you, they will. What makes these people think that they are smarter or luckier than their fellow law breakers that came before them.

Unlike SBF (who seems dumber than a rock), CZ doesn’t seem that dumb. I don’t understand this at all

There were lots of examples of "better to ask for forgiveness as a rich person than permission as a poor person", that they saw. Tech companies entered finance, taxi-driving, health-advice-dispensing, etc. and didn't fall into line with existing laws and regulations for years, until after they got rich.

They were, no question, incorrect, but if you're wanting to believe it could work (because you really wanted to get rich), you could convince yourself of it.

You, like everyone else, have never read about the smartest/luckiest criminals in the world because they don’t get caught.

Ok, fair enough. But the question still remains - what are the odds of not getting caught? Just because a handful of people win the lottery every year doesn’t mean you and I will, correct? In the case of lottery, all I am gonna lose is a few dollars that I paid for the ticket, but doing illegal activities can cost me my freedom and life.

And they don’t get caught because they don’t take too much. So less interesting

Well, it did kinda work. At least for a while. CZ, SBF, etc gained fabulous wealth and would have gotten away with if not for those darned kids! The reality is lots of people are willing to take extreme risk for extreme reward. Sometimes those risks involve the potential of serious jail time.

Its very interesting to me that we went from "dont be evil" to full on Bond Villain leading every sudo-tech company in 20 years.

I guess the initial lies that pushed the dont be evil line set the tone that you say one thing and do another...

sudo as in “superuser do” or as in “pseudo-“

It's been heartbreaking to watch this unfold slowly over my lifetime.

The techno optimism I had in the 90s has been crushed by profound despair for the human species, as I watch the salivating sociopaths among us getting accolades as they invent brand new ways to use this technology to subjugate the rest of us. These are our new role models?

People have always been like this. I don't know why anybody believed it would be different this time around.

So true. I didn't- Just felt like pointing out the irony.

In just 25 years, we went from the early Internet’s “information wants to be free” to the crypto mindset of “we must insert expensive scarcity into digital realms”.

And often it’s even the same people. I’m baffled by the Marc Andreessens of this world.

> And also Binance gleefully and knowingly banked [...] child pornographers. That’s not an allegation; that has been confessed to.

I would like to learn more about that. Does anyone have a source?

> More than 1,000 transactions took place involving three marketplaces that dealt in child pornography and related material, FinCEN said. An administrator of one of those sites, Dark Scandals, was indicted in 2020. The site featured violent rape videos.

https://news.bloomberglaw.com/crypto/binance-lapses-boosted-...

While crypto might not be the ideal solution, it's hard to not notice that modern AML/KYC banking laws are rapidly degrading into complete bullshit, and it is nice to have a workaround.

I've just read an article how Russian emigrants around the world (that's up to several million people, more than some European countries) are struggling with opening and maintaining bank accounts, and have to resort to all kinds of workarounds, crypto and Binance included. You might not have any sympathy for them, especially in current circumstances, but they did nothing wrong, and won't cease to exist just because of your lack of sympathy.

Where I live now, there is a growing number of street currency exchange shops which will gladly and openly accept your USDT and hand over cash in either local currency or USD $100 bills; no documents ever asked, of course. That kind of infrastructure did not exist a mere couple years ago.

You might think, why don't just ban it all, but, I'll say it again, the problem with this line of thinking is that if you, as the government, declare large enough numbers of mostly innocent people criminal or "undesirable", they won't magically vanish into thin air overnight; to the contrary, you've just made life harder for your own law enforcement, as real criminals will now have a much larger crowd to blend in.

For many countries where it is difficult to legally buy or transfer USD at international market rates (either because of sanctions or capital controls), there is a thriving USD/USDT/BTC black market, involving, in extreme cases, the majority of population; see Argentina or Venezuela for example. Labeling all of them as "criminals" achieves you nothing.

This comment was marked [dead] when I read it. I vouched it back into visibility. I wish people would respond with a comment if they disagree, rather than reporting it.

Meta-comment aside, there’s another population segment who suffer from overbearing AML/KYC regulations - homeless people. Many homeless people do not have any form of ID and hence cannot open a bank account. What option do they have? I would argue for low value accounts, say <$5000 annual transaction volume, AML/KYC enforcement should not be required. $5000 is such a small amount in the grand scheme of money laundering that the government should really focus on the bigger fish. Splitting your laundered money into many bank accounts would, or could, fall under existing structuring laws and would be easily detectable by any bank.

I haven’t even mentioned that in many countries, such as the US, you have absolutely no guaranteed right to banking access. Your access to banking can be shut off overnight by any one of the various middle men involved. Until these things are solved, and legal persons can be guaranteed access to banking then crypto is necessary.

Here's a trilemma:

1. Everyone should have access to banking, and a $5k nominal/year in most of the G7 economies[0] is small enough it shouldn't attract attention.

2. If you don't require proof of ID, you can't stop people signing up for as many small accounts as they want to.

3. Homeless people may not have any formal proof of ID (either because it's too expensive, or as a direct consequence of why they're homeless in the first place[1]).

You can try to get around #3 with biometrics. But even with AI assistance, the goal here is to prove a person isn't already on the system — which is much harder than merely showing they're the same person as on the ID card they have with them, for reasons which are basically a generalisation of the Birthday problem[2].

[0] one of the G7 is the EU, the worst of the EU is Bulgaria at €12400 GDP (nominal) per capita, Wikipedia reports that "More than a fifth of the labour force work for a minimum wage of $1.16 per hour.[203]" but that citation (which follows) is from 2012 and this is where I stopped going down the rabbit hole: https://web.archive.org/web/20121224023912/http://epp.eurost...

[1] off the top of my head: because they ran away from home as a minor and didn't take sufficient documentation with them; or because they had an untreated mental health problem; or because they're an unregistered migrant; or because they were born in the country but out of the system.

[2] https://en.wikipedia.org/wiki/Birthday_problem

You’ve struck on an interesting problem in decentralized systems, Sybil attacks [0]. How do you prevent someone from registering multiple accounts and pretending to be multiple people? In Bitcoin, and other cryptos, the problem is ignored because it doesn’t matter at the address level since you have the same amount of bitcoin no matter how many addresses it’s split between. However, in other systems within the crypto-ecosystem it may be desirable to establish a 1:1 human:account ratio. This is exactly what Sam Altman was/is trying to solve with his WorldCoin thing which also uses biometrics (I’d personally not sign up for WorldCoin and advise against it for others). Largely it remains an unsolved problem AFAIK.

Jumping back to banking the homeless, I mentioned in the previous comment that if criminals tried to use these small accounts to launder money it should be relatively easily detectable by the banks. I would add that I don’t think it’s a problem if a given homeless person opens N of these accounts for small values of N since that would still be a small total cashflow volume. The main things I’m interested in with such a scheme would be allowing homeless people to have somewhere to store what little money they have without risk of having it robbed from them [1], allowing them to have a normal way to get paid from any job they might work, and allowing them to purchase things online (perhaps delivered to an Amazon locker or other pickup location). I’m not saying this idea is perfect, it certainly isn’t, but my point in the previous comment was that there are people who are underserved by the existing banking infrastructure.

0: https://en.wikipedia.org/wiki/Sybil_attack

1: They could authenticate with an account number or card and a PIN at an ATM. Here opening multiple accounts would be an advantage for the security conscious because they could open a duress account and put a fraction of their money in it to withdraw if they were ever forced to by a robber.

I’m new to HN, could I check how does this report/vouching thing work?

If someone is new and their comments get reported (because people disagree? or must there be a violation of the site guidelines), then the comment would be marked as dead and thus hidden?

Who can vouch for these users then? Is there an upvote/downvote mechanism too that’s not visible to me because I’m a new user?

There’s an account setting to show dead comments.

You may also need some minimum amount of karma to vouch, not sure.

Thank you for the reply, good to know!

> This comment was marked [dead] when I read it. I vouched it back into visibility. I wish people would respond with a comment if they disagree, rather than reporting it.

Comments from brand new accounts (as in this case) are marked dead by default as a spam prevention measure, I believe.

Thank you.

I preferred to register a throwaway for obvious privacy reasons, immediately got shadowbanned, and while I refrained from posting the actual article link [1] that I mentioned, that did not really help.

[1] (Russian) https://vc.ru/relife/928248-50-bankov-kotorye-chashche-vsego...

> it's hard to not notice that modern AML/KYC banking laws are rapidly degrading into complete bullshit

They were always bullshit from day one. AML/KYC is literally the financial arm of warrantless global mass surveillance. To me it's comical when I see HN defending unlimited strong cryptography and yet drawing the line at untraceable financial transactions. They are one and the same.

There is a difference between "evil" and "ineffective", and while I agree with the more controversial "evil" part, my point was to emphasize the "ineffective" part of it.

I won't go into further details even under anonymous account, but I have some first-hand experience dealing with compliance from various financial institutions, I have a general idea of what they ask, what they do NOT ask, and all of this feels much like IP address logging or so-called "chain analysis": it may work against unprepared people (mostly those who "have nothing to hide"), but is almost trivially bypassable by any semi-motivated attacker.

Mostly it's because incentives are completely off. These people are not the police; their top priority is to cover their asses with enough paperwork, not actively engage in yet another anti-whatever crusade.

While I'm definitely a "crypto skeptic", I think it's probably going to persist in this niche of "US-equivalent hawala banking for people who aren't allowed the stability of the US dollar".

People worried about US hyperinflation are nuts. People worried about Argentine hyperinflation have a reasonable point.

A big problem with everything is that digital money has no scale. It's reasonable to want to stop people transacting billions of dollars for Russian weapons and it's not reasonable to pursue every last Russian national. But in an electronic system "one" and "one billion" fit in the same field.

I have a Lithuanian friend (not even Russian, or Russian heritage) who has a same name as a sanctioned person in Russia. He has never been able to make an international wire transfer. Banks bounce his transaction back based on a name check.

> AML/KYC banking laws are rapidly degrading into complete bullshit

It did not. That was their purpose all along but it's nicer to say we are implementing AML instead of we are sanctioning these guys or we are restricting outflows.

Crypto did not boom because it is mathematically revolutionary (it is, but most people don't really understand it). It boomed because there is a market for it.

The only reason it got big enough to be boom-eligible was that geeks, nerds, and cypherpunks (in particular) understood how mathematically revolutionary it was.

Google Riggs Bank and BCCI.

I almost liked the tone this was written in until I got to "totes". It's a fine line between clever and cloying. Depressing how much of that article I understood.

We should strive to eliminate finance, not to go back to the past when each lord had their own currency. Cryptocurrency is hindering human progress.

A fully automated post scarcity society would be nice.

Indeed.

You're contradicting your original post by agreeing

How so? Economies only exist because of scarcity. A post scarcity society would naturally have no need for an economy.

How, post scarcity (star-trek like) world does not need currency or finance at all.

If compared to the national currencies Bitcoin is 16th largest, larger than 100+ national currencies

https://coinmarketcap.com/fiat-currencies/

So the development is towards other direction - less currencies of lords.

Disagree, I am talking about whole set of cryptocurrencies. see here: https://coinmarketcap.com/all/views/all/.

I recognize that this is partly taste and some will hate the style here, but wow how did patio11 get even better at writing? Every sentence is a delight.

The word crypto comes from the Ancient Greek word kruptós, which means "hidden" or "secret". (a quote from AI)

Thus it is not a big surprise that some shady things might be going on as relates to it. Crime wants to be secret.

Cryptocurrency (abbreviated 'crypto') is made possible by cryptography (also abbreviated 'crypto', but few call it that nowadays). Cryptography is from the Greek for secret because it involves doing various things with 'secret keys'. What you use it for may or may not involve secrecy - here are just a few of the most prominent examples:

- Authentication to prove your identity (no secrecy)

- Encryption to keep information private except to certain keyholders (secrecy)

- Signing to prove that information is as originally published (no secrecy)

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