Bitcoin Forum

Bitcoin is having a hard time shaking off its association with criminal activity perhaps because it offers anonymity to its users - a feature that is often used in the mainstream media to slam the digital currency. But Bitcoin’s anonymity is, according to researcher George Danezis, no aid to thieves and launders who in practice find it quite difficult to exfiltrate the proceeds of their crimes.

Firstly, the innovation of Bitcoin is in the ‘Blockchain’ – a transparent, distributed ledger of all transactions - because every transaction is completely visible to all, it is perfectly possible to trace the path of stolen coins and find out the exact wallet address in which the coins end up.

It is then very hard for the thief to extract that value from the system because the wallet can be watched for further activity. Know Your Customer rules lie in wait at the ‘in’ and ‘out’ points, where digital currency meets FIAT. Banking systems, exchanges and payment processors all have to satisfy identity checks to avoid being shut down and these will inevitably expose the thief.

Furthermore, in a small community such as Bitcoin, moving large sums of money around is bound to attract attention. A common workaround is often attempted is called ‘Peeling’ – splitting a large sum into many smaller parts and moving these about to confuse the trail. The problem here is that if you can trace even one of these parts, you can trace them all, so it’s a high-risk strategy. In response ‘Mixers’ are becoming a popular tool to remain under the radar. This clever invention has a coin input and output and somewhere in the middle it forgets exactly which coins belonged to whom - but even this method has its drawbacks. Danezis tells us that by watching the mix and using ‘linear regression from equations derived over time’ it is possible to deduce which inputs are linked to which outputs.

‘All of this illustrates just one point…that it is very difficult to exfiltrate the proceeds of crime’

So Bitcoin in itself isn’t inherently bad, in fact it’s pretty unsympathetic to thieves and launderers, much less so than cash for instance. It’s just that bad actors get all the press.

Many thanks to George Danezis and Professor Nicholas Courtois host of the UCL Bitcoin, Cryptography and Finance Multidisciplinary Research Seminar. Listen to episode 6 of the BitcoinUK Podcast for the full seminar 'Tracing Thieves and Launderers'.

Cash is a "bitcoin trace" like other system.

- customer take cash to ATM
- number of bills is traced
- customers pay a merchand
- merchand deposit cash to bank
- number of bils is traced

With cash, you can "sniff" the world ... if you want.
In Bitcoin, you MUST trace to secure.

But in real world, FED(or EU) generate bills every month, now ... so no need to trace the cash now.

Link please

Well there are lots of workarounds .
Lets say i steal some bitcoins, and they trace it and get to the point where it was sent to some exchange for cash. And they find  my name on that bank account . So they will say that are my bitcoins? How they will prove it. What if on some point of the road they got spent by thief and found they way to me ? So there is no way they can say that bitcoins ware in my possession from the point they ware stolen ? Right ?

So basically there is no point in laundering bitcoin .

And even if u want to, just deposit to some casino, or dice game , and than cashout, u will get cashout from lots of deposits/hot wallet ... Its rly simple to launder bitcoin , if u rly need to.

move in and out of large exchanges and casinos
convert in and out of darkcoin, move the coins around to different darkcoin wallets

"Your Honor, years ago I recognized my kinship with all living beings, and I made up my mind then that I was not one bit better than the meanest on earth. I said then, and I say now, that while there is a lower class, I am in it; and while there is a criminal element, I am of it; and while there is a soul in prison, I am not free."
-Eugene V. Debs

‘All of this illustrates just one point…that it is very difficult to exfiltrate the proceeds of crime’

Well said. I agree, it would be hard for criminals given the public "ledger" of transactions that bitcoin provides.

That public ledger doesnt show names and address owners. I could be buying drugs from somebody and u will see that transaction, but u will never know that its transaction i bought drugs with. What OP said, yes its posible to track coins , and when they meet exchange u need to give ur name and everything and that exchange can give ur address and ur name to authority's but they cant prove that coins ware stolen by u.

Again , example. If u or somebody else steal bitcoins , and lets say buy something from me, and he sends them to me, the i go to exchange with that coins and , what they will see that i stole them ? Its impossible to prove that if there is 2 transactions.

And again if u are rly in the need for laundering it, (idk why would u be) u just go to any casino deposit and cashout , and u will get brand new "clean" bitcoins. :D .

Please stop using the word "laundering" to describe the process of executing one's right to privacy, this word has too many negative associations. It should not be used anymore at all, except maybe in the context of washing machines.

CoinJoin allows for actual successful anonymity to bitcoin.