What happens if a Bitcoin wallet is this capable?

[Vvang]

Is it possible that a BITCOIN wallet implement mixers inside the wallet itself without the government coming for that person? I have a friend who is a genius compared to the dumb me who believe this is not a good idea, I don't want to see him get into trouble that's why I asked.

He also asked why we haven't had such capable Bitcoin wallet yet, I told him about samurai wallet and what the centralised power is making them face right now, do you think that this can land my friend into big problem or it's problem free.

[Ucy]

Ofcourse it is possible if you can find ways to serve users (who will be anonymous) with verified identities.

Firstly, the users use a Decentralized KYC Application to capture and verify their identities physically or probably online without anyone but themselves having access to the ID data (or without violating their privacy rights), this means their verified data will be hidden to everyone except themselves, making them to remain anonymous.
After their identities are verified on the decentralized application, they can connect to the mixer via API and be allowed to mix their coins. If there is a future investigation of a crime address, the real ID of the user associated with the address may be de-anonymized via consensus or the IDs could be blindly known/investigated using non-human setup like AI or ZKP (zero knowledge proof)

[Antona]

Your gut is right, its a massive red flag for regulators. Wallets that built-in mixers, like Wasabi or Samourai, have faced serious legal heat. It directly touches anti-money laundering laws your friend might be a genius coder, but he's not smarter than a entire government's legal team thats a fight you dont want.

[Charles-Tim]

What is the difference between this and a centralized mixers? People are still using Coinjoin. If he wants to use it with central platforms like exchanges, that is not advisable.

Or he can use a mixer instead of Coinjoin, but mixers are centralized.

Alternatively, he can go for a decentralized exchange where bitcoin can be converted to monero and back to bitcoin.

[Antona]

He's asking for trouble. Even if he codes it perfectly, the second it gains any users he'll be on a watchlist. It's not about the tech being impossible, it's about the real-world consequences being very possible and very bad. Advise him to stick to building on testnet if he's just curious.

[d5000]

Your gut is right, its a massive red flag for regulators. Wallets that built-in mixers, like Wasabi or Samourai, have faced serious legal heat. It directly touches anti-money laundering laws your friend might be a genius coder, but he's not smarter than a entire government's legal team thats a fight you dont want.

Samourai is a centralized CoinJoin-style coordinator.

However, the fact that they were centralized was probably not even the main problem. The problem was that they worked and presented themselves like a company. And thus they were subject to AML laws. They took a fee for the coordination service. And there were also some quite big communication fails, they advertised themselves as a tool to evade sanctions.

Some in the "Mixer restrictions" thread have said that they could probably have avoided the legal trouble if they weren't so irresponsible in their communication.

There are CoinJoin coordinators who still are active, centralized ones (like Wasabi, who have however shifted to do AML checks to not expose them to the Samourai trouble) and decentralized ones (like Joinmarket).
And Joinmarket does offer a wallet too, with the "mixer" integrated.

Perhaps if he wants to offer something new the coder could offer a wallet with various options for CoinJoining. If the coder takes no fee from the process, he is also not subject to AML laws. But as early as he gets any income (other than perhaps donations) he could be subject to AML laws.

[SilverCryptoBullet]

Is it possible that a BITCOIN wallet implement mixers inside the wallet itself without the government coming for that person? I have a friend who is a genius compared to the dumb me who believe this is not a good idea, I don't want to see him get into trouble that's why I asked.

He also asked why we haven't had such capable Bitcoin wallet yet, I told him about samurai wallet and what the centralised power is making them face right now, do you think that this can land my friend into big problem or it's problem free.

There are technologies for privacy like Coinjoin and wallets with deep privacy features like Samourai wallet, Wasabi wallet, and the others. You can not trust any wallet as there are dramas about Wasabi wallet too, and the same issues possibly exist with other Bitcoin wallet softwares.

Checking wallet softwares with technical reviews from https://walletscrutiny.com/

You can choose a Bitcoin wallet with another website https://walletscrutiny.com/. If you want privacy, choose parameters for privacy in the filter.

[rat03gopoh]

If you study the Samourai case, your friend would be safe if he simply wrote the open source code, not directly involved, or profited from anyone trying to implement the code into a full-fledged wallet.
Mixers will always be considered illegal, but some parts won't be subject to legal action (as long as that AML policies are keep as such).

[JeromeTash]

When creating such a wallet, make sure you are completely anonymous because things can go south real quick. The government and law enforcement do not care about the mixers until they start believing that money has been laundered through it, especially by terrorists or hackers.
Government does not completely ban mixing service but when they want, they may come after you especially if the know you.

[Outhue]

If I am the one in your friend's shoe I will go the satoshi way, he have left a good example for us and yet many people failed to follow, if I have the capacity to create such useful feature in a bitcoin wallet I will turn into a ghost just like what satoshi nakamoto did, so even if the governments around the world are pissed they won't be able to come after me.

If he can't do something like this he should better abandon the idea and find something else to work on, something that won't bring in problems in the future, crypto space is still lacking big on security features, North Korea are responsible for the biggest crypto theft of the year by simple social engineering, billions are lost to scammer still even after all the warnings.

[blockman]

Increasing anonymity nowadays will put you into trouble although there are still ways that we can do in doing that. Mixers are still hot in the eyes of the regulators and that's why if someone is using that, they might not be in trouble yet until they start tracking the owners of it and seizes the platform itself. We've seen this happen many times in the mixers that have advertised in the forum. The best way so far to increase someone's anonymity is through this.

Alternatively, he can go for a decentralized exchange where bitcoin can be converted to monero and back to bitcoin.

[FinneysTrueVision]

If they don’t make some of the same mistakes as the Samourai developers, it is more likely than not they will be left alone. Other wallets for Bitcoin and altcoins exist which have advanced privacy features. It also depends on how the mixer is integrated. Sparrow Wallet and Bitcoin Keeper were using Samourai’s Whirlpool coordinator, but their developers did not get arrested because they were not directly involved in Whirlpool’s development and its operation, they were only integrating a component built by an independent team.

[pooya87]

Unfortunately the answer is yes, there is a possibility that the centralized authority sees any attempt at improving users privacy as a threat and tries to be nasty toward the developers of such projects. This has already happened before and I personally believe the main reason why the inventor of Bitcoin, Satoshi Nakamoto used an alias and is still anonymous to this day is exactly that reason. We know CIA even took one of the lead developer at the time (Gavin Andresen) in for questioning just because he was involved in Bitcoin as a dev.

Although the level of the risk depends on the jurisdiction as well. For example if you live in the US the risk is extremely higher since they don't mess around when it comes to dealing with any attempts of people trying to protect their privacy. The US government deals with such people with an iron fist...

[hugeblack]

At the protocol level, Bitcoin is extremely transparent. Therefore, if your friend want to develop something related to privacy, it's better to work on Monero or any other blockchain that offers these features, or at least build a decentralized bridge between them, thus achieving both privacy and profitability.

Perhaps if he wants to offer something new the coder could offer a wallet with various options for CoinJoining. If the coder takes no fee from the process, he is also not subject to AML laws. But as early as he gets any income (other than perhaps donations) he could be subject to AML laws.

I don't think the problem is centralization as much as it is the previous administration's attempts to intimidate developers through legal action against well-known developers.