Bitcoin mixing is NOT money laundering, per se

[BlackHatCoiner]

“More broadly, the Treasury Department is aggressively combatting illicit use of all aspects of the CVC ecosystem by terrorist groups, including Hamas and Palestinian Islamic Jihad.”

"Never leave a good crisis to waste".

This is attacking our privacy and Bitcoin altogether. It will push everything decentralized. If I'm aware that centralized exchanges will be forced to classify mixed coins as funding terrorism, then I'd absolutely not risk it. The bill is clearly dystopian, but I didn't expect more from not technically competent politicians; every coin is potentially originating from what this article deems as mixing. What are they going to do? Completely ban bitcoin? I'm looking forward to see how this goes.

[1714227025]

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[1714227025]

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[stadus]

It's true that mixers aren't designed for money laundering, but due to their potential for obfuscating transactions, people often assume they are used for that purpose. I wonder how many mixers have been shut down or had funds seized by the government. Unfortunately, these actions can tarnish the reputation of the entire industry, if we can even call it that.

However, those who have a good understanding of Bitcoin know that it's not completely anonymous anymore. Once the source address is known, it becomes easier to trace transactions associated with a specific account. There are individuals who highly value their privacy, especially if they hold a substantial balance in their wallet. They don't want their funds to be easily traceable. That's where mixers come into play, offering a way to enhance privacy. Still, it's important to note that mixers can't prevent malicious actors from using them, as mixers don't typically investigate the source of funds.

In my quest to understand more about mixers, I did some research, and here's what I found.

Are cryptocurrency blenders legal?

Crypto mixers are not inherently illegal, though they are used for illegal activity. According to a July report from Chainalysis, cryptocurrency mixers are a “go-to tool for cybercriminals dealing in cryptocurrency” and illicit addresses account for nearly a quarter of funds sent to mixers since January.
In the U.S., the Financial Crimes Enforcement Network (FinCEN) considers mixers to be money transmitters under the Bank Secrecy Act (BSA) that need to be registered and meet certain requirements. Chainalysis, however, noted in its report that it is “not aware of any bitcoin or Ethereum mixers currently following these rules.”

https://www.coindesk.com/learn/are-crypto-mixers-legal/

The way I understand it, they want mixers to comply with specific requirements before they can be considered legal. However, are there any mixers currently in operation that are legal?

[o_e_l_e_o]

This is attacking our privacy and Bitcoin altogether.

This.

This isn't an attack against mixers - this is attack against bitcoin itself, against privacy itself. Here is how they are defining "mixing" for the purposes of this report:

The term “CVC mixing” means the facilitation of CVC transactions in a manner that obfuscates the source, destination, or amount involved in one or more transactions, regardless of the type of protocol or service used, such as:

(1) pooling or aggregating CVC from multiple persons, wallets, addresses, or accounts;
(2) using programmatic or algorithmic code to coordinate, manage, or manipulate the structure of a transaction;
(3) splitting CVC for transmittal and transmitting the CVC through a series of independent transactions;
(4) creating and using single-use wallets, addresses, or accounts, and sending CVC through such wallets, addresses, or accounts through a series of independent transactions;
(5) exchanging between types of CVC or other digital assets; or
(6) facilitating user-initiated delays in transactional activity.

This definition excepts the use of internal protocols or processes to execute transactions by banks, broker-dealers, or money services businesses, including VASPs, that would otherwise constitute CVC mixing, provided that these financial institutions preserve records of the source and destination of CVC transactions when using such internal protocols and processes, and provide such records to regulators and law enforcement, where required by law.

This essentially makes illegal everything except fully KYCed bitcoin held on centralized exchanges which report every single deposit, trade, and withdrawal to the US government. Mixers fall under (1). Coinjoins fall under (2). Casinos and sportsbooks fall under (1). Any non-KYC exchange falls under (1) and (5). Any kind of decentralized or peer to peer trading falls under (5).

And most importantly, simply owning your own coins, holding them in your own wallet, and using them as you like falls under (3) and (4). "Creating and using single-use addresses", for fuck sake! You know, the entire way bitcoin is supposed to be used in the first place.

This needs fought against, hard.


Re-reading the proposal in more depth, and here's another piece worth highlighting:

FinCEN’s analysis of the top 10 CVC mixers by volume per commercially available data determined that approximately 33 percent of all deposits as of August 2022 were attributed to high risk sources, with 13 percent of all deposits coming from known illicit activities.

In August 2022, FinCEN analyzed 10 mixers, finding that these services processed more than $20 billion in total volume between January 2011 and August 2022. The majority of this total occurred between January 2021 and August 2022. FinCEN assessed what sources constituted high risk and illicit activites based on commercial source attributions of entities.

So $20 billion in volume over a 12 year period, 13% of which was from illicit activities. So a grand total of $2.6 billion of illicit money over 12 years. Let's put that in to context. Danske bank laundered $230 billion through their branch in Estonia. Wachovia laundered $390 billion for drug cartels. Standard Chartered laundered $265 billion for Iran and other sanctioned nations. 18 of the world's biggest 20 banks have been fined for money laundering - and these are only the cases we know about. By FinCEN's own research (which just so happens to be a black box like all bullshit chain analysis - I wonder why? ), a single money laundering incident involving a single fiat bank is responsible for more than 100x all illicit mixer use over the last 12 years. Once you combine the hundreds of fiat bank money laundering incidents, then this $2.6 billion attributable to cryptocurrency becomes completely irrelevant.

Ask yourself again why they care about this minuscule fraction so much while turning a blind eye to the fiat banks, which are multiple orders of magnitude worse.

[franky1]

This is attacking our privacy and Bitcoin altogether.

This.

This isn't an attack against mixers - this is attack against bitcoin itself, against privacy itself. Here is how they are defining "mixing" for the purposes of this report:

The term “CVC mixing” means the facilitation of CVC transactions in a manner that obfuscates the source, destination, or amount involved in one or more transactions, regardless of the type of protocol or service used, such as:

(1) pooling or aggregating CVC from multiple persons, wallets, addresses, or accounts;
(2) using programmatic or algorithmic code to coordinate, manage, or manipulate the structure of a transaction;
(3) splitting CVC for transmittal and transmitting the CVC through a series of independent transactions;
(4) creating and using single-use wallets, addresses, or accounts, and sending CVC through such wallets, addresses, or accounts through a series of independent transactions;
(5) exchanging between types of CVC or other digital assets; or
(6) facilitating user-initiated delays in transactional activity.

And most importantly, simply owning your own coins, holding them in your own wallet, and using them as you like falls under (3) and (4). "Creating and using single-use addresses", for fuck sake! You know, the entire way bitcoin is supposed to be used in the first place.

3 & 4 is not about just having wallets or addresses!!! (your again going back to your old group-speak chants that just being a node is being made illegal(facepalm))

its actually about the activity to then coin-hop funds down a path of multiple transaction taints which then make it appear funds moving along those addresses all belonging to the same wallet. thus doing a suspicious money shuffling (shell game) procedure that normal people dont do

EG if a VASP(exchange) had flagging tools that knows funds from address A are blacklisted.
and address A owner just moves funds to address B C D E before then depositing thinking a 4 taint hop to E address is sufficient taint distance to declare clean. however this would not to the VASP mean its sufficient distance to declare clean, just via taint hopping. because the very act of taint hopping becomes suspicious in of itself

the way they would vasp/services monitor or flag something as taint hopping is the way services did years ago. when people would spam every block moving a certain amount of funds to new addresses where in logical common sense real world utility, funds would not move to new addresses every 10 minutes several times

a tip for you:
if you can learn what their descriptors of suspicious activity really mean. you lot of privacy queens can then advise/design services that avoid these methods, thus not get spotted
so learn what these descriptors/methodologies actually mean, to learn how not to get highlighted

The term “CVC mixing” means the facilitation of CVC transactions in a manner
(5) exchanging between types of CVC or other digital assets; or

This definition exempts the use of internal protocols or processes to execute transactions by banks, broker-dealers, or money services businesses, including VASPs, that would otherwise constitute CVC mixing, provided that these financial institutions preserve records of the source and destination of CVC transactions when using such internal protocols and processes, and provide such records to regulators and law enforcement, where required by law.

This essentially makes illegal everything except fully KYCed bitcoin held on centralized exchanges
..
Any non-KYC exchange falls under (1) and (5). Any kind of decentralized or peer to peer trading falls under (5).

that part, just adds more weight that exchange services should be regulated to avoid being treated as suspicious/illegal
(EG localbitcoins.com users got slapped around alot years ago for running exchange services without a money transmitter MSB licence, same will be said for DE-FI swap services..)

and big tip for you. in combination with other regulations.. it does not make just being  bitcoin node/bitcoin wallet owner/btc holder illegal.. but it does mean being an LN router DE-FI service using your own involvement to facilitate a payment for someone else for a fee, becomes a factor you should be aware of.. if you participate in shuffling(shellgame) value for others for a fee.. then if your not a regulated service that registered for a money transmitter/MSB licence to be verified as a VASP then expect problems

[bettercrypto]

Bitcoin mixing (Bitcoin mixing or Bitcoin tumbling) is a technique used to hide the identity of Bitcoin users. When using Bitcoin, transactions are publicly stored on the blockchain and can be tracked by anyone. The use of Bitcoin mixing helps to mask users' Bitcoin addresses and makes it harder to track transactions. However, the use of Bitcoin mixing can also be used to launder money and the funds are used to fund illegal activities. Therefore, the use of Bitcoin mixing completely depends on the intended use of the user. If used correctly, Bitcoin mixing is not money laundering.

And unfortunately our behavior is at the root of the problem, I find that people love to blame products when it is the user who is responsible for that behavior. What I find funny is that the law enforcement agencies keep pretending that they only see the wrongdoing of these products and blame it.

Well, to be honest, as far as I understand, If you look at him literally, the mixing of bitcoin actually hides the identity of bitcoin users and hides their addresses to make it difficult to see them. That means he can really be used for money laundering.

In short, it depends on the person holding the bitcoin, or it depends on the motive or intention of the person holding the bitcoin. I'm not saying that everyone who uses Bitcoin mixing is doing money laundering; that's not what it means. Maybe someone else is actually doing it.

[BlackHatCoiner]

This essentially makes illegal everything except fully KYCed bitcoin held on centralized exchanges which report every single deposit, trade, and withdrawal to the US government.

I guess the Bitcoin network will be illegally operated in the US if this bills passes, as mining bitcoin falls under (1). 

Ask yourself again why they care about this minuscule fraction so much while turning a blind eye to the fiat banks, which are multiple orders of magnitude worse.

It is pretty easy to pinpoint how bad bitcoin laundering is when you don't get lobbied there. 

As I said, I'm looking forward to seeing how this will work. Blockchain analysis is a scam and can be totally inaccurate. Are you going to accuse someone for being a terrorist just because they happened to receive mixed coins? Are you going to force everyone sharing their TXID with the government whenever they buy/sell bitcoin? Please explain me how this works, don't just give me this giant piece of theoretical horseshit.

[NotATether]

In my quest to understand more about mixers, I did some research, and here's what I found.

Are cryptocurrency blenders legal?

Crypto mixers are not inherently illegal, though they are used for illegal activity. According to a July report from Chainalysis, cryptocurrency mixers are a “go-to tool for cybercriminals dealing in cryptocurrency” and illicit addresses account for nearly a quarter of funds sent to mixers since January.
In the U.S., the Financial Crimes Enforcement Network (FinCEN) considers mixers to be money transmitters under the Bank Secrecy Act (BSA) that need to be registered and meet certain requirements. Chainalysis, however, noted in its report that it is “not aware of any bitcoin or Ethereum mixers currently following these rules.”

https://www.coindesk.com/learn/are-crypto-mixers-legal/

The way I understand it, they want mixers to comply with specific requirements before they can be considered legal. However, are there any mixers currently in operation that are legal?

If mixers have to fully identify their users before they can use them, then what the hell are they good for?

[thecodebear]

To all advocates of anti-anonymous Bitcoin and Internet tools: Bitcoin mixing is NOT money laundering, per se.

I think that should be obvious to everyone. Money Laundering involves doing something with money from illegal activities. Mixing is a tool and has nothing to do with illegal activities. It's a tool that can be used by anyone, including money launderers, but has nothing to do with money laundering itself. Just like if you own a knife that doesn't mean you committed murder, though you could use it for murder.

[HmmMAA]

Ah yes the blanket statement that all politicians and fiat bosses use to annihilate a section of cryptocurrency they don't like.

They conveniently ignore the fact that their own banks are 100x more guilty for money laundering and terrorist financing at scale.

So true , let's make bitcoin as equally or even more guilty to prove that we are by far better than them .

[BlackHatCoiner]

So true , let's make bitcoin as equally or even more guilty to prove that we are by far better than them .

Software is not guilty. People are. And there will always be people who will evade the law provided they're privacy protected; which, as I previously mentioned, does not apply in the reverse scenario.

If you want to turn Bitcoin into a communist, privacy invading tool which provides zero support for future softforks, you can make your own client and see who follows. I believe no sane person wants Stalin-coin, but you have the freedom to use the code.

Edit: Friendly reminder that off-topic, whiny posts regarding BSV will be deleted.

[bbc.reporter]

“More broadly, the Treasury Department is aggressively combatting illicit use of all aspects of the CVC ecosystem by terrorist groups, including Hamas and Palestinian Islamic Jihad.”

"Never leave a good crisis to waste".

This is attacking our privacy and Bitcoin altogether. It will push everything decentralized. If I'm aware that centralized exchanges will be forced to classify mixed coins as funding terrorism, then I'd absolutely not risk it. The bill is clearly dystopian, but I didn't expect more from not technically competent politicians; every coin is potentially originating from what this article deems as mixing. What are they going to do? Completely ban bitcoin? I'm looking forward to see how this goes.

I very much agree. This is not only an attack on mixers, this is also an attack on the whole cryptospace. The broad wording under the new rules was speculated to also include DeFi and other types of decentralized swaps.

Presently there might be 300 million wallets that might be affected and the owners of those wallets might have their personal information reported. Be careful on using a mixer then sending coins to a centralized exchange or a gambling site where you have KYC.



In the course of compliance with special measure one, covered financial institutions may be required to submit reports and retain records containing certain unique identifiers108 and other personal information109 of a party, or parties, to a CVC mixing-exposed transaction.

Based on a recent report, this could affect more than 300 million users of unhosted CVC wallets insofar as a user’s personal information may be reported if their wallet is deemed by a covered financial institution to be involved in a covered transaction. Because there is no restriction on the number of wallets an individual may have, this number may overestimate the number of unique individuals whose personal information may be required.

To the extent that previously reported estimates regarding the distribution of CVC mixer users by type—privacy-oriented versus abusers of anonymity—are usable for inference, special measure one could require the reporting of personal information in connection with up to approximately 66 (87) percent of CVC mixer deposits in the absence of any other identifiable connection to high risk (illicit) activity.

Source https://www.fincen.gov/sites/default/files/federal_register_notices/2023-10-19/FinCEN_311MixingNPRM_FINAL.pdf

Also, if the American government wanted to really crackdown on terrorist funding and moneylaundering, they should begin with the biggest banks in Europe and sanction them hehehe.

[EarnOnVictor]

Bitcoin mixing (Bitcoin mixing or Bitcoin tumbling) is a technique used to hide the identity of Bitcoin users. When using Bitcoin, transactions are publicly stored on the blockchain and can be tracked by anyone. The use of Bitcoin mixing helps to mask users' Bitcoin addresses and makes it harder to track transactions. However, the use of Bitcoin mixing can also be used to launder money and the funds are used to fund illegal activities. Therefore, the use of Bitcoin mixing completely depends on the intended use of the user. If used correctly, Bitcoin mixing is not money laundering.

And unfortunately our behavior is at the root of the problem, I find that people love to blame products when it is the user who is responsible for that behavior. What I find funny is that the law enforcement agencies keep pretending that they only see the wrongdoing of these products and blame it.

Well, to be honest, as far as I understand, If you look at him literally, the mixing of bitcoin actually hides the identity of bitcoin users and hides their addresses to make it difficult to see them. That means he can really be used for money laundering.

In short, it depends on the person holding the bitcoin, or it depends on the motive or intention of the person holding the bitcoin. I'm not saying that everyone who uses Bitcoin mixing is doing money laundering; that's not what it means. Maybe someone else is actually doing it.

You are on point my friend, human beings are too desperate and hellbent, and they use any available loopholes to perpetrate their deeds. Bitcoin itself is good, and so is the mixing of the coin (after all, it enhances privacy and anonymity where the primary design of the coin could fail).

But mixers also create avenues for bad actors, 100% of the people who use mixers can't be using them for good. We can suspect that with the cracks in hundreds of millions of dollars by various governments so far.

People are actually using mixers to perpetrate their evil, regardless, we can't blame the coin, neither can we blame the mixers, let the deeds of those who use them judge them for whatever thing they use them for (good or evil).

[o_e_l_e_o]

Be careful on using a mixer then sending coins to a centralized exchange or a gambling site where you have KYC.

Wrong message.

What we should be saying is "Be careful using centralized exchanges", or better yet "Never complete KYC anywhere." Mixing is not the problem. Coinjoins are not the problem. If anything, knowing how draconian the government is being with trying to surveil you and your coins, you should be mixing and coinjoining more, not less. Stay private, and stop using services which sell out your privacy at the drop of a hat and work in cahoots with your government to surveil, monitor, and control you.

You are either free, or you comply. You can't be both.

But mixers also create avenues for bad actors, 100% of the people who use mixers can't be using them for good.

So does the internet. Shall we ban that too?

As the figures I've outlined above show, even by FinCEN's own research, the amount of illicit money being moved through mixers is absolutely minuscule. Like, we are talking less in the last decade than fiat banks launder in a few days.

[franky1]

Be careful on using a mixer then sending coins to a centralized exchange or a gambling site where you have KYC.

Wrong message.

What we should be saying is "Be careful using centralized exchanges", or better yet "Never complete KYC anywhere." Mixing is not the problem. Coinjoins are not the problem. If anything, knowing how draconian the government is being with trying to surveil you and your coins, you should be mixing and coinjoining more, not less.

VERY WRONG MESSAGE
mixers are the problem. they are literally listed in regulation as a problem. the word "mixer" does get mentioned in regulations.. so to avoid the penalties of regulations, avoid the descriptors of the regulations that can lead to you getting watched by services and then reported to authorities


the draconian rules exist.. ignoring them and doing things that are listed as getting you surveilled is not the cure to avoiding getting you surveilled

what you should be saying is "learn the draconian rules. then invent a service does the end result you are looking for, but sidesteps/does not do the listed details of the certain named thing

EG if taxi cabs are regulated.. create uber
if apple apps are regulated on applestore.. create googleplay or an apk repo

the solution is not to be EG a tax evader by ignoring tax law/pretending taxlaw does not apply... its instead to learn tax law and find the loopholes to be a tax avoider, doing things not listed in law as prohibited, regulated, monitored

there are many ways to remove taint without doing the things listed in regulations. that are not "mixers". find them, create them, use them

[pinggoki]

If mixers have to fully identify their users before they can use them, then what the hell are they good for?

This notion basically defeated the purpose of having to use a mixer but then again if mixers want to help combat money laundering, I guess it wouldn't be such a bad idea. I guess that we have to find a way where the use of mixers aren't going to lay any suspicious eye on the people that are using bitcoin mixers. Damn, the problem of malicious entities is that they're abusing the freedom that the innocent has to enjoy is such a conundrum.

[Abiky]

I think that should be obvious to everyone. Money Laundering involves doing something with money from illegal activities. Mixing is a tool and has nothing to do with illegal activities. It's a tool that can be used by anyone, including money launderers, but has nothing to do with money laundering itself. Just like if you own a knife that doesn't mean you committed murder, though you could use it for murder.

It's just like the Internet. People can use it for both good and bad things. There's nothing governments can do about it, other than enforce the rule of law whenever possible. Instead of hunting down crypto mixers, governments should hunt down people using these services for illegal activities. Not doing so tells us there are other intentions. We all know governments want to destroy crypto (or at least minimize its impact on the mainstream economy) because of its decentralized design. Especially anything that has to do with privacy. When they can't track or control financial activities, that's when you become a threat to the corrupt system empowered by banks.

I believe the future of crypto mixers lies in decentralization. The more non-custodial (decentralized) mixers there are, the harder it will be for governments to stop people from obtaining true privacy. I'm yet to see how it's possible to stop criminals from using decentralized mixers for breaking the law (money laundering, tax evasion, etc). KYC/AML is not the answer to this. We can't predict the future, so lets hope for the best. Just my opinion

[franky1]

I think that should be obvious to everyone. Money Laundering involves doing something with money from illegal activities. Mixing is a tool and has nothing to do with illegal activities. It's a tool that can be used by anyone, including money launderers, but has nothing to do with money laundering itself. Just like if you own a knife that doesn't mean you committed murder, though you could use it for murder.

It's just like the Internet. People can use it for both good and bad things. There's nothing governments can do about it, other than enforce the rule of law whenever possible. Instead of hunting down crypto mixers, governments should hunt down people using these services for illegal activities. Not doing so tells us there are other intentions. We all know governments want to destroy crypto (or at least minimize its impact on the mainstream economy) because of its decentralized design. Especially anything that has to do with privacy. When they can't track or control financial activities, that's when you become a threat to the corrupt system empowered by banks.

I believe the future of crypto mixers lies in decentralization. The more non-custodial (decentralized) mixers there are, the harder it will be for governments to stop people from obtaining true privacy. I'm yet to see how it's possible to stop criminals from using decentralized mixers for breaking the law (money laundering, tax evasion, etc). KYC/AML is not the answer to this. We can't predict the future, so lets hope for the best. Just my opinion

ok here is a game for you.. you know what mixers do for innocent people.. now pretend the word MIXER was never invented. invent another work that doesnt meet the details of regulations but produces same end result for the user..

each time you keep saying "mixers" have to continue. is continuing the issue..
uber replaced taxi cabs.. so think outside of the box of promoting MIXERS

[Z-tight]

but then again if mixers want to help combat money laundering, I guess it wouldn't be such a bad idea. I guess that we have to find a way where the use of mixers aren't going to lay any suspicious eye on the people that are using bitcoin mixers. Damn, the problem of malicious entities is that they're abusing the freedom that the innocent has to enjoy is such a conundrum.

The work of mixers and CoinJoin isn't to combat money laundering, it is to provide better privacy for people who use BTC. Kyc and privacy are mutually exclusive, so you cannot offer privacy and at the same time collect people's data.

Take note that the government and anti bitcoiners are trying very hard to spread the idea that BTC and privacy implementations like mixers and CoinJoin are a big problem in terms of money laundering and the movement of illicit funds, but it is not true, there are other payment methods that are more attractive to money launderers and many people do not even know because of what the media tells them.

[fokinlipat]

If there was really nothing suspicious about the service mentioned in OP, government must not have taken action against them. When something gets out of hand, then it becomes necessary for government to take action and this is what happened in case of chipmixer.

[gunhell16]

Be careful on using a mixer then sending coins to a centralized exchange or a gambling site where you have KYC.

Wrong message.

What we should be saying is "Be careful using centralized exchanges", or better yet "Never complete KYC anywhere." Mixing is not the problem. Coinjoins are not the problem. If anything, knowing how draconian the government is being with trying to surveil you and your coins, you should be mixing and coinjoining more, not less. Stay private, and stop using services which sell out your privacy at the drop of a hat and work in cahoots with your government to surveil, monitor, and control you.

You are either free, or you comply. You can't be both.

But mixers also create avenues for bad actors, 100% of the people who use mixers can't be using them for good.

So does the internet. Shall we ban that too?

As the figures I've outlined above show, even by FinCEN's own research, the amount of illicit money being moved through mixers is absolutely minuscule. Like, we are talking less in the last decade than fiat banks launder in a few days.

It is true that Bitcoin mixing is not money laundering, but it can be a tool or instrument to use in money laundering. There will be no money laundering activity if no one thinks to use the Bitcoin mixer for his bad intentions or purpose here. So what others said is correct: it depends on the intention of the bitcoin holders.

Even though there was no Bitcoin back then, there was money laundering happening in different countries. Even though there was no internet back then, there was money laundering happening already, right? The others even go through the black market, as far as I know. So, it means that other money launderers saw that they could use or abuse the Bitcoin mixer for money laundering activity. Though, this is not the main purpose of Bitcoin Mixing.