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".
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".
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
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?
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.
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.
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?
You just moved the cheese to the escrow agent.
I apologize, in my post I meant to say centralized exchanges.
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.
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.
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.
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.
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.
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.
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.
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.
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".
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.
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!"
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?
Nothing illegal about proof of work.
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.
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?
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...
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.
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.
Unless you're stealing electricity or computing of course.
What’s illegal step is mining crypto on your gpu?
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.
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.
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.
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.
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?
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.
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?
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.
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.
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.
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.
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.
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).
"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...
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 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
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.
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.
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
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.
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).
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."
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 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.
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.
>"... 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.
His wrongdoing lies in not taking his "police" role seriously enough.
I'm absolutely incredulous at this statement.
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...
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'm pretty sure "Bond Villain" is primarily intended as a pun.
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.
Have you considered that the author did try to understand the underlying ideology? It seems pretty accurate to me.
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'd say that is incredibly accurate. Libertarian ancap bros have previously wanted to found their own objectivist states either by building oil rig type structures on international waters or taking over an underdeveloped African state.
And the common denominator is always wanting to keep all money (but still benefiting from democratic institutions in the markets they do business in). There may be other stated goals, but those are not serious.
Libertarian ancap bros
Resorting to insults is not very conductive to intellectual honesty. Your comment equates libertarianism to "wanting to keep all money" which is an extremely cartoonish understanding.
Libertarians, especially crypto people, are cartoonish in my experience. Cartoonish is not equivalent to false. Some things in life are ridiculous, and then we should be able to call a spade a spade --- or call a bond villain a bond villain.
Your comment equates libertarianism to "wanting to keep all money" which is an extremely cartoonish understanding.
Sure, but it's true.
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.
> “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.
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.
I think he called CZ an evil bond villain, not everyone.
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
The author, patio11, has been writing about crypto since at least 2018 and is thoroughly familiar with "the ideology behind cryptocurrencies".
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 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).
The author is a pragmatist and simply thinks it ain’t gonna happen.
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.
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.
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.
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.
"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.
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.
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.
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.
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.
Replace "crypto" with "drugs" and your message will remain basically the same.
State currencies are outcompeting crypto, including by considering it an asset denominated in said state currencies.
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.
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?
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...
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.
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.
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. """
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.
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 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.
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.
for good reason
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.
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?
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.
The US military and the US as a large market you want to trade with make it legal.
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.
You can’t have real dollars without a US bank account.
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.
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'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
Old but obligatory link, the Evil Overlord List:
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.
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.
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 financial sevices industry considers fraud as a feature.
Just in moderation
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.
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?
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.
2) you can issue some kind of physical money then periodically settle crypto. It’s not all or nothing.
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-...
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).
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)
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.
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.
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...
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.
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.
Google Riggs Bank and BCCI.
I really appreciated the deep insightful analysis wrapped in an excellent metaphor.
It’s interesting how the market’s reaction to this was basically - nothingburger, tick tock, next block.
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.
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...