US DOJ Calls Bitcoin Mixing ‘a Crime’ in Arrest of Software Developer

[Assface16678]

a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity-enhanced CVC against the receipt of another type of value

vs.

a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed

Read bolded. JoinMarket "market-makers" are actually "liquidity-providers", that ask for a fee in exchange for providing liquidity. Is that considered a money-transmitter?

I don't think so. To qualify as a money transmitter in the second scenario, one would need to both develop the mixing platform and also profit from the associated money transmission.

It's arguable that a market-maker does neither. They are profiting from the bid-offer spread, not the mixing activity:

A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.

You would see the same distinction with an exchange. A market-maker on an exchange doesn't pocket trading commissions whenever trades are made -- the exchange operators do. That's who FinCEN is targeting, the ones who build the platform and are profiting from it.

I think monitoring a bitcoin mixer or software is good to monitor because today there is a lot of projects released by the people and they want to create those to spread into the world of crypto and gained a lot of users. Today there is a lot of software created just use to scam other people and also it is good we the US restricting the use of software also we want to avoid having future problems like not secured data and information. Still, we need to have a lot of verifications before we tell that bitcoin mixing is a crime because we all know it is decentralized we can restrict but we cannot control the market value of these coins and the use and purpose of it.

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[Wind_FURY]

a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity-enhanced CVC against the receipt of another type of value

vs.

a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed

Read bolded. JoinMarket "market-makers" are actually "liquidity-providers", that ask for a fee in exchange for providing liquidity. Is that considered a money-transmitter?

I don't think so. To qualify as a money transmitter in the second scenario, one would need to both develop the mixing platform and also profit from the associated money transmission.

It's arguable that a market-maker does neither. They are profiting from the bid-offer spread, not the mixing activity:

A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.

You would see the same distinction with an exchange. A market-maker on an exchange doesn't pocket trading commissions whenever trades are made -- the exchange operators do. That's who FinCEN is targeting, the ones who build the platform and are profiting from it.

Then in a decentralized "market-place" for mixing such as JoinMarket? Who's the target? That's a purely 1's and 0's tumbling scenario.

[squatter]

I don't think so. To qualify as a money transmitter in the second scenario, one would need to both develop the mixing platform and also profit from the associated money transmission.

It's arguable that a market-maker does neither. They are profiting from the bid-offer spread, not the mixing activity:

A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.

You would see the same distinction with an exchange. A market-maker on an exchange doesn't pocket trading commissions whenever trades are made -- the exchange operators do. That's who FinCEN is targeting, the ones who build the platform and are profiting from it.

Then in a decentralized "market-place" for mixing such as JoinMarket? Who's the target? That's a purely 1's and 0's tumbling scenario.

Nobody, not for unlicensed money transmission anyway. JoinMarket just links together liquidity providers with liquidity takers, who pay fees to each other. The developers of JoinMarket are not generating business income from release of the code, so they aren't considered money transmitters under this law.

[Abiky]

I don't think so. To qualify as a money transmitter in the second scenario, one would need to both develop the mixing platform and also profit from the associated money transmission.

It's arguable that a market-maker does neither. They are profiting from the bid-offer spread, not the mixing activity:

...

You would see the same distinction with an exchange. A market-maker on an exchange doesn't pocket trading commissions whenever trades are made -- the exchange operators do. That's who FinCEN is targeting, the ones who build the platform and are profiting from it.

That's certainly true, mate. FinCEN targets central operators who profit from market trades, money transmitting services, etc. But I find it odd to see the SEC targeting the Etherdelta developer after being a decentralized exchange with no central operator. If they've still enforced securities laws on a decentralized exchange, they could easily make decentralized mixers' developers accountable too. After all, the government would not want people to use crypto in order to obtain financial freedom. Once they see Bitcoin and other cryptocurrencies as a threat to the existence of the current monetary system, you could expect something like this to happen in the future.

We cannot discard the possibility of governments making developers accountable for decentralized exchanges, mixers, and other crypto solutions. The US government has been the most strict one when it comes to crypto/Blockchain regulation. They've taken down the mixer in question and could easily shut down others over time. Once people start using non-custodial Bitcoin mixers like Wasabi Wallet and JoinMarket, you could expect opposition from the US and other worldwide countries. The main excuse from these entities will be that decentralized mixing solutions open a pathway for criminals to launder money and evade taxes at will. While we know that Fiat is used more for this than crypto, governments don't see it that way.

In the end, this will be a never-ending battle between crypto/Blockchain proponents and governments with central banks. Governments will continue to pressure the industry until everything is completely centralized (dependent on centralized exchanges, and other services). After all, it's no secret that today's crypto land is largely dominated by centralized exchanges. It would be surprising to see centralized mixers enforcing KYC/AML sometime in the future due to government's pressure within the mainstream world. If that happens, I believe that people will be more inclined to using non-custodial mixers than anything else. The recent situation of arresting a mixer operator, is only the beginning. Just my thoughts

[figmentofmyass]

FinCEN targets central operators who profit from market trades, money transmitting services, etc. But I find it odd to see the SEC targeting the Etherdelta developer after being a decentralized exchange with no central operator. If they've still enforced securities laws on a decentralized exchange, they could easily make decentralized mixers' developers accountable too.

etherdelta = non-custodial, not decentralized. they had centralized servers, order book matching, DNS registration, etc

the SEC noted this distinction in their case against etherdelta:

Whether any decentralized exchange is “maintaining” or “providing” these services would be in general harder to prove if the “exchange” was truly nothing more than software on the Ethereum blockchain (what we could call fully decentralized), but it would be easier to prove if the decentralized exchange’s administrator was actively maintaining data outside of the blockchain that was essential to facilitate trades, such as an order book. In the SEC’s Cease and Desist order, they note that EtherDelta orders “reside[] on a centralized server maintained by EtherDelta and not on the Ethereum Blockchain.”

p2p trades (or mixes) done completely at the protocol level (without reliance on centralized third parties) don't fit that situation. the biggest issue for p2p trading is decentralized order matching, which is still a big challenge.

[Abiky]

etherdelta = non-custodial, not decentralized. they had centralized servers, order book matching, DNS registration, etc

the SEC noted this distinction in their case against etherdelta:

..

p2p trades (or mixes) done completely at the protocol level (without reliance on centralized third parties) don't fit that situation. the biggest issue for p2p trading is decentralized order matching, which is still a big challenge.

Interesting fact. For once, I've thought that the Etherdelta exchange was completely decentralized. But now I know more about the situation. This explains why the SEC required the Etherdelta developer to comply with securities. I guess that if software developers decide to make everything decentralized at the protocol level, mainstream governments wouldn't have a reason to prosecute them. As far as I know, there's only one true decentralized exchange called Block DX. It may survive a lifetime as governments will be unable to interrupt its services.

As far as mixers go, we need more decentralized solutions for Bitcoin in order to completely eliminate the need for centralized mixing services. While we still have the Wasabi Wallet, and JoinMarket, the much-awaited decentralized mixer called "TumbleBit" is still in active development and not ready for mainstream use. People will either need to rely on privacy coins completely (Monero, Grin) or trade Bitcoin in a P2P manner to prevent suspicion from the government (or they could use Wasabi Wallet while they're at it). Once TumbleBit is ready for mainstream use, you could expect people to use Bitcoin more thoroughly for privacy-centric transactions (as I believe it's the best solution around for privacy).

The current actions of the US government is just the beginning, as other countries will follow in eliminating centralized mixers from existence. Thankfully, we have decentralized solutions for preserving our privacy no matter what the government's efforts will be. The recent news should have no effect whatsoever in Bitcoin's growth within the mainstream world. Sooner or later, governments worldwide will realize that their efforts in diminishing Bitcoin's growth/usage will be in vain, leaving them with no choice but to join the "monetary evolution". India has already lifted its ban related to Bitcoin and other cryptocurrencies' usage within the country. Which means that countries will become more friendly to crypto and Blockchain tech as time goes by. Just my thoughts

[kemoglo]

I definitely expect the US to crack down on mixers, I'm surprised they haven't been putting backdoors or creating their own to trace hackers when they mix funds after a big crime. I expect the US to keep this up and it being one of their large efforts they were discussing earlier this month.

The title of the article is really poor, does give an impression that every mixer will get a special uber ride to jail. But the reality is that the guy made a service specifically to move around black markets, it gave me the impression that if you're not actively promoting illegal activities you should be in the clear if you want to use mixing platforms. However, I do see govts kinda don't want people to be completely off the grid anyway, and this could be used as a premise for future trials to eventually crack down on all efforst to fully anonimyze your funds, and that's what I think should be worrisome. But only time will tell.

[charlenea13]

I unquestionably anticipate that the US should take action against blenders, I'm amazed they haven't been putting indirect accesses or making their own to follow programmers once they blend assets after a serious wrongdoing. I anticipate that the US should keep this up and it being one among their enormous endeavors they were talking about prior this month.