Yes, you can launder money through World of Warcraft but the payments usually go through Paypal. Online poker is another obvious way to launder hit hard by KYC.
How the powers that be do not see this, astounds me.
As soon as the first cryptocurrency acquires some semblance of price stability, it becomes more dangerous to the old system.
Given 2 options, one with a lot of friction and one without, no matter the "marketshare" of the first, the latter one will eventually win.
The only way fiat can prevent this is to stop punishing good actors with AML/KYC compliance.
The fact that these laws still refer to and try to regulate geographically-focused transfers of money (which make literally no sense in an Internet cryptocurrency context... If I fly in a plane and have a Bitcoin wallet app on my phone which gives me access to spend 15 grand worth of Bitcoins anywhere (including ON the plane, if it has wifi), do I have to "declare" the "carrying" of more than $10,000 "cash"?) shows how behind-the-times this worldview is.
There's a transitivity aspect to it. Ultimately taxes need to be paid in fiat, and large organisations will eventually get stomped on for accepting crypto if it subverts government control.
On the second trip through the loop, you have crypto which can be used for small (in a sense, black market) transactions and fiat which can be used to pay things like utility bills or buy stuff from companies which must accept fiat. Individuals will provide exchange services (buy iphones with crypto!) at their own risk, basically by subverting KYC with small transactions. [We are already here].
What's the nth trip through the loop? I'm personally not sure, but interested in your views.
Ultimately global trade will have to occur in the global currency, and governments large and small will eventually get stomped on for accepting only their local currency if it subverts international consensus.
Regardless, Bitcoin has several advantages. For one thing, you're not dependent upon continually obtaining a flow of paper notes from a foreign country that may lie halfway around the world. For another, you can divide Bitcoin to extremely small and precise quantities - the dollar on the other hand doesn't scale as well to economies where a penny may start to approach a significant individual unit of money.
There are of course many other advantages of Bitcoin that make it attractive for people in many different countries to adopt. The fact that you can transmit and receive it to and from anywhere in the world, with the same certainty of transaction confirmation as cash in hand, without the need to either physically ship cash or rely on a network of physical cash shipment, is a pretty good one, especially as the world grows ever smaller.
A final advantage would be that you are never hostage to the political dangers of a nation-state controlled currency (i.e. a small group of rich white men can at any point decide to devalue your savings, to the point of destruction, by printing an unlimited amount of the currency.)
> Legal tender... means that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender.
In other words, any transaction not involving fiat currency can be legally transformed into a transaction involving fiat currency (which makes "backed by gold/silver/whatever" currencies like Liberty Dollar[2] meaningless).
Any transaction involving fiat currency which isn't settled can lead to legal punishment, ie. fines, prison, etc.
Any punishment which isn't legal (eg. taking the gold which is 'rightfully yours') also leads to legal punishment, so there's no way to "escape" the system.
[1] http://www.royalmint.com/aboutus/policies-and-guidelines/leg... [2] http://en.wikipedia.org/wiki/Liberty_Dollar
Because "fleeing to the virtual currency and staying there" has very small value and utility, unless you can at some point channel those money to regulated business and tangible goods...
Only if they can actually do stuff with that virtual currency in the real world, like pay rent and buy food. Otherwise, not so much.
"Given 2 options, one with a lot of friction and one without, no matter the "marketshare" of the first, the latter one will eventually win."
This isn't always true.
"The only way fiat can prevent this is to stop punishing good actors with AML/KYC compliance."
As has been posted, it's not that hard to comply. And if they want to act like a real currency, then they should be following the same regulations as real currency.
I might be nitpicking, but people don't like to "stay in cash". They just like tax evasion. It's not about staying in cash or not, it's about the ability to underreport revenue without an auditable paper trail.
You know, if a contractor gives you an invoice, and you pay in cash, nothing actually prevents them from burning their copy of the invoice and saying it never happened if the IRS asks.
Source: I'm from a country where the grey market is very alive and very flourishing.
And government regulators will be quite happy to make life more difficult for vendors as well as money transmission businesses if they start to worry that criminals are finding it too easy to spend their Bitcoins.
Organised criminals staying in BTC is not going to make the average person want to flee to it, it's going to increase their suspicion that Bitcoin's days of being a surprisingly friction free way of buying goods and services in their own country are numbered.
Which means he's probably not paying tax on that himself. Which is tax evasion, pure and simple. Which is illegal for good reasons.
You can disagree with the tax system in the US, but that doesn't make tax evasion legal.
I know that's a little facetious but "value" is almost entirely based in what a human can get out of it - and that is almost entirely in the real world.
Come up with a program that lets users manage multi-currency transactions with a basket of currencies ( game currencies, paypal 2 paypal balances, (bit|alt)coin, reddit gold, odesk credit, store credit balances (gift cards), und so weiter).
Extra credit if you can add constraint solving to defeat traffic analysis and reporting limits.
Technically legal to develop and give away if you are a US citizen; but probably a really bad idea to run as a web service unless you really like being a test case in federal court or want to become a spy for the FBI.
But that implies some sort of exchange ? You could make a peer to peer thing for the actual transaction but the bid/ask must be public surely?
Throw in Walmart gift cards - aha do I see it now - all these things are convertible from dollars and so can be used to launder money ...
If so then I guess I don't care about an open exchange - I am going to own both sides of the exchange as a drug lord anyway.
But I presume this is less exciting as a money laundering setup as it is all traceable?
Is that it?
I imagine that if you were serious about something like this you'd probably recruit a number of intermediaries to receive payments and acquire goods for you since shipments of high-thread count sheets are less likely to draw adverse scrutiny than significant flows of negotiable currency. If you want the real drug lord version of this read up about the Peso Exchange [0] which is a form of repatriating money from illegal proceeds that will never go away.
And rather than thinking of it as a strictly money laundering tool, think of it as enabling the "unsurveilled marketplace", not just drugs but the trade in items that are restricted in some jurisdictions, or for which specific efforts are being made to delegitimize preparatory to banning ( think tractor repair diagnostics without the snitch chip, or radar/lidar detectors, or any of a number of tools that could be banned as circumvention devices ).
The thing is that we all know that Anti-Money-Laundering efforts are inherently corrupt [1] and that only the little people ever go to jail for it.
0. http://www.fincen.gov/news_room/rp/advisory/html/advis12.htm...
1. http://www.bloomberg.com/news/articles/2013-07-02/hsbc-judge...
Um... Just because they're virtual doesn't mean there's not a banking system and aren't subject to banking laws. Virtual currencies are well on the radar and being regulated just like non-virtual currencies.
How are you supposed to regulate these services when anyone can open a Bitcoin bank and serve anyone anywhere in the world with an internet with an internet connection? If they couldn't stop movie piracy, how are they supposed to stop free global financial services? They have even less of a legal case to make for intervention than piracy!
They could hit it really hard. They haven't stopped illegal images from being spread, but they have made it really rare except for the darkest corners of the web.
The excuses for the prohibition of free financial services on the other hand are all basically covert attempts to protect the sovereignty of state military/police institutions, and do not actually align at all with the interests of regular folk. Plus absolutely everybody needs and enjoys high quality, unrestricted financial services.
So I see the chances of government attempts to suppress Bitcoin succeeding as more or less 0. What would be the grounds for it? Where would they gather the support that would allow them to openly violently suppress great swathes of people to try and keep it from happening?
It's even less likely to succeed than efforts to suppress copyright-breaking, because with Bitcoin there are no legitimate victims, it is only the state who will lose out.
In the past it was legal to produce and distribute it. Most people didn't care enough to stop it. In a relatively short time certain groups turned it from a 'meh, not my problem' to 'kill it with fire, nukes, lasers, and anything else we can throw at it'. They could potentially do the same to bitcoins. (You can even find there was a period where most all child abuse wasn't considered a problem, with one of the key cases of the era being a case where the lawyers for one abused child argued that the child should be legally considered an animal because at that time animals had greater protection). And the numbers of individuals into it are larger that most people realize (consider that 1 in 5 children are sexually abused by the time they reach 18 to know just how large the problem is).
Now, maybe certain factors like the potential demand growing for bitcoins would be enough to keep it from being banned. Also, even if you could get the public worked up about the topic, it is much harder to shock and awe them. What would a pro-ban advocacy group do, show numbers of wallets? And the ability for the government to scare people has taken a hit thanks to the backlash from the war on drugs.