The absolute insanity Congress is writing now...

[d5000]

In general, I share the concerns laid out in the OP.

There's still a difference between what is written in this FinCEN proposal, and "considering all re-using of addresses money laundering". Basically what they seem to want is for financial institutions to have to report customers engaging frequently in such actions and are already suspicious to do mixing in jurisdictions outside the US, what is already known in AML regulation as a "risk based approach".

There's also a part where they talk talk about possible legitimate mixing usage:

At the same time, this special measure will minimize the burden upon financial institutions and those who seek to use mixing for legitimate purposes.

FinCEN proposal from October 2023

So at least they don't say that every mixing is illegal or suspicious (PMLC - "primary money laundering concern").

Anyway I'm not as optimistic as @stompix here. The broad wording could lead to a lot of false positives, and would also create a nightmare for Bitcoin's fungibility if this data is leaked and shared. I think if the Human Rights Foundation (that's the cited tweet coming from) is criticizing this, then it's serious.

[Belarge]

Jj

Sometimes I sit and think, what if the privacy of Bitcoin was on Monero's level? What if Monero was the first cryptocurrency? What would they do against it?

Bitcoin is important and have been in strict domination in these past years. Montero is also one of the promising projects but it doesn't mean we should overhyped them, rather focused more on the current projects that have set in fruitful evidence in placr. We can only make imaginations about things but they don't come to pass because there's always hits to accomplish in the system.

[larry_vw_1955]

its about classifying mixing as mixing.. whereby mixers use single use addresses and send value through a series of transactions
(appearing as spam spending multiple times in a short period) to obfuscate whom is involved start middle or end

i dont understand why people want to use mixing services in the first place. but they probably shouldn't be doing it since it is shady. if you need privacy then use something meant for privacy like monero. and deal with the consequences. if there are any but don't turn bitcoin into something it's not and then make everyone have to pay...

i think that pdf document also discusses how doing things like atomic swaps is just another form of mixing. and i agree it's probably just as egregious as using mixing services because essentially that's what people probably use them for is to obfuscate the source of the funds...

[NotATether]

(D) Creating and using single-use wallets, addresses, or accounts, and sending CVC through such wallets,
addresses, or accounts through a series of independent transactions;

its not about classifying single use wallets/addresses as mixing

its about classifying mixing as mixing.. whereby mixers use single use addresses and send value through a series of transactions
(appearing as spam spending multiple times in a short period) to obfuscate whom is involved start middle or end

normal people dont spend value through a series of transactions which the coordinator has the keys for to obfuscate if the series is one coordinator or multiple participants in a chain of rapid hops
instead normal people just pay the destination in one transaction
mixing however DOES use the process of single use addresses and hops the payments through multiple transactions before getting to the intended recipient

I understand that.

But this draft conflates both of them together. It could be interpreted to mean any of these conditions being violated or multiple (or all of them).

That is why I don't think this bill is going to succeed.

Having said that, I am still strongly against this bill, and already knowing your position about mixers, this will be the only reply I'll be writing to you here about this subject.

[pinggoki]

This just shows the situation of current politicians in position. It just means that american citizens need to elect better people who can study properly about different topics and implement laws that are appropriate for the matter at hand.

As long as the government has its misconceptions about crypto or bitcoin, they are never going to be in favor of it.

As much as this is a really good opinion about US politics, you don't understand a lot about how greedy and vile these people are going to be when it comes to holding their power and position in the government, even if you want to believe that there's a fair election in the US, there's bound to be some form of manipulation so the people that doesn't deserve to be in power will be the ones that's going to get elected. There needs to be more than just banding together in the US other than choosing the right politicians to be on the position. Remember that this is also applicable to every country so make sure that you're doing it right. Regarding the stupidity of the US Congress, they're just going to make things more complicated for their people to get into cryptocurrency, I guess when you have old people that don't even know how to convert their PDFs to a Word document, you're bound to get this kind of legislation.

[davis196]

I'm glad that I'm not a US citizen and I don't live in the USA. The problem is that the USA is trying to act as an empire and impose it's legislation on other jurisdictions. If those jurisdictions don't voluntarily "bend a knee to the master" then they get punished with sanctions.
The only consequence of such legislation would be US Bitcoiners moving their BTC funds in centralized exchanges located outside the USA(I know that having a hardware wallet is better, but many people still use hot wallets). Maybe soon the hardware wallets like Ledger and Trezor will start complying with such stupid regulations and many BTC HODLers will have to move their BTC somewhere else. I hope that the Republicans will win the elections and stop this nonsense.

[stompix]

Anyway I'm not as optimistic as @stompix here. The broad wording could lead to a lot of false positives, and would also create a nightmare for Bitcoin's fungibility if this data is leaked and shared. I think if the Human Rights Foundation (that's the cited tweet coming from) is criticizing this, then it's serious.

There can't be a false positive when this is a definition and the purpose of the law targets the one that is defined there.

Let's give you an example from EU directives, in my parents' line of work, agriculture, we have this:

‘farmer’ means a natural or legal person, or a group of natural or legal persons, regardless of the legal status of that
group and its members under national law, who exercise an agricultural activity;

Now, if we apply paranoia-level distrust, by the same standard it would mean that everyone who is engaged in some agricultural activity, meaning you picking your apples will be subject to this directive, right?  And wait till you realize that by having a rabbit and since you're growing it's agricultural activity, so should I give you the list of food and banned drugs you're not allowed to treat/feed it? And since you are a farmer how you should lawfully dispose of it?

But no, let's go even further, in 2017 EU proposed a directive banning cage farming, it banned the raising of any animal in a cage unless certain dimensions would be considered, how many people landed in jail for having a parrot or a canary on their balcony? 

I understand that.
But this draft conflates both of them together. It could be interpreted to mean any of these conditions being violated or multiple (or all of them).

No, it doesn't, it gives a definition for mixing that it is a conflation of multiple activities.
Nothing in this world would be possible if not using these things, a fraudulent financial transaction to be punishable it must be defined, so what makes it an unlawful banking transaction? First, you would need to define a banking transaction but obviously, not every financial transaction is illegal, not every time someone deceives someone there is a financial transaction, but you need a complete definition for that to cover every aspect.

[dkbit98]

Now, I have seen stupid bills proposed by this house before, but this is the absolute most ridiculous piece of legislation I have ever seen.

They are surely stepping up with their crazy shit but I don't think this bill will be accepted any time soon.
I think they are creating stuff like this to shock people so that when they propose other restrictions they don't look so drastic, this is the strategy they use all the time with other law changes.

To say that not reusing an address is mixing? Man, what happens when someone only receives a payment one time and doesn't move the funds?

Should people also create new bank accounts every time they receive new fiat payment?  
I think people seriously need to think about making drastic changes with this rotten government model we live today, but I am sure Trump will ''fix'' this in next election circus show.

[d5000]

There can't be a false positive when this is a definition and the purpose of the law targets the one that is defined there.

As far as I have understood the proposed regulation, that's what FinCen expects from covered financial institutions (such as banks or exchanges):

- regularly conduct blockchain analysis on the CVC (=cryptocurrency) funds they can connect to their customers (e.g. via deposits and withdraws)
- if they suspect that a customer is engaged in CVC mixing, then reporting the customer and the associated transactions.

The problem is just that the definition is not precise enough, and that blockchain analysis itself can fail or lead to false positives. Let's suppose we have a customer of an US exchange which has bought Bitcoins on a P2P exchange to an entity which later was linked to Iran or North Korea (due to blockchain analysis). The customer does use CoinJoins to protect his privacy. So we have here all ingredients present that the exchange must report the customer and his transactions - even if the customer didn't at all have any bad intention: he has interacted with a suspicious entity, and he has done CoinJoins which are a subclass of the transactions which the FinCEN deems as "CVC mixing".

Of course that doesn't mean that legal action will be taken against this person, but the fact that all his activity will have to be reported, means that a lot of people become "suspicious" basically only due to best practices like CoinJoining or using single-use addresses in combination with using P2P exchanges (where as a private person it's very difficult to know if you're interacting with a criminal, although of course there are some red flags, like a very cheap price).

In fact, they acknowledge the problem themselves in the section "(C) Clients of Primary Affected Parties", where their argument is that if a privacy-oriented person is reported, then nothing may happen and their data will be well protected  

If you have another interpretation of the FinCEN proposal I'm eager to hear yours But please let's stay close to the text of the proposal.

There is also this opinion by the Samourai lawyers, very technical but interesting for those wanting to see the details of the criticism.

[stompix]

If you have another interpretation of the FinCEN proposal I'm eager to hear yours But please let's stay close to the text of the proposal.

Oh, it's pretty simple
Is someone trying to obfuscate the source and the destination of the funds? Then
A- is he using multiple one-use addresses to transfer those coins > he is mixing it
B- is he using only one address that he has used 1000 times before? he is not mixing his funds

There is also this opinion by the Samourai lawyers, very technical but interesting for those wanting to see the details of the criticism.

Apart from the fact that I would not take advice from the lawyers of a guy who landed in jail based on their advice, even they say the same thing, it's a tentative definition encompassing activities. But, let's make it far easier, how would you define mixing transactions if it were up to you to write a law about it ? I'm pretty sure you're going to end with the same text!

[bluebit25]

As arrogant as they talk about how to control a decentralized sector, please don't introduce things that they just want to lock us up to manage. The meaninglessness of the imposition only increases contradictions and makes more people turn away and not trust what they do.

I think about things that in the future if they continue to express their attitude of wanting to control bitcoin (crypto), perhaps it will develop in a way that ignores their involvement, and needs to be the way they exist. It's just a formality that doesn't help create harmony in the crypto community.

[kentrolla]

This is why politicians desperately need to learn how Bitcoin/Crypto works. You can't write legislation that makes any sense when you don't have a clue how the thing in question works. These ideas are coming from not understanding that cryptocurrencies work completely differently from banks.

The industry needs legislation, but first Congress needs to a basic understanding of how this stuff works. They need like a two day bootcamp to get them up to speed on the basics, then they'd laugh at these stupid ideas.

Same thing has happened in India which once had highest number of traders and now Binance is banned along with all the other foreign exchanges to pressurise them to implement so called law of land to tax 30% on gains and 1% TDS on every transactions.

The problem is they don't have any idea about crypto or Bitcoin and jump to conclusions with their limited knowledge which is too dangerous and also they are so cruel that even if they understand still they will go against it since they don't have control over it.

[d5000]

Is someone trying to obfuscate the source and the destination of the funds?

And how exactly would you know that?

On the blockchain you can only see that this user only uses single-use addresses, not his "intent".
You can now pay a chain analysis firm to see if they can link them together. You can then suspect that if he made internal transfers (i.e. within his own addresses), then he's "trying to obfuscate source and destination". But that would mean that you cannot make even basic privacy improvements, not even UTXO consolidations, without being suspected as "obfuscating".

how would you define mixing transactions if it were up to you to write a law about it ? I'm pretty sure you're going to end with the same text!

The problem is not so much the "mixing" definition. There should be an exact definition when these transactions become suspicious to be linked with criminal entities, and that's missing in the FinCEN proposal. If I overlooked it then please quote it Thus, the consequence will be that any "internal wallet transactions" of any customer, which are linked with coins that the chain analysis firms consider even slightly "tainted" will have to be reported by the businesses covered by this measure (banks, exchanges ...). I guess that's a lot of customers they'll have to report.

[darkangel11]

Now, I have seen stupid bills proposed by this house before, but this is the absolute most ridiculous piece of legislation I have ever seen.

To say that not reusing an address is mixing? Man, what happens when someone only receives a payment one time and doesn't move the funds?

Also what is stopping people from creating a new transaction that sends the UTXO from the address back to itself in a new UTXO?

They don't even know anything about how crypto works and they are already greedy and trying to extract taxes from Americans and apparently non-Americans too since there is no way you can differentiate between them or force an open-source software to give you an ID.

Especially that this is done automatically, often without the user even knowing that the unspent change is stored on another address within the same wallet.
AFAIK you cannot blame someone for this and treat him like a criminal if there was no intent to break the law, even if such law exists.
ALso, who's there to blame if it's the software that does it automatically for the user? Ban all bitcoin software when coinbase is using that software to store bitcoin for blackrock?

[franky1]

The problem is not so much the "mixing" definition. There should be an exact definition when these transactions become suspicious to be linked with criminal entities,

there is

mixing is not illegal in all cases/uses due to criminal use specifically.. because criminal use specific mixing is then called LAUNDERING
so theres your definition of criminal use of mixing... LAUNDERING


much like the use of funds sent through alot of hops of addresses(series of transaction) in quick succession is called TUMBLING
and when using single use addresses+tumbling is then defined as a class of mixing*
regulators for years have listed tumbling plus other features as suspicious red flags that raise the level of suspicion threshold to be worth of investigating as mixing

mixing is not default illegal due to launder as-is from the start. its just suspicion rated as linked to possible laundering.. it is however possibly illegal for other reasons which are other reasons of needing suspicious investigation
for instance IF the coordinator is accepting a direct fee for operating the service and processing payments on behalf of other users.. because they then become a money service business and when operating without a money service business licence and not complying with the regulations of MSB, thats when mixers get caught by authorities for reasons of operating as a unregistered MSB

there is many forms of regulatory guidance on these which regulated services follow and form their own operating procedures to comply. they even have designated compliance officers too.

...
personal thoughts the whole topics thing..
of the use of single use addresses AND transacting through a series of addresses should have remained in the definition of 'tumbling'..
but it seems government just want to attach it to the tagline of mixing..
which should only apply if multiple inputs from different utxo's are then tumbled together

EG
changing
Creating and using single-use wallets, addresses, or accounts, and sending CVC through such wallets,
addresses, or accounts through a series of independent transactions;
to
Creating and using multiple single-use wallets, addresses, or accounts, and sending CVC through such wallets,
addresses, or accounts through a series of independent transactions;

..
i think d5000's issue with "please spoonfeed me summarised list in my hand of the definitions' is more about how these clickbait tweets of emotional twitter users that have not done full research, get their own tweets misinterpreted and then comes the clumsy misrepresentations of lots of people then redefining things and forming their own opinions..

however if people done better research on the actual source data. they will see the topics first post vs the definition that even stompix was able to display are different and where in this topic stompix shows he done more research than NotATether

NotATether wanted to take a emotional random blogpost of some rando's opinion and try to clickbait it into presuming that just using single use addresses is mixing..

advice to NotATether, when reading posts, tweets, blogposts.. try to look for the source and learn whats misrepresented opinion or whats fact

[larry_vw_1955]

there is

mixing is not illegal in all cases/uses due to criminal use specifically.. because criminal use specific mixing is then called LAUNDERING
so theres your definition of criminal use of mixing... LAUNDERING

i'm genuinely curious why mixing is such a big deal for honest people. why do they even need to use it? give me one good use case.

much like the use of funds sent through alot of hops of addresses(series of transaction) in quick succession is called TUMBLING

honest people don't need to "tumble" their bitcoin.

NotATether wanted to take a emotional random blogpost of some rando's opinion and try to clickbait it into presuming that just using single use addresses is mixing..

that blogpost was biased towards trying to get people to make a donation to coincenter.org so in my opinion the entire thing had ulterior motives...as i had previously mentioned.
 

[d5000]

give me one good use case. [...] honest people don't need to "tumble" their bitcoin.

1) You ask for donations for a project publishing a Bitcoin address somewhere (forum, blog etc.), for example for an open source software project, and then want to buy something with them. You don't want people to see to which merchant you bought (this can be sometimes done with chain analysis).

2) You live in a dictatorship and try to set up an opposition movement. There are people willing to donate to you. Both the donors and you as the movement leader will need a mixer or another privacy enhancing tech to stay undetected. More than 50% of the world population lives in countries where opposition activity can be dangerous, so this does not only apply to few people.

3) You are not living in a dictatorship, but are an activist for a group which does something which can be seen as controversial even if it's fully legal. For example, you could be part of a minority religious group, a LGBT activist group, a group fighting against excessive ecologism, a pro-israel or pro-palestine group, a Feminist or Masculist or Trans group, or even somebody fighting against some strange conspiracy etc. (you see I made an effort to not concentrate on a single "political current" here ) It's none of the business of anybody to know the money flows of the persons in these groups as long as they don't do anything illegal, but they are often confronted with doxxing, threats and hatred, so they have more reasons to care about privacy as much as possible.

4) You're living in a democracy which suddenly, e.g. due to an election where a populist wins, your authorities become much less trustable. Happened in a lot of countries (Venezuela, Tunisia, Russia 20 years ago, maybe even India ...). So everything in use case 2 is also valid for you, even if you're only slightly sympathysing with opposition movements.

I'm sure that there are many, many more use cases.

For 1) you could in theory also use a centralized exchange, for 2) it's not an option at all because you can't trust your authorities, and for 3) it may be not a good idea either, depending on the subject and the country. But what if you simply don't want to deal with KYC? KYC can be considered dangerous because it can enable criminals to steal your identity. Some, including me, are in some cases accepting that risk. But it's perfectly legitimate to outright reject it.

And don't forget that one of Bitcoin's USPs is censorship resistance. This is above all crucial for the use case 2, but for all other cases too. You can't have censorship resistance if Bitcoin becomes less fungible due to all the tainting.

[PrivacyG]

i'm genuinely curious why mixing is such a big deal for honest people. why do they even need to use it? give me one good use case.

Why do you need to close the door to the bathroom stalls when ever you go to a public toilet?  Is there any thing you are hiding or why are you so secretive?  It is not such a big deal for honest people, we all poop and we all have a butt too.  Why use the door?  Keep it open!

My answer to your silly question is very simple.  Privacy.  It is one very good cause.

[franky1]

there is

mixing is not illegal in all cases/uses due to criminal use specifically.. because criminal use specific mixing is then called LAUNDERING
so theres your definition of criminal use of mixing... LAUNDERING

i'm genuinely curious why mixing is such a big deal for honest people. why do they even need to use it? give me one good use case.

however when using things that are regulated as mixing, they become instances of people intently trying to hide for many many reasons.. the funny part is when people appear elusive and try to hide, they actually get spotted and scrutinised more..

its like a bunch of people walking down mainstreet in public, people walk normally, pass-by and no one looks twice..
however the guy jutting around, dodging other people, hiding behind bushes, crawling behind parked cars, looks odd and people start to take notice.. this makes people then look more intently at the guy trying to hide.. thus defeating his own purpose

people can have many legal and lawful reasons to hide, some are just to avoid the wife finding out about the sex doll he bought with money he should have used to pay for her medical bill.. there are many innocent reasons people want to hide their funds from family or business partners that are not illegal but just embarrassing.. however if they want to do it right they need to learn how to do it properly to not cause more problems or get spotted more easily than just the normal way

i have never used a mixer or done tumbling for my main stash. yet no one can link my forum profile name to my stash even after many many years, i hide in plain sight by not doing the stupid things that get me noticed.

...

the whole scheme that CRIMINALS do to promote that normal people should mix too, is simple..
criminals want normal peoples clean coins.. and the only way to get clean coins is con/scam normal people into thinking the normal people should use mixers.. and pretend that its ok for normal people to receive dirty coins..
however the hypocrisy of this is.. if its ok and not going to cause issues for handling dirty coins.. then why would criminals be trying so hard to offload their dirty coins

...

as for the whole classifications of definitions.. this is where money services regulated and delegated to monitor their customers funds movements, the businesses dont just have a yes/no of "illegal" they have a score chart of suspicion.. where certain events, features and actions are rated as a level of suspicion  which triggers internal investigation by the money service, which then they would be eyes-on looking closer if it reaches a threshold. and if they then find more info that raises the level then it escalates
coins from a dark market has a high threshold
just mixing has a lower level
just tumbling has a lower level
just single use address, by itself has a lower level.

however the culmination of different features can add up.
but just single use+tumbling wont result in a court order to allow authorities to request all customer data of a money services customer
its a culmination of lots of data and rating that raises things to a suspicion rating of a crime they can link the customer too, to then trigger authorities to investigate and if they have enough to suspect a crime then they ask the courts for a data access request order to get all info about a money service customer or/and freeze that customers assets and access to the service

..

bitcoin is a public ledger.. there is no expectation of privacy in public
money(traditional) has never been expected to be private, nor property of the bearer. its always been scrutinised by taxmen for centuries and traditional money was patent and licenced by the kingdoms/governments of the time

bitcoin for a short period had a experience of not being defined as money/currency, and instead treated as private property(2009-2013)
however since 2014 bitcoin was treated as a currency and as such countries governmental and law authorities started gaining jurisdiction on the use of bitcoin, mainly at the gateways back to fiat, such as money service businesses

[larry_vw_1955]

Why do you need to close the door to the bathroom stalls when ever you go to a public toilet? 

because it is an accepted societal norm and not only a norm but an expectation and if you don't do it you can get in to trouble. it is not an accepted or expected societal norm that i am to hide my bitcoin transactions.

Is there any thing you are hiding or why are you so secretive?  It is not such a big deal for honest people, we all poop and we all have a butt too.  Why use the door?  Keep it open!

that's not how modern day society works. there would be a stigma about someone that kept the door open. and other people would think there is something wrong with them.

My answer to your silly question is very simple.  Privacy.  It is one very good cause.

privacy in pooping is not the same basic human right as privacy in spending money though. big difference. if you dont understand that then i don't know... maybe read franky's reply

bitcoin is a public ledger.. there is no expectation of privacy in public
money(traditional) has never been expected to be private, nor property of the bearer. its always been scrutinised by taxmen for centuries and traditional money was patent and licenced by the kingdoms/governments of the time

1) You ask for donations for a project publishing a Bitcoin address somewhere (forum, blog etc.), for example for an open source software project, and then want to buy something with them. You don't want people to see to which merchant you bought (this can be sometimes done with chain analysis).

2) You live in a dictatorship and try to set up an opposition movement. There are people willing to donate to you. Both the donors and you as the movement leader will need a mixer or another privacy enhancing tech to stay undetected. More than 50% of the world population lives in countries where opposition activity can be dangerous, so this does not only apply to few people.
.
.
.

thanks for some interesting use cases i can certainly understand each one and yet somehow i think the vast majority of people mixing their bitcoin has nothing to do with any of those. what it has to do with i have no idea other than money laundering type things. that's just my own opinion. people trying to avoid paying taxes and things like that.