How did AML kill the decentralized market of Bitcoin?

[goldkingcoiner]

AML has nothing to do with Bitcoin and it did not kill the decentralized nature of Bitcoin.

[Questat]

AML has nothing to do with Bitcoin and it did not kill the decentralized nature of Bitcoin.

Thanks, I definitely agree with that.

So I'm changing the topic to "How did AML kill the decentralized market of Bitcoin?" so everyone will focus on its market, not the technical aspect.

Thanks @Slow death, you are getting my point.

[pooya87]

Now, as adoption grows, we see the government stepping in, regulating heavily, and squeezing out that anonymity we once thought was core to Bitcoin.

To be fair because bitcoin as a payment system has the most transparent ledger that is available to anyone to go through, we could never consider it anonymous.

So I'm changing the topic to "How did AML kill the decentralized market of Bitcoin?" so everyone will focus on its market, not the technical aspect.

That makes more sense. Unfortunately regulations have only created more restrictions for the adoption while not helping protect the adopters. But I still wouldn't use the term "kill" to describe what happened since we already have decentralized marketplace as well. From Bisq as a decentralized network all the way to self-hosted market places similar to the dead OpenBazaar project.

[PrivacyG]

As we all know, Bitcoin is decentralized, and in its early days, we were proud of that fact--believing no government could control it and even thinking it might replace fiat. Those were the days when we were highly optimistic about Bitcoin’s future.

I honestly do not think the early birds of Bitcoin ever thought it would replace Fiat.  It is a far fetched dream even now, let alone back then.

However, with the current AML (Anti-Money Laundering) policies in place, it seems like Bitcoin’s decentralization is being challenged by regulations, especially with the introduction of KYC (Know Your Customer) requirements.

In fact, it made things better AND worse for Decentralization.  Worse because it is getting much harder for Decentralization to work and evolve freely.  See the case of Wasabi where they had to either leave the project behind or comply.  But things are getting better too and Decentralization is evolving like never before simply because due to these Regulations, the Developers had to find alternatives to make Decentralization stronger while avoiding the obligation of introducing Know Your Customer or Anti Money Laundering Regulations.

Bisq is still here.  Haveno too.  Bitcoin still works any where in the World.  Decentralization still exists and this incentivized the creation of better alternatives, but I have to admit they are not always easy to use so there is a learning curve involved too.

[SilverCryptoBullet]

AML has nothing to do with Bitcoin and it did not kill the decentralized nature of Bitcoin.

AML is enforced on centralized platforms where people don't own any private key of their fund.

With Bitcoin, people can make choices, between owning private keys with non custodial wallets or not owning private key with centralized platforms. If they choose the first option, they are free from KYC.

There is no way to KYC a Bitcoin public address and we know that Bitcoin private keys are massive. KYC Bitcoin private keys, public addresses is like KYC all atoms in the universe. It's simply impossible to do.

[icalical]

AML regulation generally target exchanges and centralized services, making it more difficult for bad actors to use crypto for illegal means such as money laundering. In fact, most people in the industry support such rules, because these can build trust that could help crypto gain wider adoption long-term.

Said that, Bitcoin as such is still decentralized. The core protocol is not under the control of any government or entity. We still can use Bitcoin in a decentralized manner if you're interacting straight with the blockchain, using peer-to-peer transactions. Again, that is a challenge to deal with, privacy versus regulatory compliance. But, as we have seen, the industry is in a flux, and some sets of regulations, like the ones in the European Union's MiCA framework, actually encourage more crypto adoption while keeping safety concerns important.

[BlackHatCoiner]

Decentralization is such an ill-treated word. Bitcoin is not decentralized as long as there are no KYC procedures involved in some centralized exchanges. Bitcoin is decentralized as long as the individual can download the blockchain and autonomously verify everything without trusting a third party. That's the most appropriate definition for it.

Regulations might impact the market, but Bitcoin, the protocol, is immune. Do not forget that it was molded by the most severe financial crisis of the last century.

[Dr.Bitcoin_Strange]

Can we still enjoy the decentralized nature of bitcoin?

As regards the Anti money laundering policies, it is concerned to all centralized legal organizations, but Bitcoin doesn't have any centralized organizations or office, the centralized exchange that makes possible the trading of Bitcoin is only in compliance with the AML policy, that's why they ask for KYC, it doesn't stop the decentralization of Bitcoin. If you want decentralization, never use a centralized exchange that ask for your  personal information before you can use the exchange.

[nakamura12]

I don't see any problem with AML or KYC since I am not doing any illegal activities. This is only in centralized exchange platform so decentralized platform still exist although most exchange platforms being made are centralized exchange platform which as you have known that they require KYC and follow the rules to avoid violating the AML.

[Smartprofit]

As we all know, Bitcoin is decentralized, and in its early days, we were proud of that fact--believing no government could control it and even thinking it might replace fiat. Those were the days when we were highly optimistic about Bitcoin’s future.

However, with the current AML (Anti-Money Laundering) policies in place, it seems like Bitcoin’s decentralization is being challenged by regulations, especially with the introduction of KYC (Know Your Customer) requirements.

Here's a brief definition of AML and money laundering for context.

Money laundering is a type of financial crime. It involves taking criminally obtained proceeds (dirty money) and disguising their origins so they’ll appear to be from a legitimate source. Anti-money laundering (AML) refers to the activities financial institutions perform to achieve compliance with legal requirements to actively monitor for and report suspicious activities.

https://www.sas.com/en_ph/insights/fraud/anti-money-laundering.html

Can we still enjoy the decentralized nature of bitcoin?

In my opinion, KYC and AML procedures are not aimed against the decentralization of the first cryptocurrency, but against the anonymity and privacy of its users. This, of course, also causes great harm to the Bitcoin network.

If we talk about Bitcoin decentralization... Bitcoin decentralization lies, firstly, in the decentralization of mining, secondly, in the decentralization of coin ownership, thirdly, in the decentralization of development. Every time we hear that some country bans Bitcoin mining, we must understand that this is an attack on Bitcoin decentralization!

Every time we hear that some country bans Bitcoin transactions or introduces mandatory declaration of cryptocurrencies - we must understand that this is an attack on Bitcoin decentralization!

Every time we hear that Bitcoin ETF funds plan to use part of their profits to provide grants to developers - we must understand that this is an attack on the decentralization of the first cryptocurrency!

Bitcoin decentralization is a very big value and it would be a shame to lose it.

[dificanovi]

The AML policy provides a barrier for Bitcoin as a decentralized cryptocurrency. Some governments have a problem with decentralized Bitcoin so that some countries ban Bitcoin. Countries that ban Bitcoin are afraid of money laundering by corruptors or criminal transactions such as buying weapons and buying illegal drugs. However, in countries that accept Bitcoin, there is no problem with decentralized Bitcoin because that is where the advantages of Bitcoin lie. People who live in countries that accept Bitcoin are very happy because they can benefit from decentralized Bitcoin, they can buy something with Bitcoin and can also benefit from trading bitcoin because the price of bitcoin is not controlled by the government but rather buyers and sellers who can control the price of Bitcoin.

[coolcoinz]

In my opinion, KYC and AML procedures are not aimed against the decentralization of the first cryptocurrency, but against the anonymity and privacy of its users.

Really? How are you anonymous when using a centralized custodial service? Were you ever anonymous?

10 years ago when there weren't many regulations, you were still tracked by your bank. There was no forced KYC on exchanges but if you wanted to buy bitcoin you had to send money from a bank. That transaction could always be traced back to you if the agencies like the IRS or the police decided to investigate.

It was the same when you wanted to sell bitcoin on exchange. You had no KYC, could make the account using a burner email, but you had to send fiat money somewhere. Even if you sent it to a paypal account that account had some KYC involved, for instance to activate it you had to send money from a bank account first to confirm your identity.

Bottom line, there was never any anonymity if you wanted to use fiat money, but it was always there when you transacted p2p.

[Z-tight]

As we all know, Bitcoin is decentralized, and in its early days, we were proud of that fact--believing no government could control it and even thinking it might replace fiat. Those were the days when we were highly optimistic about Bitcoin’s future.

I never expected BTC to replace fiat, even Satoshi who created BTC didn't create it for it to replace fiat, it was created as an alternative currency to fiat and not its replacement.

Take note that BTC is still decentralized, there is no kyc or aml policy in the BTC network in itself or on-chain, kyc is for centralized crypto services and they do not represent BTC. There is also no government controlling BTC, it is censorship resistant and permissioness, it is up to bitcoiners to decide how they want to use their BTC.

[nelson4lov]

Now that Bitcoin has an ETF, I don't think there's going to be a time that we'd not have government eyes on Bitcoin especially now that Bitcoin is officially on wall street markets. The decentralization we can still have has to do with how nodes are distributed and how concensus and decision making among these nodes + community is going to be carried out. I think that is the part that will most likely not get  directly by governments unless they come up with nonsensical policies to prohibit certain activities such as restrict mining or try to gain gain more hash rate and coordinate the network.

We're still good for now.

[Questat]

As we all know, Bitcoin is decentralized, and in its early days, we were proud of that fact--believing no government could control it and even thinking it might replace fiat. Those were the days when we were highly optimistic about Bitcoin’s future.

I never expected BTC to replace fiat, even Satoshi who created BTC didn't create it for it to replace fiat, it was created as an alternative currency to fiat and not its replacement.

That was way back in the day, man... Some people were really optimistic about it, and I’ll admit, the thought crossed my mind too, but only briefly. I remember because I was working at a bank at that time..I'm talking about 2016, when I first registered here, right before that major bull run happened.

Take note that BTC is still decentralized, there is no kyc or aml policy in the BTC network in itself or on-chain, kyc is for centralized crypto services and they do not represent BTC. There is also no government controlling BTC, it is censorship resistant and permissioness, it is up to bitcoiners to decide how they want to use their BTC.

Yes, of course, but the subject was shifted for the sake of discussion; it’s not about the network but more about the market. Check out some of the posts above..sorry for any confusion!

Now that Bitcoin has an ETF, I don't think there's going to be a time that we'd not have government eyes on Bitcoin especially now that Bitcoin is officially on wall street markets. The decentralization we can still have has to do with how nodes are distributed and how concensus and decision making among these nodes + community is going to be carried out. I think that is the part that will most likely not get  directly by governments unless they come up with nonsensical policies to prohibit certain activities such as restrict mining or try to gain gain more hash rate and coordinate the network.

We're still good for now.

And experts say that this will be the reason for liquidity and price stability in the market, but pure Bitcoin enthusiasts and HODLers wouldn’t agree with that.

[Smartprofit]

In my opinion, KYC and AML procedures are not aimed against the decentralization of the first cryptocurrency, but against the anonymity and privacy of its users.

Really? How are you anonymous when using a centralized custodial service? Were you ever anonymous?

10 years ago when there weren't many regulations, you were still tracked by your bank. There was no forced KYC on exchanges but if you wanted to buy bitcoin you had to send money from a bank. That transaction could always be traced back to you if the agencies like the IRS or the police decided to investigate.

It was the same when you wanted to sell bitcoin on exchange. You had no KYC, could make the account using a burner email, but you had to send fiat money somewhere. Even if you sent it to a paypal account that account had some KYC involved, for instance to activate it you had to send money from a bank account first to confirm your identity.

Bottom line, there was never any anonymity if you wanted to use fiat money, but it was always there when you transacted p2p.

I am anonymous whenever I use fiat (cash). Cash is currently (probably) the highest level of anonymity and privacy available to humans.

Bitcoin is pseudonymous. A third-party blockchain analyst can see all Bitcoin transactions, but they cannot determine who is making those transactions. This used to be the case...

Nowadays, thanks to AML and KYC procedures, Bitcoin is not even pseudonymous, it is absolutely not anonymous and not private.

People use fiat gateways and deanonymize themselves (and indirectly their counterparties). This is a big problem.

[TheUltraElite]

Does the procedure of undergoing KYC/AML mean that your bitcoin is becoming an asset controlled by a central figure? Nope.

Then how would you explain AML killing the decentralization aspect?

What we are concerned about is the disclosures of amount of bitcoin being held by people. This should not pose a threat to law abiding citizens - maybe we will see taxation in future, but that would not hurt us unlike what it will hurt criminals.

The bright side is that more frauds will be caught and scammers will start avoiding bitcoin's pseudo-anonymity to escape authorities.

[avikz]

I am still optimistic about the future of Bitcoin! Even though we all wanted to stay anonymous while using Bitcoin, deep down in mind, we all were doubtful about the regulations. Governments do not like things done under their nose without letting them know. So they have ceased and closed the decentralized exchanges. That was expected to happen to be honest.

But Bitcoin can be still used in an anonymous way. However, you will have to acquire bitcoin through mining and cannot move those to exchanges. Use peer to peer bitcoin transactions to remain anonymous.

[SickDayIn]

AML hasn't killed any decentralized part of Bitcoin. Bitcoin was always designed as a public ledger, the intention was never for transaction to be fully anonymous. If you make poor OpSec choices and ignore the power of data analytics, then yes some of your coins may be linked to your identity.

In the early days, a significant portion of cryptocurrency holders were involved in illegal activity. For example, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (reference: https://www.forbes.com/sites/haileylennon/2021/01/19/the-false-narrative-of-bitcoins-role-in-illicit-activity/). Whereas today in 2024, it's only 0.34% (reference: https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/)

[Alpha Marine]

At the end of the day, Bitcoin on its own is still a decentralised coin. Using it in a centralised way doesn't stop the coin from being centralised. Bitcoin on its own is not owned, controlled and managed by anybody or set of people, so anybody can use it, anybody can own it and sell it if he wants to.

In the early days, a significant portion of cryptocurrency holders were involved in illegal activity. 

This is a common misconception that has been going on for years and it has now been debunked.
People against bitcoin and crypto keep coming up with various excuses of why bitcoin is bad and why it shouldn't be acceptable, they talked about the damage to the climate and how it's facilitates illegal activities, which are not true.
I'm not saying people don't use bitcoin for illegal things, but it's exaggerated. There is no crime that is been committed with bitcoin now that has not been in existence long before bitcoin and there's no crime that has increased simply because bitcoin was created.

In 2021, 0.15% of known cryptocurrency transactions conducted were involved in illicit activities like cybercrime, money laundering and terrorism financing, representing a total of $14 billion.

Wikipedia