[HN Gopher] U.S. Treasury sanctions virtual currency mixer Torna...
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U.S. Treasury sanctions virtual currency mixer Tornado Cash
Author : yamrzou
Score : 212 points
Date : 2022-08-08 14:56 UTC (8 hours ago)
(HTM) web link (home.treasury.gov)
(TXT) w3m dump (home.treasury.gov)
| malfist wrote:
| Surprised it took them this long. Tornado is straight up money
| laundering with the guise of "privacy" and crypto.
| mikeyouse wrote:
| And most of the North Korean crypto funds have gone through
| there..
|
| https://www.coindesk.com/tech/2022/04/15/sanctioned-crypto-w...
| [deleted]
| eric_cc wrote:
| Except it's not and you're 100% wrong.
|
| Tornado cash is used by people who buy crypto on centralized
| exchanges, want to take private self custody of their crypto
| without the CEX or other entity spying on them.
| mrep wrote:
| If it looks like a duck, swims like a duck, and quacks like a
| duck, then it probably is a duck.
| SparkyMcUnicorn wrote:
| You could use this same argument against E2E encryption.
| kache_ wrote:
| dear feds:
|
| ring signatures
|
| signed, n people in a chain of trust that is m long
|
| stop fighting, you're not going to win :)
| twstdzppr wrote:
| Don't fund North Korea, thanks.
| anotherrandom wrote:
| If I use Tornado Cash, I'm not funding North Korea -- I'm
| simply using their service. I have no knowledge of who is
| receiving my stuff and no intent to fund North Korea,
| therefore I am not funding North Korea. If it happens by
| accident then oh well, there's no realistic way to tell it
| happened anyway and there's certainly no way for me to tell
| it did
| 8note wrote:
| You're ensuring that North Korea can buy stuff with their
| stolen money.
|
| Well, you're going out of your way to make sure that North
| Korea can buy stuff with their stolen money, by letting
| them say that it's yours.
| twstdzppr wrote:
| Users of HN apparently have a soft spot for helping
| oppressive regimes because of privacy, apparently.
| kache_ wrote:
| Who said anything about funding north korea? Just make it
| illegal to do so. Why does that assume violating my privacy?
|
| You actually can't really stop privacy enabled
| cryptocurrencies. By all means, I'd like to see a concerted
| effort to do so. (Because poking the bear will just fuel more
| cryptographic innovation that dodges control :P)
| pjc50 wrote:
| I'm rather surprised that it took this long, given their role in
| sanctions evasion.
| xapata wrote:
| The nice thing about the blockchain (for law enforcement) is
| that the transaction history never decays.
| legutierr wrote:
| > All transactions by U.S. persons or within (or transiting) the
| United States that involve any property or interests in property
| of designated or otherwise blocked persons are prohibited unless
| authorized by a general or specific license issued by OFAC, or
| exempt. These prohibitions include the making of any contribution
| or provision of funds, goods, or services by, to, or for the
| benefit of any blocked person and the receipt of any contribution
| or provision of funds, goods, or services from any such person.
|
| So, it seems that it is prohibited for US persons to send tokens
| to these smart contracts, or to withdraw tokens from these smart
| contracts.
|
| What about miners running in the United States? Are US-based
| miners also prohibited from producing blocks that include
| transactions that interact with these smart contracts?
|
| And what about blocks that are produced by non-US miners, and
| which contain transactions that interact with these smart
| contracts? Might US-based miners be prohibited from validating
| and building upon such blocks?
|
| Does US law effectively now mandate a fork of Ethereum so that US
| persons can safely interact with a blockchain that excludes all
| interactions with Tornado smart contracts? It seems like an
| extreme implication, but can the possibility be excluded?
| Canada wrote:
| In terms of mining transactions, the Ethereum proof of stake
| system will financially punish anyone who fails to attest to
| honest transactions, and there's no escaping that just because
| "sanctions". See this post for details:
| https://0xfoobar.substack.com/p/ethereum-proof-of-stake
|
| I believe we'll likely see other actions taken by US companies,
| such as Twitter banning the Tornado Cash account, Microsoft
| deleting its github repositories, the registrar of its current
| domain name disabling it, Discord kicking it off, and so forth.
| Perhaps large RPC providers refusing calls involving the
| sanctioned addresses, though I think that's less likely.
|
| We will also see an escalation of fiat enabled exchanges
| refusing to do business with users who bring assets from
| Tornado Cash connected accounts, however there are other
| developments in the pipeline that will mitigate this, and
| increased aggression by proponents of financial exclusion will
| drive adoption as they are a real pain for legitimate actors
| too, and also these systems are necessary to increase
| transaction throughput anyway. (eg. rollup protocols on
| Ethereum, lightning network protocols on Bitcoin)
| ChainOfFools wrote:
| > Twitter banning the Tornado Cash account, Microsoft
| deleting its github repositories, the registrar of its
| current domain name disabling it, Discord kicking it off, and
| so forth
|
| Perfectly happy to see all the centralized support crutches
| kicked out from under another poster child for fake
| decentralization rhetoric. Let's see how they do after they
| have to eat that dogfood for breakfast, lunch, and dinner,
| not just for dessert.
| Canada wrote:
| Agreed. As expected, Github has deleted it. Glad I cloned
| it all before I wrote any replies in this thread.
|
| Edit: Authoritative AWS nameservers have now stopped
| resolving tornado.cash.
| nootropicat wrote:
| What do you expect to happen? Centralized service have
| better ux, so it makes sense for most people to use them -
| but nothing about ethereum or tornado requires them. People
| will only use their own nodes, tor and/or ipfs if that's
| the only solution that works - but as long as public rpcs
| like infura and normal domains aren't censored there's
| really no reason to (for a normal user, not a dev etc).
|
| What's important is to keep that potential open, of course.
| bergenty wrote:
| How can this be enforced? They can't block people from using it
| and they can't(?) blacklist people from using the tokens that
| come out the other end.
| matkoniecz wrote:
| > they can't(?) blacklist people from using the tokens that
| come out the other end.
|
| why not?
| notch656a wrote:
| Just another tool for sweeping discretionary prosecution. Rest
| assured the government can get pretty much anyone on something
| civil rights destroying if they like.
| lizardactivist wrote:
| Does it give people a higher degree of freedom, privacy, and
| control over their money?
|
| If so, it doesn't surprise me that the US gov wants to sanction
| and ban it.
| zaphar wrote:
| The problem with the 'mixer' approach to this is that the US
| Gov _knows_ the bad money went into the mixer. They also know
| that it 's harder to determine where the bad money came out to.
| This means that money that all of society has a valid vested
| interest in tracking and seizing is in the mixer. Part of
| having that freedom, privacy, and control is having to live
| with the consequences of doing business with people who land
| you in circumstances like this.
|
| I don't buy any argument that hinges on:
|
| * Someone stole my money. * But they used a privacy enhancing
| service to hide it. * So the authorities have no recourse.
|
| If someone uses that service for legitimate reasons knowing
| that the people who steal money are also using then they just
| have to live with the fact that their privacy means they can't
| prove they weren't the ones who stole it.
| ETH_start wrote:
| >>* Someone stole my money. * But they used a privacy
| enhancing service to hide it. * So the authorities have no
| recourse.
|
| The resourse can't be
|
| * ban the privacy enhancing service
|
| If cash were introduced today, it would be banned under that
| principle.
|
| Real privacy means criminals _will_ use it. That 's the price
| society pays to not give the government enormous surveillance
| powers.
| r00fus wrote:
| This is ridiculous. The reality of the situation is that
| the law does make a distinction between
| activities/venues/products that have a significant non-
| criminal usage (cash/retail stores/hammers) vs. ones that
| have mostly criminal usage (mixers/crackhouses/lockpicks).
| ETH_start wrote:
| The only reason cash has significant non-criminal usage
| is that it has had time to gain a foothold in society.
|
| If all communication apps had a backdoor for government
| surveillance, and one was introduced with E2E encryption,
| at first, criminals would disproportionaly flock to it,
| and you could very well argue for it to be banned under
| the principle you espouse. Thus you would strangle every
| privacy solution in its cradle before it has had a chance
| to become mainstream.
| notch656a wrote:
| >they can't prove they weren't the ones who stole it.
|
| Proving your innocence is not how the criminal justice system
| works in the US. If you have stolen goods, it's on the
| government to prove that
|
| A) they are stolen
|
| B) (and to criminally convict you) that you knew they were
| stolen
| zaphar wrote:
| We aren't talking about criminal conviction though. We are
| talking about something entirely different. We are talking
| about people freely transacting with people who the
| government already _knows_ and has convicted of illegal
| activity. And those people who are freely transacting now
| have their funds difficult to spend, because because they
| are inextricably mixed up with illegal funds.
|
| It's very hard to argue that you didn't _know_ your funds
| were inextricably mixed up with those illegal funds because
| that is the a major _purpose_ of a mixer. Choices like
| those have consequences. Falling under sanctions is one of
| them.
| zaphar wrote:
| Or to put it another way. If you use a mixer you are
| _knowingly_ helping to launder money. Which is itself a
| crime.
| notch656a wrote:
| By that logic everyone with two brain cells who has
| worked on an interstate road crew should be imprisoned.
|
| Of course you may consider one _knows_ launderers will be
| helped but have no _intent_ to help them, which may be
| true of the interstate road crew, bank tellers, or a user
| of Tornado Cash.
| zaphar wrote:
| I don't think you can actually say you have no intent to
| help them. All of the other uses you mention other than a
| mixer have perfectly valid uses that don't involve
| committing a crime. But mixing your money in with
| illicitly obtained funds with the intention of making it
| so no one can tell your money apart from the illicit
| funds is the very definition of money laundering.
|
| So no, your analogy doesn't even remotely apply.
| notch656a wrote:
| Of course you can say you have no intent. Plenty of
| people use Tornado Cash to separate one wallet from
| another without any intention whatsoever to aid in any
| way illicit activity. Just like the road crew, they know
| the service will be used for illegal purposes but can
| have zero intent for it to happen.
| SparkyMcUnicorn wrote:
| When it comes to civil forfeiture, it's pretty much the
| complete opposite.
| colinmhayes wrote:
| This is actually not true. If you have stolen goods the
| government can and will confiscate them until you prove you
| got them legally.
| thesausageking wrote:
| To have freedom and privacy, we need due process. If a Gov
| agency investigating a crime wants information, they can get
| a warrant.
|
| A lot of illegal activities happen over email. That doesn't
| mean the government can require everyone to give them access
| to their email so they can monitor it just in case crimes are
| committed.
|
| What you're advocating for is the surveillance system China
| has setup where the government has a back door to access
| every social media post, every mobile app, every security
| camera, etc. Any companies that don't comply (Facebook,
| Google, Twitter, ...) are banned. They make the same claims
| that you did that "it's in society's interest" for
| individuals to give some of their privacy and freedom because
| the society has a vested interest in this information.
| jahewson wrote:
| Ridiculous. Money laundering leads to a loss of freedom,
| privacy, and control because it empowers exactly the kind of
| people who want to take those things away from you.
| zionic wrote:
| I want to pay someone to mow my lawn in crypto.
|
| I _don't_ want to pay them from my primary account with
| (potentially) millions in crypto visible thus subjecting me
| to a $5 wrench attack
|
| So instead I have a "payments" hot wallet and use Tornado
| cash to disburse funds from my cold wallet for paying things
| while obscuring my total net worth/lifetime transaction
| history.
|
| This is perfectly legal and moral.
|
| Edit: incase this wasn't clear the above is purely
| hypothetical.
| whatisweb3 wrote:
| Not all users of Tornado Cash are money laundering. The US
| government positions Tornado Cash as a system for money
| laundering but it is more accurately described as a system
| for privatizing your transactions. A user with an
| identifiable ENS name might want to hold and trade some ETH
| without broadcasting every action to the entire world - this
| becomes a personal security risk - and Tornado Cash is a way
| to do this that is decentralized and cryptographically
| secure.
| dcolkitt wrote:
| Ridiculous. E2E encryption leads to a loss of freedom,
| privacy, and control because it empowers exactly the kind of
| people who want to take those things away from you.
| pudo wrote:
| Curious to see how the crypto world will respond. They'll
| probably take a minute to realise that being sanctioned is unlike
| being indicted: if someone is indicted, _they_ have a problem but
| you can technically keep doing business with them.
|
| If an entity is sanctioned, anyone doing business with them (such
| as handling BTC downstream from Tornado) will face a criminal
| liability. _You_ will have a problem, and a nasty one.
|
| That thing just turned into a hand grenade.
| potatototoo99 wrote:
| Most crypto already bypasses the US and their laws.
| [deleted]
| thehappypm wrote:
| I would agree that individual transactions might, be not most
| entities.
| game-of-throws wrote:
| The linked press releases disagrees.
|
| > While most virtual currency activity is licit, it can be
| used for illicit activity
| colinmhayes wrote:
| So how does sanctioning defi work? Isn't the whole point of it
| being decentralized to make it unsanctionable? If the government
| forces exchanges to reject any coin that has ever touched a mixer
| won't we just end up in a situation where every coin is
| unnaccessable given enough time?
| tevon wrote:
| Without digging deeper into the protocol, I imagine these
| sanctions may be completely ineffective.
|
| The announcement says they are sanctioning 40 addresses
| associated with Tornado, can't those addresses be cycled out of
| commission and a new set be put in place?
| JumpCrisscross wrote:
| > _can 't those addresses be cycled out of commission and a
| new set be put in place?_
|
| That gets harder when the employees start getting arrested,
| the bank accounts Tornado uses to pay them start getting
| frozen, domains seized, _et cetera_ , at Tornado and at every
| identified wallet that transacts with it.
| colinmhayes wrote:
| Does tornado even have employees? I guess they can seize
| the front end domain, but the actual defi protocol is
| decentralized, how do you freeze that?
| JumpCrisscross wrote:
| > _the actual defi protocol is decentralized, how do you
| freeze that?_
|
| You don't. You just keep nailing people to touch it.
| Sanctions make things difficult for someone. Nobody
| expects them to _e.g._ poof Pyongyang.
| nostrademons wrote:
| It takes about 10 minutes to deploy the existing
| tornado.cash smart contract to a new address, and can be
| done with freshly-mined ether. Some kid in Russia could
| do it and the U.S. government would never know who he is
| nor have jurisdiction to touch him. There are no need for
| employees, servers, domains, whatever. Once it's upon on
| the blockchain again, its existence serves as a schelling
| point for people to use it.
|
| This is much more like a pandemic than a war. In a war
| you know who your enemy is, you can see them making
| preparations and organizing forces, and you can counter
| them with your own moves. In a pandemic, somebody sneezes
| in Wuhan and 10 million people die. Any attempts to
| regulate folks who might've touched dirty things just
| piss people off.
| jsmith45 wrote:
| You generally need a sufficient volume of traffic for a
| mixer to be effective.
|
| A nobody spinning up their own copy of the contract may
| have trouble attracting the volume. If this becomes a
| significant issue, the treasury can expand the sanctioned
| entity definition to include to any smart contract that
| uses the code from TC. Or automatically scan for such
| addresses and update the list of aliases for the
| sanctioned entity. Or several other approaches.
| kube-system wrote:
| Sanctions don't make the coins illegal, they make it illegal
| for anyone to do transactions with an entity.
| olalonde wrote:
| Which entity? Users of Tornado Cash? Their developers? As a
| business accepting Ethereum, how do I know whether my
| customer has used Tornado Cash in the past? It's not really
| possible to know unless the customer volunteers the
| information.
| kube-system wrote:
| These entities:
|
| https://home.treasury.gov/policy-issues/financial-
| sanctions/...
|
| > As a business accepting Ethereum, how do I know whether
| my customer has used Tornado Cash in the past?
|
| Why does that matter? You need to make sure you don't break
| sanctions. You don't have to worry about other people.
| olalonde wrote:
| I guess they just don't really understand how Ethereum
| works? The minute whoever controls those addresses
| transfers the ETH out to some other addresses (a
| cheap/trivial operation) the sanctions are obsolete.
|
| Are you not phased at all by the inaneness of it?
| kube-system wrote:
| It may seem inane if you assume that the _only_ purpose
| of the sanction is to prevent the money from being
| transferred.
|
| It could be that they have enough parallel information
| that they know who controls these addresses and they're
| just waiting for someone to violate these new sanctions
| :)
| [deleted]
| olalonde wrote:
| I doubt that. It's not possible to track which of the
| depositors withdrew. That's the whole point of the smart
| contract.
| kube-system wrote:
| Within the realm of the blockchain, yes. But regulators
| do much of their work in meatspace. Smart contacts won't
| protect you from information gathered elsewhere.
| game-of-throws wrote:
| To me this feels similar to how most paper cash has traces of
| cocaine.[1] LEO will seize the cash, but if they re-enter it
| into circulation the cash becomes legitimate again. You're not
| liable if you spend the same contaminated dollar bill that a
| drug dealer once used, but you would be liable if you did
| business with that drug dealer.
|
| [1]: https://en.wikipedia.org/wiki/Contaminated_currency
| birdyrooster wrote:
| Except this isn't currency. This is property (a definition
| given by the SEC) which has a completely different legal
| standard. There is no excuse of ignorance for receiving and
| selling stolen property or property used in service of a
| crime. It's an open secret that crypto is being used for
| illegal activity because it is not being enforced currently.
| giaour wrote:
| > Isn't the whole point of it being decentralized to make it
| unsanctionable?
|
| No. Guns and bullets are decentralized, but murder is still
| illegal. Law enforcement agents can investigate crime committed
| using crypto just like they can investigate crime committed
| using any other instrument.
| pudo wrote:
| Yes.
|
| Exactly this is happening here, and not in a rhetorical way.
| And the US government have, you know, guns.
| JumpCrisscross wrote:
| > _Isn't the whole point of it being decentralized to make it
| unsanctionable?_
|
| Why would this be expected? Cash is decentralized. That didn't
| prevent countries from sanctioning things.
| colinmhayes wrote:
| Cash itself has never been sanctioned though? If the
| government said "we're now keeping a database of cash serial
| numbers that are hereby banned" would everyone need to
| install the "cash checker" app and scan each bill they
| receive?
| [deleted]
| specialp wrote:
| Cash has to be physically sent somewhere else. There are
| already restrictions on large amounts of cash (> $10000)
| where large transactions must be reported to the
| government, and it must be declared entering or exiting the
| country. This is why smuggling cash out of the USA from
| drug proceeds is a very challenging issue for cartels.
|
| But crypto cannot be physically inspected at international
| borders. So for the government, just like wire transfers,
| they want to know the source and recipient of such funds.
| If there were a service where you could bring a large
| amount of cash, obfuscate the origin, then wire it to a
| bunch of bank accounts under criminal control, that would
| be the definition of money laundering and also cracked down
| on.
|
| In this case if Coinbase took some BTC that went through
| Tornado it would be equivalent to taking a wire transfer
| from a bank known to be laundering money.
| notch656a wrote:
| The US has effectively no customs on leaving the country.
| I doubt those wanting to leave with cash have it that
| bad.
| leeter wrote:
| If you're taking 10k or more in cash out of the country
| and fail to file a fincen-105 you can have all of the
| cash sized with no recourse. CBP regularly uses cash
| sniffing dogs for this purpose.
|
| https://www.fincen.gov/sites/default/files/shared/fin105_
| cmi...
| notch656a wrote:
| CBP has an alert on my passport and I'm flagged as being
| a bad-boy with insane amount of grilling (and illegal
| jailing, strip-search, ~16 hour detainment, the works)
| every time I enter the country. Even I have never been
| searched leaving the country. I'm sure it happens but I
| think it is quite rare. I repeat myself, there is
| effectively no customs leaving the country even if you
| are flagged as most-high-risk as I am.
|
| >CBP regularly uses cash sniffing dogs for this purpose.
|
| The dogs are just probable cause generating machines. Had
| one of these dogs "sniff my asshole" and the agents got a
| warrant for me to forcibly be taken to the hospital to be
| "internally examined." (and I was sent the bill by the
| hospital, both ERs they took me to ~60 miles apart even
| though I never consented to any of it) The dog never
| alerted. It's just cover so they can get a warrant
| whenever they want.
|
| Yeah I'm aware it's illegal to not report on the way out,
| I'm only saying it seems unlikely criminals doing that
| are going to get caught.
| [deleted]
| jeffbee wrote:
| There's a reason that you can't walk into Goldman Sachs and
| open a trading account with a box full of cash. They can't
| tell where it came from. In certain respects, cash is
| sanctioned.
| leeter wrote:
| It's never been sanctioned but it is tracked. Every single
| time cash (the physical printed bills) flows through a
| federal reserve branch or even some mainline banks the
| serial is noted and reported to a database. They do this in
| case money known to be tainted (stolen, counterfeit etc.)
| shows up. So if a bill with a flagged serial number comes
| up that info is forwarded to the FBI/Secret service. That
| doesn't mean they'll come knocking on your door if you
| deposit a single tainted note, it just tells them that the
| note somehow made it to your locality. But if you deposited
| a ton of them all at once? Yes you'd probably get a visit
| and some very pointed questions on where you got them and
| how. This has happened a few times when people found cash
| from robberies (the D.B cooper case being one). https://en.
| wikipedia.org/wiki/D._B._Cooper#Recovered_ransom_...
|
| Most people have probably deposited a counterfeit bill and
| never known it too. Again singular bills are not a problem.
| They just tell the secret service to keep an eye on that
| locality and potentially contact businesses that saw the
| counterfeits come in assuming those businesses didn't flag
| it themselves.
| [deleted]
| giaour wrote:
| > If the government said "we're now keeping a database of
| cash serial numbers that are hereby banned" would everyone
| need to install the "cash checker" app and scan each bill
| they receive?
|
| This database exists, but only banks and police evidence
| clerks check cash against it.
|
| > Cash itself has never been sanctioned though?
|
| Most countries have a strict limit on the amount of cash
| you're allowed to carry over the border.
| JumpCrisscross wrote:
| > _Cash itself has never been sanctioned though?_
|
| Ethereum isn't being sanctioned. Tornado is. If you
| transact with Tornado, you're in violation of the law. If
| you don't, you're not, whether you use Ether or not.
|
| > _if the government said "we're now keeping a database of
| cash serial numbers that are hereby banned" would everyone
| need to install the "cash checker" app and scan each bill
| they receive?_
|
| Law enforcement has long used marked bills [1]. The cash
| isn't "cancelled." If you randomly end up with one, you're
| fine, in the same way that if you unknowingly end up
| transacting with a wallet that transacted with a wallet
| that touched Tornado, you're also probably fine. But if
| your garage has a box of marked bills, or if your wallet
| did a big transaction with another wallet that does lots of
| Tornado activity, you're going to be on law enforcement's
| radar.
|
| [1] https://en.wikipedia.org/wiki/Marked_bill#cite_note-4
| colinmhayes wrote:
| I just don't see how the government can go about proving
| you received the money because you sent to it a mixer vs
| receiving it from a seemingly legal transaction with
| someone else who mixed it. Especially with defi exchanges
| that I doubt will check if coins have been mixed.
| acdha wrote:
| Flip that around the other way: you are identified having
| received a transaction at the end of a chain from some
| crime with serious consequences. Do you want to have to
| prove to their satisfaction that you had no knowledge of
| this and aren't part of some cartel's money laundering
| operation? Can you keep doing that each time you use a
| mixer or does that start to look like a pattern where
| they stop believing you? Is there anything in your life
| that is innocent but could be strung together by an
| ambitious investigator? (e.g. your roommate's boyfriend
| is Colombian, now you're both getting questions and I
| hope he's not self-employed)
|
| It's that grind which is fatal for mixers, not unlike Tor
| exit nodes. Nobody _needs_ to use them except money
| launderers but they depend on benign traffic for
| concealment. Even most privacy-minded people are going to
| hesitate if it taints their ability to make transactions
| with regulated businesses and the less innocent traffic
| there is, the more likely it is that using one will
| attract scrutiny, accelerating that feedback loop since
| most people don't want to deal with the risk even if they
| are totally innocent.
|
| The other level to consider: this mentions DPRK. That
| means all of the intelligence agencies could be involved
| and that increases the odds that a mixer is compromised
| or even run by them as a honeypot. Think about how you
| can decide whether to trust one, and whether the odds are
| that you're signing up for additional privacy invasion
| like the people who've used certain messaging systems or
| VPNs.
| concordDance wrote:
| > If you transact with Tornado, you're in violation of
| _US_ law.
|
| Fixed it for you. There's a tendency, particularly in the
| USA for people to assume that their law is universal
| shakezula wrote:
| You're being needlessly pedantic here. They implied US
| law because the article is by the U.S. Treasury.
| kube-system wrote:
| That is quite a conclusion to jump to, rather than simply
| interpreting the word "the" as an article referring to
| the sanctions listed in this post.
| vkou wrote:
| US law isn't universal, but it does apply to anyone who
| wants to interact with the US financial system. Which is
| most people doing business outside their country of
| residence, including most people using crypto.
| SXX wrote:
| At least on government and banking level there are
| sanctiona against bring cash USD / EUR to Russia and might
| be Iran / North Korea. Private person can do that, but any
| bank or country that will sell cash to Putin's regime will
| likely end up being sanctioned too.
| ipaddr wrote:
| Like Germany?
| SXX wrote:
| Germany dont send real paper US dollars or EUR to Russia.
| Instead Russia just get some more numbers on Gazprombank
| correspondent bank account in some EU financial
| institution.
|
| There is a huge difference between what can be done with
| paper money vs numbers on traceable bank account.
| cesarb wrote:
| > If the government said "we're now keeping a database of
| cash serial numbers that are hereby banned" would everyone
| need to install the "cash checker" app and scan each bill
| they receive?
|
| I recall something like that happening when I was younger.
| This was long ago, in the pre-Internet days, so
| unfortunately I haven't been able to find anything about it
| online; this is only my distant recollection.
|
| There was a theft of a large amount of new bank notes,
| which hadn't yet entered circulation. The government
| distributed a list of the ranges of bank notes (since the
| notes were newly printed, they were in large sequential
| ranges), and every cashier in the whole country (for
| instance, in supermarkets) had to check every note they
| received against that list; since the notes in question
| hadn't entered circulation yet, they could be treated as if
| they were counterfeit.
|
| (Since as far as I recall this happened back in the
| hyperinflation days, and the whole currency has been
| replaced one or more times since then, there is no longer
| any need to check against that list.)
| Arainach wrote:
| Nothing so brash. Make the largest banks check (the federal
| reserve already does), and add consequences on handling
| banned bills that will encourage smaller customers to check
| before they get to thr FR level.
| uncomputation wrote:
| This is kind of a misconception a lot of people have about law.
| Especially in crypto, you'll hear people gape "oh what, the
| government is going to ban random numbers? oh, the government
| is gonna ban something they can't shut down?" I guess they
| imagine something more dramatic like secret police doing sting
| operations against every crypto user out there. In reality,
| they're making a new stick i.e. once they have already decided
| to prosecute you for something, if they can show you used a
| mixer, this will be just a new charge to throw at you or a
| multiplier on your sentence.
|
| I'm finding it a little difficult to put into words succinctly
| but as an example, they're still going to after e.g. Coinbase:
| the big guys. They're not gonna track down every party
| interacting with any mixer and prosecute because that's hugely
| resource intensive. But now when they go after e.g. Coinbase,
| they have a new tool in their belt. (IMO IANAL.)
| birdyrooster wrote:
| I am sure they see Coinbase as being part of a gigantic
| racketeering operation where the whales game government and
| finance to facilitate black markets.
| NovemberWhiskey wrote:
| You're not sanctioning a mechanism; you're sanctioning an
| entity.
| colinmhayes wrote:
| But it's an entity that is decentralized, and theoretically
| has no owner. It's just an address that takes coins as input
| and spits them out somewhere else. I don't think etherium
| itself will agree to let the government ban people from
| sending their coins to a certain address, so I'm struggling
| to see who exactly the government will be going after.
| NovemberWhiskey wrote:
| How do you think the government goes after exports to e.g.
| North Korea? It goes after people doing the exporting, not
| the North Koreans.
| kube-system wrote:
| None of that matters. Sanctions allow the government to
| prosecute anyone who does transactions with the sanctioned
| entity. Period. It doesn't matter how the technology works
| or whether the facilitators of those transactions cooperate
| with anyone else on anything.
| colinmhayes wrote:
| Well how do you know someone sent their coins through a
| mixer? If they're dumb and go straight from mixer to an
| exchange it's easy, but what if they trade the mixed
| coins for an nft? Is the former nft owner now implicated?
| NovemberWhiskey wrote:
| You don't follow them out of the mixer, you trace back
| from where they went into the mixer.
| colinmhayes wrote:
| The whole point of a mixer is that you want to go from
| psuedononymous wallet to something that can be exchanged
| for fiat without conflating your identity with the crime.
| Presumably everyone putting the money in the mixer hasn't
| linked their identity to their wallet.
| kube-system wrote:
| Of course -- all money laundering attempts to obscure the
| source of money. Usually, launderers get caught when they
| make mistakes, or when money is used for goods or
| services which are more easily observable.
| notch656a wrote:
| I have a brilliant idea to address these privacy
| concerns. Make the bad thing like selling counterfeit oxy
| or whatever illegal, so that the bad thing is illegal
| rather than the money. Then we can make "money
| laundering" not a crime. If it's harder to catch
| criminals then tough shit, our privacy is worth it.
| kube-system wrote:
| It is common and logical to criminalize both the crime
| and the facilitators of a crime. We don't let a getaway
| driver get off scot free from a bank robbery just because
| they weren't the ones pointing the gun inside of the
| bank. Money laundering is, by definition, money obtained
| from criminal activity.
| notch656a wrote:
| We should also prosecute the road crew, because everyone
| knows when they build the road criminals absolutely will
| use it for crime. It's facilitating.
|
| Road crew like many tornado cash users, they have no
| "mens rea" intent to aid money launderers, even though
| they have knowledge it can happen. By your below logic
| the courts find Tornado Cash user not guilty of "mens
| rea" money laundering.
|
| >Edit to reply to your edit (why not post a reply?):
| that's exactly why they have been added to the sanctions
| list explicitly, rather than prosecuting users for money
| laundering.
|
| Awesome, roads used by money launderers should be
| sanctioned as well so "legitimate" users can't use them
| either, everyone who built them knew they would be used
| by criminals and so do the people paying the fuel taxes
| that maintain them so criminals can drive on them. I'm
| replying this way because I've run out of replies (I can
| only reply 5 times per 3 hours).
| kube-system wrote:
| No. Western court systems are not a dumb box of logic
| gates; they evaluate mens rea.
|
| Edit to reply to your edit (why not post a reply?):
| that's exactly why they have been added to the sanctions
| list explicitly, rather than prosecuting users for money
| laundering.
| kube-system wrote:
| How do you know the cash you got out of the ATM hasn't
| been in North Korea? You don't, and you wouldn't be
| guilty of sanctions violations even if they were.
|
| You violate sanctions if you transact with a sanctioned
| entity. It is that simple.
|
| If the NFT owner accepts coins from a sanctioned address,
| then yes, they have violated sanctions.
| colinmhayes wrote:
| So if a sanctioned address sends coins to a different
| address and that address trades for an nft the nft owner
| has violated sanctions? So now every time you exchange
| crypto you have to check if the other party is on a
| sanction list? What if you want to make a wallet illicit?
| Don't you just need to mix some coins and send them to
| that wallet?
| kube-system wrote:
| Again, this is all very simple. Someone who transacts
| with an address that is on a sanctions list is in
| violation of sanctions.
| colinmhayes wrote:
| So all you have to do is send your coins to a new address
| once they've been mixed? Who's to say the same person
| owns both wallets?
| kube-system wrote:
| Yes, sanctions lists are a cat-and-mouse game.
| Cryptocurrencies did not invent this dynamic. Dictators
| have been doing the same with shell companies and
| offshore bank accounts for decades.
| Sargos wrote:
| > Again, this is all very simple. Someone who transacts
| with an address that is on a sanctions list is in
| violation of sanctions.
|
| You sound like one of those devs who shunned Dropbox
| because it's just a simple internet backed up folder you
| could implement with rsync and some python.
|
| The world isn't that simple and if these "simple rules"
| turn out to be too complex to easily reason about we as a
| society will just ignore them.
| kube-system wrote:
| I'm just telling you how the sanctions work. That part
| _is_ simple.
|
| Yes, this could have some complicated implications for
| _compliance_ with that law. This is why big banks employ
| thousands of people in their compliance departments. If
| you 're in country [x] and you're transferring money, you
| have to follow laws on transferring money in country [x].
|
| Now yes, if compliance is hard, observed compliance may
| be low. This affects many laws on the books, and if it
| becomes a problem for regulators, they may take further
| action to improve enforcement, as they did with capital
| gains on crypto transactions at exchanges.
|
| This has nothing to do with rsync/dropbox.
| harporoeder wrote:
| As far as I understand coins don't have a unique ID rather
| wallets have balances. There is not a list of serial numbers to
| compare against. So if you want to ensure money is not coming
| from a mixer you have to look at the flow graph of
| transactions. But this line is kind of unclear. One one extreme
| you could ban any wallet that has used a mixer, on the other
| extreme you could ban every wallet that is anywhere in the
| graph involved with a mixer for example someone that used a
| mixer sends you money for coffee, you send someone else money,
| and now all three of you are banned, which probably trends
| towards a substantial portion of the network.
| anticensor wrote:
| Depends on the type of cryptocurrency. Ethereum is an account
| number system. Bitcoin and Monero are TXIN/TXO systems.
| birdyrooster wrote:
| The fed is going to shutdown crypto because to do business is
| to implicitly be party to a racket. It has no real uses beyond
| the black market as we have learned over the past 14 years.
| zaphar wrote:
| They can track all funds that exit the mixer. They may not know
| _how_ those funds got in the mixer but they can require all
| exchanges that have a legal presence under their jurisdication
| to reject any funds who 's history originates from the mixer.
|
| And yes, taken to an extreme it does indeed mean that every
| coin becomes inaccessible given enough time. Welcome to the
| real world consequences of interacting with systems that are
| counter to wider societies aims.
| vl wrote:
| This is exactly what exchanges _already_ do.
| concordDance wrote:
| > Welcome to the real world consequences of interacting with
| systems that are counter to wider societies aims.
|
| I don't think there's good evidence that this is counter to
| broader society's aims, just that it's counter to the power
| of the US state (which always wants its power to grow).
| lokar wrote:
| I'm quite sure what the outcome of a poll in the US and EU
| would be that asked:
|
| Should it be legal to offer, or use, a service that masks
| the origin and destination of currency transactions from
| law enforcement who have obtained a proper court order.
|
| Don't kid yourself, the tech/crypto crowd is not anywhere
| near average sentiment.
| gfodor wrote:
| That's just one frame on the question at hand, that tilts
| the poll in one direction.
|
| The principle at hand here is if online transactions
| ought to have a floor on visibility by law enforcement
| higher than using cash. So there are other versions of
| the question that would get you different answers.
| game-of-throws wrote:
| You can tilt any poll any way you want with exaggerated
| language. Surely you know this, and it's why you biased
| the question the way you did.
|
| > Should phone carriers be required to divulge text
| messages to law enforcement who have obtained a proper
| court order?
|
| vs.
|
| > Should government workers be allowed to spy on your
| dick pics?
|
| https://www.youtube.com/watch?v=XEVlyP4_11M
| zaphar wrote:
| A mixer doesn't fit that definition. Even if they
| obtained a court order they may not be able to provide
| the information. You are moving the goal posts.
| qeternity wrote:
| Some laws state things you must not do, and others state
| things you must do. Financial regulations tend to fall
| into the latter. Thus a service that cannot comply with
| these things is illegal.
|
| It's not moving the goal posts. It's just the real world.
| lokar wrote:
| Law exists to support social goals. If rules and "goal
| posts" must be changed to achieve the goals, they will
| be.
| lern_too_spel wrote:
| The people have voted that they would rather have KYC than
| criminal organizations operating at scale and foreign
| governments stealing from Americans. You may disagree, but
| your position is against that of society at large. You are
| perfectly free to exit society and transact only outside
| it.
| aaaaaaaaata wrote:
| > The people have voted that they would rather have KYC
|
| Source? Paraphrased from what the other commenter said:
| Um, no.
| game-of-throws wrote:
| Interesting logic. Would you say the people have also
| voted for the war on drugs?
| giaour wrote:
| US voters, at least, have voted in representatives at all
| levels of government based on campaigns centered around a
| "tough on drugs" message, especially during the crack
| cocaine moral panic of the early 90s. It's not much of a
| stretch to say the people have voted for the war on
| drugs, even if those policies would not survive a
| referendum or plebiscite today.
| Sargos wrote:
| There has never been a vote on KYC/AML policies and my
| research does not turn up any neutral sources suggesting
| the population strongly supports these rules.
|
| In fact history shows that these rules are almost all
| dictated by a small group of people with little to no
| public input. Over a hundred years ago none of these laws
| existed and society survived. 100 years from now I doubt
| these concepts will be widespread and society will still
| function well.
| lern_too_spel wrote:
| Without these laws, the wealthy don't pay taxes, criminal
| organizations grow without bound, and foreign governments
| easily avoid sanctions. As money movement became easier,
| so governments couldn't stop that movement by issuing
| letters of marque, these laws became essential.
| notch656a wrote:
| So basically these laws perpetuate the status quo while
| consolidating power in the more evil and violent
| organizations that dodge these sanctions while
| subjugating the privacy conscious.
| lern_too_spel wrote:
| These organizations follow the law and are therefore
| easily in our control. North Korea and large criminal
| organizations do not and are not. It makes no sense to
| say that some organizations are behaving badly, so we
| should give up trying to regulate all organizations.
|
| If you're really trying to argue that, you should argue
| that tradfi banks should be unregulated. Then you can get
| your money-laundering done even more cheaply than
| inefficient decentralized protocols can manage.
| notch656a wrote:
| >If you're really trying to argue that, you should argue
| that tradfi banks should be unregulated.
|
| Precisely, I do think tradfi banks should be unregulated,
| with full knowledge that will enable more efficient
| "money laundering" for some (of course for many of the
| consolidated powers that be that suck up power when the
| small guys are blocked, it's no different at all)
|
| >It makes no sense to say that some organizations are
| behaving badly, so we should give up trying to regulate
| all organizations.
|
| Blocking all users of Tornado Cash because of some
| organizations that behave badly is exactly the kind of
| logic you're impugning with your statement here. We
| shouldn't give up on all Tornado Cash transactions
| because some are bad. You contradict yourself.
| notch656a wrote:
| >You are perfectly free to exit society and transact only
| outside it.
|
| Except I'm not because it applies to 'US Persons' which
| for US citizens applies to them anywhere they are on
| earth or even on another planet. Also to not be a US
| citizen requires paying what is for many people a
| prohibitive exit tax of thousands of dollars to renounce.
| That is, you can exit society and still run afoul of the
| law.
| dcolkitt wrote:
| > Welcome to the real world consequences of interacting with
| systems that are counter to wider societies aims.
|
| ...said every totalitarian government in history
| arberx wrote:
| Whatever your stance on crypto, privacy should be a fundamental
| right.
|
| Remember, the most privacy-preserving way of trade is dealing
| with cash, yet no one sees it as "criminal."
| wmeredith wrote:
| > yet no one sees it as "criminal."
|
| The government seizes cash all the time for no other reason
| than the cash itself existing.
|
| Between 2000 and 2016, CBP and other DHS agencies conducted at
| least 30,574 currency seizures at airports, taking over $2
| billion in total. Over two-thirds of all cases involving
| currency seized at airports were not accompanied by an arrest.
| Sources: https://www.washingtonpost.com/local/trafficandcommuti
| ng/hom..., https://ij.org/report/jetway-robbery/
| hervature wrote:
| I agree wholeheartedly that the price of maintaining the
| privacy of cash and stopping these seizures, even if +90% of
| these seizure cases were legitimately illegal earned cash,
| benefits the people more than the opposite.
|
| That being said, I think there are more pervasive rules in
| our society that makes these seizures mild in comparison.
| Using the numbers you posted, that's $65k per seizure.
| Individuals carrying around the median annual household
| income is much more suspect than the $10k deposit limit that
| must be reported to the IRS. If law abiding folks get hassled
| for $10k, then $65k is obviously questionable. I think banks
| should not have to report anything but at the very least the
| limit should be $1M. $10k is a good day (Christmas, Black
| Friday, etc.) of sales for many regular people. Hell, even
| bartenders can make $10k in tips over the course of months
| not even years.
| janandonly wrote:
| I did not know this. Thanks for sharing.
|
| The #waroncash is real then?
| tepitoperrito wrote:
| Yeah, it just hasn't moved fully west. I remember India
| proposing phasing out cash for "reasons". How soon till we
| start seeing serious pushes remains to be seen.
| arberx wrote:
| Seizing cash is different than blanket banning privacy
| services.
|
| Of course, there is a large spectrum of cases here with many
| outliers.
| bhawks wrote:
| Doesn't anyone find property seizures without due process a
| bit concerning?
|
| I am sure there were a few mistakes made across those 16
| years and 2 billion dollars.
|
| Civil asset forfeiture needs some reform. Even if you go to
| court you need to prove your innocence - a much higher bar
| then traditional court cases.
| jjoonathan wrote:
| PRISM makes a mockery of the "search" part of the 4th
| Amendment, Civil Asset Forfeiture makes a mockery of the
| "seizure" part.
| mrtksn wrote:
| I wouldn't know about the specific situation in the USA but
| here in Europe(EU or not), cash seizures happens at the
| borders all the time and the due process is that you need
| to be able to explain the origin of the money.
|
| It is a popular theme for Turks working in Germany having
| their cash seized by Serbia on their way to a vacation in
| Turkey. This is because, the Turkish diaspora in Germany is
| predominantly blue collar due to the nature of their
| immigration(long story short, many years go Germany
| requested workers for their factories, many Turks took the
| opportunity) and they have a lot of opportunities to deal
| with cash and not pay tax on it.
|
| Essentially, Turks who do "tax-free" business buy
| properties in Turkey and there's a common fraud to claim
| benefits because on the books they look very poor, so they
| definitely don't want that money to go into the books and
| the Serbian police apparently caught up with it.
|
| Anyway, the fraud is about to be solved not by seizure of
| assets but by data-sharing agreement between EU and Turkey,
| the Turkish banks and the state will report the properties
| and assets to EU&UK for anti fraud purposes. There are many
| pissed off people about it.
| jeroenhd wrote:
| Privacy is a fundamental right, so using cryptocurrency that
| happen to post your transactions publicly is highly
| questionable when assuming all rights are absolute.
|
| However, your right to privacy ends where money laundering and
| fraud begin. These are real problems that get in the way of
| catching criminals, and not just simple fraudsters and other
| non-violent liars.
|
| Every paper bill has a unique serial number that gets tracked
| by banks to trace stolen money. I don't know about any
| dedicated privacy companies that will take your money and
| exchange it for random bills of equal value, but if they exist
| I'd expect the police to have an interest in them, and for good
| reason. Sure, you could use "privacy" as a reason to visit them
| regularly but I doubt you'll convince anyone.
| nprz wrote:
| > However, your right to privacy ends where money laundering
| and fraud begin. These are real problems that get in the way
| of catching criminals, and not just simple fraudsters and
| other non-violent liars.
|
| Should gov also scan every photo on your phone for criminal
| activity? Install cameras in your home? If your right to
| privacy ends when there is potential for crime then you'll
| have no privacy at all.
| collegeburner wrote:
| My right to privacy ends when _i_ start engaging in money
| laundering or fraud not when somebody else does. Otherwise
| this is a stupid argument because there will _always_ be
| somebody engaging in money laundering or fraud so there will
| never be privacy. There 's no justification to say "oh well
| it's possible you're engaging in one of those so we have to
| remove your privacy so we know. But it's to keep everybody
| safe/for the children/insert bullshit excuse here so what do
| you have to hide!"
|
| And bills probably shouldn't be serialized for that exact
| reason. My right to privacy is more important than anybody's
| right to feel "safe" from the evil bad guys. The correct
| answer to stopping crime is to stop crime, not to weaponize
| our financial system and remove civil liberties.
| NovemberWhiskey wrote:
| ... and like most rights, it's not an unbounded one.
| concordDance wrote:
| Allowing the US state to violate it might be a case of the
| cure being worse than the disease.
| acdha wrote:
| We don't need to say "might" - this has been the case for
| ages, and we can see how that's gone. This looks like
| Tornado has had enough volume that the Treasury department
| cares about applying existing laws to it, but fundamentally
| this doesn't seem to be different from Visa requiring
| foreign transactions to follow the U.S. rules.
| NovemberWhiskey wrote:
| The operation of any well-operating nation state is always
| going to involve limitations on the right to privacy. It's
| facile to think otherwise.
|
| The police need, within certain guardrails, to be able to
| search private property for evidence during investigations.
| Civil suits are going to require some element of discovery.
| Tax authorities are going to need to perform audits. Your
| landlord is going to need to come into your apartment to
| fix a leaking pipe if you're away.
| newaccount2021 wrote:
| jahewson wrote:
| No, there should be no right to launder money. Just as there is
| no right to hate speech despite there being a right to speech.
|
| Laundering cash is illegal too!
| hvs wrote:
| Hate speech is not illegal in the U.S.
| eric_cc wrote:
| TornadoCash is not only for laundering. When you buy ETH on a
| centralized exchange, send to a self-custody wallet, they can
| then watch your funds and perform on-chain analytics on you,
| etcetc. Tornado Cash helps fix this.
| maerF0x0 wrote:
| And unless treated extremely extremely carefully, BTC does not
| offer privacy. (pseudonymity at best, but in practice not
| enough)
| lysergia wrote:
| That's the double edged sword of cash. Whilst it guarantees
| privacy, it also enables criminal transactions.
| arberx wrote:
| Your legal system defines "criminal" activity. What's legal
| in the US might not be permitted in Russia.
| jayd16 wrote:
| There are indeed oversight laws around cash and no one is
| saying cash has to go away.
|
| You would need to make the follow up argument that crypto
| should be treated like cash for some reason.
| newaccount2021 wrote:
| emkoemko wrote:
| in US of A your cash is criminal police will take it and then
| you have to go to court and prove that it not criminal.
| tovej wrote:
| Cash doesn't tend to bypass international capital regulations
| quite as easily. It also doesn't waste a ton of useless energy
| when used.
| jc_811 wrote:
| Privacy is a right, absolute privacy is not. The issue is
| finding the area on the spectrum that works in our modern
| interconnected world.
| throwaway-jim wrote:
| What's the difference?
| jc_811 wrote:
| An example would be you have the right of keeping your bank
| account activity shielded (private) from the government by
| default. But, if you are participating in human trafficking
| you lose that right (it's not absolute) and the government
| can go in to track your activity to prevent further human
| abuse.
|
| Of course, this is an easy example with an obvious
| right/wrong. In the real world situations are all over the
| place, so our goal should be to constantly strive to find a
| more perfect balance.
| ska wrote:
| > What's the difference?
|
| There is an idea of balance of interests between the
| individual and the society. This is why for example your
| employer has to report salary data directly to the
| government but there are laws in place that control who
| else they disclose that too and under what circumstances.
| See also, for example, sex-offender registries, census
| gathering, etc.
|
| NB: I'm not offering comment on whether or not the balance
| on those cases (or others) has been made _correctly_ , just
| pointing out that it is a generally accepted concept in
| modern "western democracies" at least, and seems to be held
| by the majority of citizens unless you get pretty deep into
| the tails.
| arberx wrote:
| Agree.
| yunohn wrote:
| I'm not sure an expensive and energy wasting laundering
| solution is the way to solve privacy concerns. This also
| ignores the fact that it only really offers privacy for simple
| transfers, not for when you actually pay for a
| service/product/goods.
| monnies wrote:
| Funny you should say that. Let me introduce you to a little
| thing called civil forfeiture.
| rocket_surgeron wrote:
| You have the right to privacy.
|
| Privacy is not, has never been, and will never be, equivalent
| to full perfect anonymity.
| eric_cc wrote:
| I'm not sure what your point is by saying that perfect
| privacy does not exist.
|
| > privacy - noun - the state or condition of being free from
| being observed or disturbed by other people.
|
| We have the right to privacy and this is what privacy means.
| rocket_surgeron wrote:
| It is difficult for me to explain because I very rarely
| deal with in absolutes and have found that most people want
| online discourse to be in absolute terms.
|
| One thing I've done when talking to cryptobros and other
| privacy extremists is ask them to think back to a time (and
| we all know they've all done it) when they railed non-stop
| against the "banksters" and consider how much more power
| and influence they would have if the rules they themselves
| want regarding privacy are applied evenly to all
| circumstances.
|
| There are a few people, and I'm inclined to believe them,
| who say "yeah Capital One and Deutsche Bank have the right
| to mask their cartel money laundering activities under the
| concept of absolute anonymity and any attempts at know-
| your-customer or records-keeping requirements for banks are
| antithetical to freedom" but they are very rare.
|
| Again, I believe those people are being earnest because I
| know extremists exist for every position.
|
| But most people just shout "THAT'S DIFFERENT", get angry,
| and call me a boot-licker or something like that.
|
| edit: another scenario I use is:
|
| Privacy-conscious business owner: Hello yes, I would like
| to start a business selling car seatbelts whose webbing is
| impregnated with a fire retardant that we know will cause
| fatal cancer.
|
| Evil Government: Ok, please fill out this paperwork to get
| a business license and provide points of contact so people
| can sue you when they get cancer from their seatbelts.
|
| Privacy-conscious business owner: No. That is a violation
| of my rights. I have the right to perfect anonymity.
|
| Evil Government: I suppose you've got us there! Have a nice
| day.
| kube-system wrote:
| If you attempt to launder transactions on cash ledgers, it is
| also illegal.
| whoknew1122 wrote:
| Rights, including the right to privacy, must necessarily have
| limits.
|
| The right to privacy doesn't mean you can facilitate money
| laundering with impunity. Just like my right to privacy doesn't
| mean I can blind everyone in a shop if I don't want them to
| know what I'm buying.
|
| > Remember, the most privacy-preserving way of trade is dealing
| with cash, yet no one sees it as "criminal."
|
| Try to buy a one-way airline ticket with cash and see if you
| don't have suspicion fall upon you.
| yokem55 wrote:
| Sure, rights do have limits. But those limitations should
| have to go through due process before being applied. A few
| folks in the treasury department making a list of addresses
| without any kind of process for proving that the humans
| involved have engaged in wrongdoing is not compatible with
| the idea of limited government in a free society.
| boredumb wrote:
| Imagine a world where when you so much as board an airplane -
|
| "Sir are you carrying more than .5 bitcoins in a physical
| wallet on your persons, 10,000$ in cash, illegal drugs or
| cigarettes?"
| shakezula wrote:
| I don't need to imagine. I was searched at Berlin Tegel (RIP)
| and they specifically asked me if the devices I was carrying
| (2 laptops, a work and a personal one) contained
| cryptocurrency wallet information. This happened in 2018.
| rich_sasha wrote:
| I just finished reading "Billion Dollar Whale", about Jho Low
| and 1MDB scam. In a nutshell, enabled by corrupt politicians
| and bankers, one guy and his entourage embezzled multiple
| billions (not a typo) from Malaysian budget, effectively
| stealing from Malaysian people.
|
| They get eventually caught, and substantial assets are
| recovered - real estate, jewelry, art, luxury yachts. Not all.
| But in a world of fully anonymous crypto, these guys would
| either never get caught, or would vanish into thin air with
| their Ledgers, and that's that.
|
| I used to think, haha, crypto, buy some drugs with it, but this
| really scared me. I'm not _anti_ crypto, and I quite like the
| technology, but this kind of "mine and no one else's business"
| attitude terrifies me.
| jjulius wrote:
| >Remember, the most privacy-preserving way of trade is dealing
| with cash, yet no one sees it as "criminal."
|
| Except for, ya know, when you launder that cash, kinda like
| what Tornado does...
| bpodgursky wrote:
| I don't think that's true.
|
| "Laundering" cash means making declaring fraudulent income
| from a business to make the cash income look legitimate. From
| the perspective of the tax authorities, it doesn't matter
| whether you have the "same" 100 ETH you had on Thursday, the
| question still remains whether you have undeclared income.
|
| This is more like... depositing hundred dollar bills at a
| bank, and then withdrawing different ones from an ATM.
| jjulius wrote:
| Laundering isn't specific to just declaring fraudulent
| business income to make your income look real, it's broadly
| about masking the origin of illegally-obtained money,
| whatever that may look like. Mixers such as Tornado mask
| the origin of one's money.
| eric_cc wrote:
| What if you buy ETH on coinbase and use tornado cash to
| simply stop coinbase from spying on your funds?
| [deleted]
| jjulius wrote:
| ... what if? I'm not seeing the relevance to my point.
| sampa wrote:
| The Worse, The Better (c) Lenin
| Scoundreller wrote:
| > As a result of today's action, all property and interests in
| property of the entity above, Tornado Cash, that is in the United
| States or in the possession or control of U.S. persons is blocked
| and must be reported to OFAC.
|
| > In addition, any entities that are owned, directly or
| indirectly, 50 percent or more by one or more blocked persons are
| also blocked.
|
| > All transactions by U.S. persons or within (or transiting) the
| United States that involve any property or interests in property
| of designated or otherwise blocked persons are prohibited unless
| authorized by a general or specific license issued by OFAC, or
| exempt.
|
| > These prohibitions include the making of any contribution or
| provision of funds, goods, or services by, to, or for the benefit
| of any blocked person and the receipt of any contribution or
| provision of funds, goods, or services from any such person.
|
| (Formatting added because I'm not a moron)
|
| Seems like you can continue using it if you're not in the US, not
| transacting with someone that is and not with anyone on their
| sanctions list?
|
| Assuming the operators aren't in USA and aren't running
| transactions there. If this is a decentralized app, how is a
| miner supposed to avoid crunching these processing cycles?
|
| Not a lawyer
| whoknew1122 wrote:
| But Tornado is a mixer. If you're outside of the US, and your
| coin is co-mingled with US-based coin, you got an issue.
| Granted, that issue is with the US.
|
| So if your country won't play ball with the US, you should be
| fine. But if you're in pretty much any industrialized country,
| it's probably not worth the risk.
| JumpCrisscross wrote:
| > _if you're not in the US, not transacting with someone that
| is and not with anyone on their sanctions list?_
|
| And not in a country that extradites to the U.S., or every
| planning on going through one. Or using U.S. dollars. Or the
| currencies of its allies.
|
| This is OFAC. Violating its sanctions is akin to doing business
| with North Korea or Iran. People do it. But you're going to
| have a different lifestyle.
| trustnull wrote:
| > _And not in a country that extradites to the U.S., or every
| planning on going through one. Or using U.S. dollars. Or the
| currencies of its allies._
|
| Only US persons faces criminal prosecution for sanction
| violations. Non-US persons face secondary sanctions which is
| still quite serious penalty.
| Scoundreller wrote:
| I didn't see that.
|
| Could a Canadian continue to pay their Canadian neighbour for
| mowing their lawn through tornado or not?
| JumpCrisscross wrote:
| > _Could a Canadian continue to pay their Canadian
| neighbour for mowing their lawn through tornado or not?_
|
| They'd get arrested and lose all their money. So in
| practice, no.
| Scoundreller wrote:
| Under which term of the sanction?
| JumpCrisscross wrote:
| > _which term of the sanction?_
|
| What? These powers emanate from trading with the enemy
| and other wartime acts [1]. Violating sanctions can
| literally authorise U.S. military countermeasures.
|
| Tornado helped Pyongyang finance its missile programme.
| That's the colour of law we're discussing.
|
| [1] https://en.m.wikipedia.org/wiki/Office_of_Foreign_Ass
| ets_Con...
| maerF0x0 wrote:
| "First they ignore you, then they laugh at you, then they fight
| you, then you win." -- misattributed to Ghandi
| WJW wrote:
| Gandhi had the benefits of the English being war-weary after
| WW2 and the world being swept by a wave of anti-colonialism at
| the time. Quite often it actually ends well before the "you
| win" stage. The "Occupy Wall Street" people never really got
| further than step 1, for example.
| maerF0x0 wrote:
| Yes, it' definitely not a law of physics. It's an adage of
| value for a reason though too. It's about perserverance, if
| you can tolerate the previous steps indefinitely then there's
| a high probability you'll arrive at a later step.
|
| I would say Occupy got at least to step 2 or 3 before they
| gave up.
| WJW wrote:
| I thought of a better example: Fidel Castro surely
| persevered right up until the end, but despite leading Cuba
| for almost 50 years it's a stretch to say he "won" in any
| significant way against the US.
| Ekaros wrote:
| Cuba still does not have puppet regime installed by
| USA... So in that sense they did not lose.
| [deleted]
| giancarlostoro wrote:
| Wonder when they will attempt to go after the biggest mixer of
| all: Monero itself, I often wonder if that's the sole reason
| CoinBase refuses to add it to their exchange, to avoid the legal
| hell that would ensue.
| daoist_shaman wrote:
| Generally when this happens, I assume services
| allowed/permitted by the fed are backdoored to the fed's
| advantage. Monero could be an excellent example.
|
| It's the tech they they haven't backdoored that poses a threat
| to their surveillance/control model. Tech like Tornado.
| nootropicat wrote:
| Exactly. Monero's ringct model is easy to break statistically
| given some resources. Fees aren't that high. It's practical
| for a state to know 75+% of spent outputs by a combination of
| exchange info exchange and spamming. In addition there's zero
| output privacy (meaning honeypot->suspect->exchange creates
| extremely strong links when repeated).
|
| Zcash is good, but not popular. Same for zk.money
| cantSpellSober wrote:
| Can you explain more about how/why Zcash doesn't share a
| weakness that could be exploited given the resources of the
| state
| nootropicat wrote:
| The anonymity set is the best theoretically possible -
| everyone in the shielded set. It's the same for zk.money
| and tornado - the difference compared to tornado is that
| tornado has fixed amounts.
|
| There's no possible attack to deanonymize the full zero-
| knowledge model beyond the utilization of always existing
| metadata - which needs separate solutions for every such
| system. In practice, zcash doesn't have that many users,
| so the anonymity set isn't big, but that's a separate
| issue to technology.
|
| The question which one is better in practice right now is
| a more complex one. Even a perfect solution like
| zcash/zk.money is useless if (just a random number) only
| 3 people use it, and ringct with (again a random number)
| 100k separate people with roughly equal tx count would
| obviously win. My estimate is that tornado.cash is the
| most anonymous. Monero is hard to estimate because
| there's no way to know how many spent outputs are known
| to the American government and/or cooperating chain
| analysis companies. Is it <1%? Then it's probably second
| best. Is it 90%? Run away.
|
| Last but not least monero can be deanonymized
| retroactively by quantum computers. Tornado, zk.money and
| zcash can't - they can be robbed (monero can be robbed
| too, obviously) but that's a much better failure mode.
| dougk16 wrote:
| Another possibility is they want to keep eyes off tech that
| people would go to in droves if they outright banned it. They
| want to avoid the Streisand effect. Part of that play is
| indeed making people think it's already backdoored. There is
| a big push to promote that narrative. Whether it's true or
| not, who knows!
| stiltzkin wrote:
| Monero is not a mixer as Tornado.
| JumpCrisscross wrote:
| > _the biggest mixer of all: Monero_
|
| Tornado is a straight up money laundering (specifically,
| layering [1]) service. Monero _can_ be that. But it 's also
| other things, which makes it at the very least defensible in a
| way someone interacting with Tornado is not.
|
| [1] https://www.stpaulschambers.com/stages-of-money-
| laundering-e...
| grw_ wrote:
| I don't think it's fair to say it's exclusively used for
| money laundering, it surely can be used to obscure the origin
| of funds but I think 'money laundering' label requires that
| the motive be financial profit. If you just want to preserve
| privacy while interacting with ethereum network without
| financial gain, tornado is a great tool to accomplish that.
| seanw444 wrote:
| No, we must ban things that serve multiple purposes if they
| also serve a use to criminals.
| stiltzkin wrote:
| Ban USD.
| anotherrandom wrote:
| Ban cars because they can be used for robbery getaways
| pcthrowaway wrote:
| Not Teslas though, because they will snitch on you:
| https://news.ycombinator.com/item?id=32384827
| garbanz0 wrote:
| A weakness of Ethereum is that it's difficult to obscure how
| much money you have, but Tornado can untraceably separate
| your cold wallet from your hot wallet. That's a totally
| legitimate use. While it's used a lot for money laundering,
| TC is morally agnostic, just like real cash.
| jchanimal wrote:
| This is an important use case. I suppose according to these
| new rules, in the long run you'll be only allowed to use
| the government's mixer. Which would provide some anonymity
| at least until the logs are hacked or the service is
| privatized.
| notch656a wrote:
| Kraken has had it listed for ages in the US without enduring
| "legal hell."
| lysergia wrote:
| The Treasury should setup several mixer honeypot services to find
| out who's tumbling dirty money. This would be far more effective
| and would turn people off using mixers (at least for a while) and
| would uncover a vast criminal network.
| olalonde wrote:
| Tornado Cash uses zero knowledge proofs. No one, not even the
| creators of the smart contract, can break the privacy of the
| protocol.
| bragr wrote:
| That's standard operating procedure when the feds seize these
| kinds of things: run it for a bit to gather even more evidence.
| sam0x17 wrote:
| Do they even know who they are, or is this more like a strongly
| worded letter?
|
| edit: It's a russian guy, in russia, so in practice might be more
| like a strongly worded letter. Downstream effects are more like
| financial institutions are going to block assets that appear to
| have gone through this mixer, but I have my doubts that that is
| practical, especially if the mixer ups the complexity.
| i67vw3 wrote:
| I predicted it 3 months back
| https://news.ycombinator.com/item?id=31288544#31291943
|
| Mixers are really great at doing stuff they claim to do, and they
| do work as intended.
|
| Tornado.cash was next no matter what, it was just 'when'.
| xeromal wrote:
| Haha! Nice job! I love seeing someone proven right.
| rvz wrote:
| Anything aiding privacy such as privacy coins, mixers, etc will
| be banned by the exchanges, authorities and other centralized
| entities which can detect that the coins have been through a
| mixer.
|
| Given that many regulators have already banned and delisted
| some privacy coins from being exchanged, it is not a surprise
| to see Tornado.cash and other mixers also being banned by
| exchanges.
| jsmith45 wrote:
| It is worth noting that the Treasury clearly indicates that the
| concept of a mixer while inherently risky, could be fine
| designed such that it can't easily be used for illegal money
| laundering.
|
| For example, if a smart contract mixer was designed to hold
| incoming funds in abeyance until the submitter contacts the
| operator, provides proof of identity, proof of source of funds,
| etc, and once everything is checked out was finally given some
| signed token that they can send to the mixer to release the
| funds from abeyance, at which point it starts getting mixed
| with other transactions, that might potentially be acceptable.
|
| The checking needed is to stay on the treasuries good side is
| probably slow and complex (and require the operator to take a
| substantial fee), possibly to the point where no such mixer
| could get enough transaction volume to actually function, but
| it is in principal possible. Note this works even when the
| contract's design is such that the operator cannot possibly
| determine which output comes from which inputs.
|
| But Tornado Cash by design cannot do anything to even attempt
| to prevent criminals from using it, which is why it got
| sanctioned.
| Ekaros wrote:
| So much for censorship resistance... So what is left?
| anotherrandom wrote:
| TornadoCash is left because it's still usable despite the
| sanctions?
|
| This has zero impact on peoples' ability to use the service.
| Just chain hop a few times with privacy coins if you want to
| cash out on a cex
| PretzelPirate wrote:
| It's still censorship resistant even after the sanction was put
| in place. Can you point to what transactions are being
| censored? People can still use Tornado cash without the US govt
| being able to stop them.
| latchkey wrote:
| I wonder if this will finally create a market for freshly minted
| coins.
| SXX wrote:
| Now we just need someone to take some coins from Tornado Cash and
| send them to top 10,000 or something active crypto addresses like
| one CoinBase / Binance / etc using...
|
| It would be interesting to see what U.S. Treasury will do.
| Ekaros wrote:
| I was just wondering same, why not now run them through the
| major defi products? See the market reaction for fun.
| SXX wrote:
| This will happen sooner or later so this attempt looks
| totally unenforceable.
| zaphar wrote:
| Coinbase just hands the coins over to the Treasury and problem
| solved.
| SXX wrote:
| Coinbase could do it, but if someone sent these "bad" coins
| to your personal address? Let's say if you're major NFT owner
| or if you're collecting money for your non-profit via crypto.
|
| What I saying is that just for $10,000-100,000 you can
| literally taint 90% of crypto ecosystem.
| 8note wrote:
| What's stopping the non-profit from handing those coins
| over to the treasury?
|
| Not being able to decline a transaction is a design flaw
| for crypto. This will push people towards fixing it
| notch656a wrote:
| It wouldn't surprise me if 90% of the crypto with any
| velocity is already "tainted" TBH. It would be easy to
| "pepper" everyone's addresses with small (in BTC vernacular
| satoshi sized) amounts of "tainted" currency, subverting
| the whole system.
| SXX wrote:
| I guess US Treasure not going to be after every satoshi,
| but large transactions. So it's just gonna make usage of
| mixers more expensive for huge amounts of crypto as
| you'll need to split it to small transactions and pay
| more fees.
|
| Also fact that every coin is tainted is a good reason to
| demand absolutely all data possible from CoinBase and
| other companies.
| latchkey wrote:
| https://twitter.com/SecBlinken/status/1556661834287140868
| We will continue to aggressively pursue actions against currency
| mixers laundering virtual currency for criminals. Today,
| @USTreasury sanctioned virtual currency mixer Tornado Cash, which
| is a U.S.-sanctioned, DPRK state-sponsored hacking group, used by
| the DPRK to launder money.
|
| Except it is a Russian guy.
|
| https://twitter.com/semenov_roman_
| DantesKite wrote:
| He deleted the tweet lol.
| latchkey wrote:
| Good thing the internet remembers.
|
| https://web.archive.org/web/20220808155413/https://twitter.c.
| ..
| jjulius wrote:
| You'll note that, in the first paragraph of the US Treasury
| announcement that this thread is about, it says:
|
| >This includes over $455 million stolen by the Lazarus Group, a
| Democratic People's Republic of Korea (DPRK) state-sponsored
| hacking group that was sanctioned by the U.S. in 2019, in the
| largest known virtual currency heist to date.
|
| There's nothing preventing one country from supporting or using
| a hacker group in another country.
| 29083011397778 wrote:
| The implication being that America can't sanction a Russian
| dude, and North Korea can't sponsor him, or use a service he
| provides?
| latchkey wrote:
| Update: the 'fixed' version:
| https://twitter.com/SecBlinken/status/1556677862345801728
| [deleted]
| 71a54xd wrote:
| I'm surprised a DAO hasn't been established to effectively "fork"
| mixer code into a new org every time an existing mixer is
| investigated or sanctioned. Ironically, I'd bet the creators of
| Tornado Cash will simply auction their codebase to the highest
| bidder - an NFT owning the source code of a mixer could be a
| really interesting passthrough entity if you were simply
| "licensing" access to the NFT...
| WFHRenaissance wrote:
| The code is already public on IPFS I think.
| whatisweb3 wrote:
| Pretty dumb but not surprising. Private transactions should not
| be something that is criminalized, but it is taking a trajectory
| like reefer madness and the drug war. User seeking financial
| privacy is now put in the same group as terrorists. Reminds me of
| arguments being made by governments around tightening the use of
| end-to-end encrypted chat apps.
|
| Since this is a decentralized application running as an Ethereum
| smart contract with IPFS[1] interface, the move will not actually
| deter any state actors from using this, but will criminalize and
| stigmatize regular users who want to anonymize their Ethereum
| transactions.
|
| The end result may be as the government wants: force users back
| to fiat so they can maintain maximum control of funds, and anyone
| left in the mixer is default a criminal.
|
| [1] ipfs://QmU3j1B1UagFbfqgwWBu3yk1La657y8hoGoA24fG3QpPjf
| tantalor wrote:
| If crypto mixers are outlawed, only outlaws will use crypto
| mixers.
|
| This doesn't actually sound so bad.
|
| If you seek transactional privacy, then maybe don't use global
| systems. Try back alley instead.
| whatisweb3 wrote:
| Users will be forced into other systems that are less tested
| and less regulated, forced to tie their wallet to the public
| ledger, or forced to pay high fees to centralized exchanges
| to achieve similar privacy.
|
| One compromise would be a US-based smart contract mixer that
| provides strong privacy but allows the US government to
| request transaction history in extreme cases. These addresses
| can then be sanctioned, frozen by USDC and barred by all
| regulated CEX.
| uncomputation wrote:
| That's not a compromise at all to me. That's total
| capitulation. Once any party has the right to sanction or
| ban and CEX comply with government orders, what is the
| point?
| whatisweb3 wrote:
| The US government already has the right to sanction
| crypto addresses, they just did today with Tornado Cash.
| USDC also has the right to freeze funds, they have done
| it already.
|
| I would rather see the US support privacy, but if they
| refuse to allow their citizens the right to financial
| privacy, then at least they could provide better systems
| for regular users to keep their crypto transactions
| private from the entire world.
| greatjack613 wrote:
| Can someone Eli5 what this actually means? I mean tornado is
| anonymous so I can't see the operators getting screwed.
|
| Does it mean people like me who use it so Coinbase can't track my
| wallet activity are going to have our wallets banned since we
| used tornado?
| SXX wrote:
| It means that if you're in US and publicly share your crypto
| address for vanity like NFT or something anyone can easily make
| you criminal just by sending you some "bad" coins. Good luck
| proving to U.S. Treasury it wasn't you.
|
| In real world it's most likely gonna be used mostly against big
| transactions and to go after crypto exchanges.
| pudo wrote:
| If you were to send money through tornado from now on, and this
| was discovered and linked to your identity, you would face a
| criminal liability in the US.
| daoist_shaman wrote:
| pudo wrote:
| It is law enforcement working as intended. Freedom is
| complicated, I guess.
|
| Judging from your tone I suspect you'll love this fun fact:
| amongst other things, this sort of sanctions regime stems
| from the PATRIOT Act. Beacon of liberty that thing.
| jahewson wrote:
| Also civil liability, which is much easier for the government
| to pursue you with.
| colechristensen wrote:
| Deleted because I can't read.
| sram1337 wrote:
| they said "licit"
| bombcar wrote:
| Amusingly enough, since most virtual currency activity is
| simply trading it back and forth on exchanges to try to "make a
| buck", it's probably mostly "legit" now.
|
| What percentage of actual on-chain transactions are not illicit
| is another question.
| John23832 wrote:
| They're saying that most is "not" illicit. No missing "not".
| olalonde wrote:
| I like how they made absolutely no attempt to clarify what it
| means to sanction a smart contract. So many questions...
|
| > As a result of today's action, all property and interests in
| property of the entity above, Tornado Cash, that is in the United
| States or in the possession or control of U.S. persons is blocked
| and must be reported to OFAC.
|
| My understanding is that it is now illegal for U.S. people to use
| the Tornado Cash smart contract. Given that Ethereum is
| pseudonymous, I'm not sure how they plan to enforce that, but I
| guess they could catch people who use it directly through a KYCed
| account (e.g. Coinbase).
|
| > All transactions by U.S. persons or within (or transiting) the
| United States that involve any property or interests in property
| of designated or otherwise blocked persons are prohibited unless
| authorized by a general or specific license issued by OFAC, or
| exempt.
|
| This is also not clear. Are people who use or have used Tornado
| Cash now designated/blocked persons? Or is the smart contract
| itself the "blocked person"?
|
| If the former, how is that even possible to enforce? U.S. persons
| are no longer allowed to accept coins that can can be traced back
| to Tornado Cash usage in the past? What are they supposed to do
| with the "tainted" coins? Send them to the U.S. Treasury? Destroy
| them? Or are you supposed to ask your customers if they have used
| Tornado Cash in the past? What if they lie? etc.
|
| If the latter[0], it would mean that it's illegal for U.S.
| persons to accept transactions originating from the Tornado Cash
| smart contract. But that can be bypassed trivially by going
| through an intermediary address before sending the ETH.
|
| [0] I believe that interpretation is more likely given that they
| gave a list of addresses: https://home.treasury.gov/policy-
| issues/financial-sanctions/...
| Seattle3503 wrote:
| Perhaps it will make it harder to do things like pay for the
| tornado.cash domain name and hader to pay for hosting. In that
| case the website would need to move to something like IPFS,
| which would make it less accessible and reduce the anonymity
| pool.
| anotherrandom wrote:
| The issue here is that essentially nobody who has used/uses
| Tornado Cash is technologically inept enough to not know how
| to use something spun up as an onion service or eepsite
| (would help lessen the severity of the reduced anonymity
| issue), if the tornado cash folks don't just use IPFS to
| host.
|
| Regardless, the website is merely a GUI to make things easier
| and not necessary for functionality in this case... or is it
| somehow necessary?
| miohtama wrote:
| It is not illegal. You just need to ask a written permission
| from OFAC first.
| reset-password wrote:
| This seems like a strong signal that mixers work as intended. I
| don't see sanctions being effective as it's a lot easier for
| someone to create a new mixer than it is for the feds to
| investigate and sanction one. In either case it'll be
| entertaining to watch this unfold.
| toomuchtodo wrote:
| It's all fun and games until you can't transit the airspace or
| soil of the US or one of their allies. Sanctions need not have
| immediate effect, only eventual consistency.
|
| https://xkcd.com/538/
| nojito wrote:
| How so?
|
| We already know that the US has technology to track mixed
| transactions.
| janandonly wrote:
| Laura Shin's recent book about the old Ethereum DAO hack
| claims that by means of some kind of chain analysis the feds
| were able to point to a guilty person.
|
| But no details have been published on the mechanics of this
| "de-mixing".
|
| Possible it has to do with sloppy change address reuse in
| Wasabi?
| nojito wrote:
| Most of the information in crypto cases is highly redacted
| to keep the methods and means of how they track
| transactions secret.
| daoist_shaman wrote:
| I can only imagine what a round table discussion with the Joint
| Chiefs of Staff sounds like.
|
| "Sir, the hacker groups seem to love this thing we've only
| recently identified as 'FOSS.' It's surfacing to be an
| existential threat to our CONOPs. I'm requesting your approval
| to authorize immediate sanctions against the FOSS threat."
| _fat_santa wrote:
| Richard Stallman appears on horseback. Charging into battle
| to open the source to his favorite printer drivers.
| vkou wrote:
| Would you prefer it to be:
|
| 'Oh, shucks, there's no rule that says a dog can't play
| baseball, or that you can't use open source to do financial
| crime, I guess we can't sanction people who use it for money
| laundering!'
| sangnoir wrote:
| Alternative reading: investigative authorities don't want you
| using _this_ mixer, and encourage the use others for...reasons.
| acdha wrote:
| It might also be as simple as them seeing more cases where
| someone used a mixer at all that this is now on their radar.
|
| It's actually not easy to create a new mixer because the whole
| idea is that you need a fair volume of legitimate traffic. If
| you set one up and nobody uses it, you see no benefit. If only
| criminals use it, you've created a great lead generator for the
| authorities. If you're sufficiently conspiratorial in mind,
| blocking the best known mixer would be a great way to drive
| traffic to new mixers which they secretly run.
| landemva wrote:
| > a great way to drive traffic to new mixers which they
| secretly run.
|
| Mixer program code is publicly deployed and is run on-chain
| by the block validators. How would government secretly run a
| mixer?
| gerikson wrote:
| Easy. They set up a crypto project that looks just like any
| other crypto project.
| yunohn wrote:
| > a lot easier for someone to create a new mixer
|
| No, it's really not. Mixers need liquidity, which means they
| need popularity and volume. That's not overnight.
| WJW wrote:
| > it's a lot easier for someone to create a new mixer
|
| A secondary effect of sanctions is indicating what the
| regulators do and do not consider illegal. Up until now, it was
| at least marginally possible to state "But I didn't know it was
| illegal. TornadoCash was doing the exact same thing for years
| and never got into trouble". After this ruling, that excuse no
| longer applies and that might dissuade a lot of people who
| might otherwise be tempted to run a mixer of their own.
|
| Also, reputation counts for a lot when it comes to mixers. A
| mixer that has existed for years is probably legit, a mixer
| that started up yesterday is a lot more likely to be a rugpull.
| Even if it will come down to whack-a-mole with the Treasury
| sanctioning new mixers as they pop up, it might be very
| difficult for any individual mixer to build up enough
| reputation to attract significant business.
| saurik wrote:
| > After this ruling, that excuse no longer applies and that
| might dissuade a lot of people who might otherwise be tempted
| to run a mixer of their own.
|
| What is interesting here, though, is that Tornado Cash
| doesn't _run_ anything: they may as well not exist as an
| entity anymore. It also isn 't a blockchain and doesn't have
| nodes: third parties thereby also don't _run_ Tornado Cash.
|
| Tornado Cash, instead, is one of many random contracts
| executing on Ethereum (as well as third-party Ethereum-like
| constructs; some/many of those are pretty damned centralized,
| with servers that process and store transactions, so I am
| gong to concentrate on Ethereum itself as it is the most
| interesting).
|
| So, with the _smart contract_ of Tornado Cash -- as Tornado
| Cash isn 't a group of people or a company: it is just code
| -- having been sanctioned, if you are a miner and mine a
| block on Ethereum that includes a transaction that touches
| Tornado Cash, is that now illegal? I feel like this is how
| the concept of sanctions would normally play out in meat
| space with real people, to prevent the sanctioned services
| from being utilized.
|
| If so, and I think this is where it "gets good": let's say
| 99% of miners care about the sanctions, and 1% don't... when
| you mine a block, you choose a parent for that block;
| arguably now, if you actively chose to accept a parent block
| that includes a Tornado Cash transaction, that should also be
| illegal (due to being sanctioned).
| WJW wrote:
| I can think of a few ways that more specific regulations
| could address this:
|
| - It will not be legal for miners to run/"execute code on
| behalf of" smart contracts from the sanctioned list, which
| can be downloaded from the Treasury web site and is updated
| regularly. This is very akin to how the sanctioned people
| list works currently.
|
| - The treasury will maintain a list of blockchain addresses
| that are known to contain tainted coins and all businesses
| need to verify they don't accept business when the payment
| comes from one of those. A little bit more tricky since you
| can send money from any wallet to any other one, but still
| this is how a lot of the current sanctions already work.
| You could imagine this being only applicable for companies
| with a banking or exchange license or something like that.
| Perhaps it would become a part of regular auditing done by
| accountancy companies.
|
| - (Possibly the most likely depending on how much lobbying
| the crypto industry manages to get in) Miners don't have to
| do anything, but all crypto exchanges with users in the USA
| (in this case, I'd expect the EU and other big
| jurisdictions to develop similar rules over time) are
| forbidden from transacting with a list of addresses
| belonging to contracts available from the Treasury.
|
| Options 2 and 3 are very similar, but 3 is scoped only to
| exchanges. Since the majority of users is not sophisticated
| enough to transact without exchanges, this seems like it
| would give the most bang for the buck for the Treasury.
| More sophisticated launderers could be tracked on a case-
| by-case basis if needed.
|
| One thing I think is _not_ very likely to happen is for the
| Treasury to say: "Oh well! Those crypto rascals outsmarted
| us by running their money laundering smart contracts on the
| Eth VM, so we guess money laundering is fine now".
| Canada wrote:
| > It will not be legal for miners to run/"execute code on
| behalf of" smart contracts from the sanctioned list,
| which can be downloaded from the Treasury web site and is
| updated regularly. This is very akin to how the
| sanctioned people list works currently.
|
| This has come up in other contexts before, most famously
| the idea of using OP_RETURN to embed child pornography
| into the Bitcoin blockchain.
|
| An Ethereum client must download and execute all
| transactions in each block in order to determine if that
| block is valid, and thus learn current state of the
| system. The client can't know if this "illegal"
| transaction has been executed until it actually executes
| it. As an operator you don't have any choice, other than
| simply turning everything off and "rugging" all your
| customers.
|
| So let's say you're Coinbase. You have billions of
| dollars of other people's money, innocent people's money,
| in your custody. If you refuse to process blocks that
| contain transactions involving sanctioned entities, or
| that contain illegal child pornography, you destroy those
| billions of dollars of assets.
|
| You're not going to make billions of dollars of assets
| unspendable. Not a snowball's chance in hell. You will
| process those blocks as the protocol requires. Doing
| otherwise would be as ridiculous as Google turning off
| its entire search engine merely because some of its
| automated actions technically violate laws from time to
| time. It would be like Intel razing a whole semiconductor
| fab to the ground because it learned that some of the
| sand used in creating some wafers was sold by a
| sanctioned country.
|
| There is absolutely no way the US government is going to
| demand that kind of destruction of value as a matter of
| compliance.
| amluto wrote:
| I think an appropriate endgame would be an extension of
| #3: any regulated entity (e.g. an exchange) may not
| accept cryptocurrency which, _anywhere in its history_
| since the last time it came from a regulated entity, went
| through something sanctioned. This, of course, would mean
| that Monero would be right out.
|
| In general, most of the supposed value of cryptocurrency
| seems to be that everyone looks the other way when
| parties do things that look like or are illegal but take
| the money anyway. Functionality, cryptocurrency is very
| similar to e-gold, and I see no reason it should be
| allowed to do the same things just because it's somewhat
| decentralized.
| birdyrooster wrote:
| "if you are a miner and mine a block on Ethereum that
| includes a transaction that touches Tornado Cash, is that
| now illegal?"
|
| Seems pretty obvious from the statement that doing business
| that includes this Tornado Cash entity will infect your
| business with criminal liability.
| aaaaaaaaata wrote:
| No entity. Decentralized smart contract.
|
| Reply again?
| birdyrooster wrote:
| Anything that exists and is uniquely distinguishable from
| other things is an entity. I didn't mean a corporate
| entity or government entity, I meant an entity on the
| Ethereum network in the form of a smart contract.
| 60secs wrote:
| This is a great example of where the law hasn't caught up
| to smart contracts.
|
| We don't have a good framework in place for sanctioning
| contracts by address, contract itself, or by effect.
|
| I'm expecting a push toward laws will evolve to make
| calling mixers illegal, but that will likely hit some 1st
| amendment push back. If money is speech, then is it free if
| it has no privacy?
| trombone5000 wrote:
| > If money is speech, then is it free if it has no
| privacy?
|
| I'm not a lawyer, but I don't think it follows that every
| financial transaction is a 1st amendment issue, just
| because spending money to promote a message is protected.
| Fatnino wrote:
| Money is speech, speech is free, ergo money is free.
|
| Note: It is exceedingly rare for the free money to
| actually be so.
| vl wrote:
| TC mixer is different though, it's smart contract/zero proof
| based. Once it's deployed, it just continues to work. Owners
| can't steal funds. If you believe that smart contract is
| implemented correctly, you can continue to use it.
|
| TC utility is diminished by other fact - TC is blocked on
| exchange level, exchanges do not accept funds coming from TC
| smart contract.
| bergenty wrote:
| On a tangent, are smart contracts automatically "open
| source" - as in anyone can see the source or is there a way
| to obfuscate what's on the blockchain?
| soco wrote:
| I thought one of the selling points was that everybody
| can check the contract...
| WJW wrote:
| Just because you don't have the source code does not mean
| you cannot inspect what a binary does by disassembling
| it.
|
| (And as any programmer will tell you, just because you
| have the source code available does not automatically
| mean you can see where it has a tricky edge case with
| massive security implications. The obfuscated C contests
| are proof of that)
| saurik wrote:
| Just because contracts can exist whose code you don't
| have doesn't mean you don't know how anything works: not
| only can you build something on Ethereum that is open
| source and with verifiable behavior, that is currently
| the norm and obfuscated contracts are not taken
| seriously.
| saurik wrote:
| You can obfuscate source code also--see what people do
| with JavaScript on websites--so the answer is "no" under
| any case. (In specific, though, contracts are implemented
| in a bytecode, so by more basic definitions of "open
| source" the answer is still "no".)
| vl wrote:
| Smart contract's binary code is visible to anyone once
| it's deployed. (And it's pretty simple to disassemble).
|
| For most contracts they link actual source code to make
| inspection even easier - large part of trust in the
| system comes from the fact that contracts are
| inspectable.
| bergenty wrote:
| An so just binaries which I guess means it's not visible
| for all intents and purposes. Are there ready to go smart
| contract disassemblers?
| PaywallBuster wrote:
| example https://etherscan.io/bytecode-
| decompiler?a=0x610b8B78da143fC...
|
| which uses https://github.com/palkeo/panoramix
| pcthrowaway wrote:
| Dissambly into Ethereum opcodes is doable, but do you
| find that readable?
| miohtama wrote:
| All high profile smart contracts have reproducible and
| verified source code available on EtherScan.
| birdyrooster wrote:
| But why allow your business to be traceable to a mixer
| which will put you in scope of criminal investigations?
| Racketeering is not legal.
| [deleted]
| parasense wrote:
| > Up until now, it was at least marginally possible to state
| "But I didn't know it was illegal. TornadoCash was doing the
| exact same thing for years and never got into trouble".
|
| Oh I totally get that, but...
|
| I reasonably believe in good-faith that it hasn't been
| categorically proven to be illegal. The reasons for this may
| seem obvious to many, but just it's not for anybody else then
| I'll give at least one persuasive argument. Illicit activity
| happens through legitimate financial transactions. For
| example, if I trade somebody a pizza for $10, how am I to
| know that $10 wasn't used in a criminal activity, ever, in
| the total existence of those note's circulation? And further,
| by using cash at all, as a concept insofar that cash is not
| rigorously tracked while in circulation, that the whole cash
| money system is illegal... Cash based economies to a great
| extent protect the privacy of participants. Those machines
| that make change, I suppose that's money laundering, and I
| would suppose they are laundering money for someone, but
| also... they be making legitimate 20x quarters from a $5 bill
| in a coin operated business setting. The quarter change
| making machine is the physical analog of a crypto mixer, but
| it's perhaps a bad example. Because making change for the
| sake of privacy is an unlikely activity, albeit a reasonable
| legitimate (if you ask me) activity.
|
| I honestly would love to see more court precedence set on
| some of these so-called "structuring" laws where somebody
| intentionally "structure" or "laundered" money for the
| honest-to-goodness sake of legitimate privacy, or even for
| somehow being a form of free speech, something like that...
| to strike away some of these absurd regulatory powers before
| a panel of jurors.
| nootropicat wrote:
| >A secondary effect of sanctions is indicating what the
| regulators do and do not consider illegal.
|
| No, it shows the exact opposite - that mixers are legal and
| the government has to utilize a completely arbitrary
| executive power to ban particular mixers.
| lern_too_spel wrote:
| Leaving aside the liquidity problem with that statement, it's
| also a lot easier to insider trade than for the feds to
| investigate it. That's why the penalty is so high.
|
| Eventually, they'll just KYC the whole chain to your wallet
| because it's much cheaper to do. If you can't prove that your
| chaincoins are clean, you can't convert them to usable money.
| kinnth wrote:
| Isn't mixing a thing of the past now? Most darknet sites now
| only use XMR which is inherently privaty focussed. So this
| banning will help limit the ease of hacked fund mixing, but
| less about purchasing on darkweb.
| celticninja wrote:
| Ransomware payments
| mgraczyk wrote:
| There's a bit more to the analysis that you have to consider.
| Two points 1. The amount of money you can mix
| depends on the scale of the mixing operation 2. It's easy
| to build something that looks like a mixer but at some point
| steals the deposited money.
|
| The feds don't have to prevent all mixers from operating. They
| just have to kill the biggest, most trusted players.
| shapefrog wrote:
| > it's a lot easier for someone to create a new mixer
|
| Sure thing. Send me your money and I will absolutely 100% for
| sure send back the same amount but anonymized.
| bergenty wrote:
| Seems really easy to get a computer to copy the binary (source)
| and set up unlimited copies though.
| JumpCrisscross wrote:
| > _it 's a lot easier for someone to create a new mixer than it
| is for the feds to investigate and sanction one_
|
| Sanctions enforcement tends to pay for itself. It's hard to
| create new mixers from prison or when your bank accounts keep
| getting frozen. (It's easy to set up a cash business and
| launder money. Most people don't do it. It's still a thriving
| industry.)
| onlyrealcuzzo wrote:
| IIUC, Tornado Cash is open source.
|
| You don't need a lot of resources to run your own.
| SparkyMcUnicorn wrote:
| Running your own is pointless, unless a bunch of other
| people also use it.
| JumpCrisscross wrote:
| > _don 't need a lot of resources to run your own_
|
| This is true of all money laundering. Any business that
| takes cash has everything it needs to cook the books to
| show phantom income.
| giaour wrote:
| It's a question of scale. Laundering a small amount of
| money via a business entity that accepts cash isn't hard,
| but people get caught when they get greedy and start
| trying to launder implausible amounts.
|
| TC clones can probably fly under the radar with a small
| transaction volume, but any attempt to launder large sums
| would get caught pretty quickly (with standard forensic
| accounting techniques used to trace the beneficiaries).
| anotherrandom wrote:
| TornadoCash is a smart contract, so there is not really a way
| to enforce the sanction.
|
| Plus, there is not really a way to tell who creates a smart
| contract if you cover your tracks well enough.
|
| This sanctions stuff is smoke and mirrors for the government
| to try and convince themselves they are capable of doing
| something.
|
| The most realistic approach is for major chains to go POS and
| the major validators and other important pieces of the puzzle
| to need a lot of resources to the point where they become
| businesses and are on the governments radar (and by extension
| they would need to comply with regulations).
|
| But because everyone knows that is a natural consequence of
| POS, it is exactly why no reasonable person would be on board
| with a transition to it.
| landemva wrote:
| What are your thoughts about Liquid on BTC?
| https://blockstream.com/liquid
| nootropicat wrote:
| >other important pieces of the puzzle to need a lot of
| resources to the point where they become businesses and are
| on the governments radar (and by extension they would need
| to comply with regulations).
|
| >But because everyone knows that is a natural consequence
| of POS, it is exactly why no reasonable person would be on
| board with a transition to it.
|
| You described mining - public companies operating big
| industrial warehouses with miners. PoS is the opposite - it
| needs next to zero physical resources. No reasonable person
| can support PoW unless they support totalitarianism.
| There's no way to make PoW resistant to government
| interference.
| uncomputation wrote:
| > a lot easier for someone to create a new mixer
|
| As in, deploy contract, yes. As in, have enough liquidity to
| both "mix" (aka launder) money and provide sufficient
| anonymity, no, that's a network effect which is largely winner-
| take-all. The largest mixers will be the safest and most
| effective but then also the biggest targets. As you go down the
| list, they get less likely to be sanctioned but more likely to
| be unsafe/honeypots/ineffective.
| TrapLord_Rhodo wrote:
| It's an open source contract... Why would you need to create a
| new mixer?
| bsedlm wrote:
| if money is fungible, how come it can be dirty xor clean?
| djschnei wrote:
| When the guys with guns say so.
| [deleted]
| ETH_start wrote:
| This is an attempt to criminalize privacy. Tornado Cash is a
| decentralized privacy protocol.
| malfist wrote:
| No, this is an attempt to enforce money laundering laws.
| Sargos wrote:
| Privacy and money laundering go hand in hand. You can't have
| one without the other.
| ETH_start wrote:
| By criminalizing privacy.
| amanaplanacanal wrote:
| You haven't had anything like financial privacy in the US
| in decades. The bank secrecy act was passed in 1970, FFS.
| eric_cc wrote:
| A horrible attempt. Tornado cash is used for privacy.
|
| Cell phones are used in laundering. Let's ban cell phones.
| [deleted]
| nootropicat wrote:
| This is why PoS is a must. There's no way to hide industrial
| mining facilities and miners will be eventually forced to enforce
| sanctions. A validator even with 100k eth just needs a
| connection, trivial to hide.
| 0x64 wrote:
| PoS is coming in ~a month, the upgrade dates date will be
| announced on Thursday.
| firloop wrote:
| Less than a month ago, Vitalik Buterin deposited 220 ETH into
| Tornado Cash.
|
| source, 4 transactions: 100 ETH - https://ether
| scan.io/tx/0xd8d586ad33434be0f51c5c9d6996b1c8b208b04155683eee3778
| 49b67a0b13cd 100 ETH - https://etherscan.io/tx/0xfeb39976
| 4590a7c1ca321492b4634ceba530093d43d814aa1c5afdf3fa03b092
| 10 ETH - https://etherscan.io/tx/0x0f82d42f6d455f3b745be670a04d37
| a254d02a4b1ae35af967ed7d90de34ffdc 10 ETH - https://ether
| scan.io/tx/0x98c40bdde8edd84ba4c483bfca447bb3209957c1be90582d5fbf
| 8630845df814
| bhouston wrote:
| What was his explanation?
| olalonde wrote:
| Possibly got tired of random people tracking what he did with
| his ETH, like parent just did.
| ptero wrote:
| Why should he care to provide one? Honest question.
| anonporridge wrote:
| Why do you need an explanation for seeking privacy?
|
| Guilty until you can prove your innocence?
| hanniabu wrote:
| Sadly a good portion of HN thinks blockchain is only used
| for money laundering and will be completely fine with this
| subversion of rights
| gfodor wrote:
| Haha I read "sanctioned" as in "endorses" and was very, very
| confused.
| parasense wrote:
| >While the purported purpose is to increase privacy, mixers like
| Tornado are commonly used by illicit actors to launder funds,
| especially those stolen during significant heists.
|
| Think about the children!
| [deleted]
| lima wrote:
| Surprising it took them so long.
| [deleted]
| iameli wrote:
| I'm not, like, against the idea of sanctioning North Korean
| hacking groups. But the regulators here aren't really prepared
| for the crypto endgame.
|
| I could clone Tornado.Cash's contract code in half an hour; would
| my new deployment also be sanctioned?
|
| What about if Ethereum migrated to some kind of ZK-EVM and _all_
| of the transactions are suddenly private and untraceable? Other
| chains already have some of these properties.
|
| I dunno. I don't think I particularly want to live in a world
| where it's essentially impossible to regulate money. But I don't
| really see how to avoid it anymore.
| TrapLord_Rhodo wrote:
| It shows their hand. Instead of the sweeping regulation
| required, they are going to sanction it and pretend like
| they've fixed the problem.
|
| All they've done is Sanction 'A tool'. Why would sanctioned
| entities care if they used a sanctioned tool? it honestly makes
| no sense to me.
| JumpCrisscross wrote:
| > _would my new deployment also be sanctioned?_
|
| No. But it would be illegal.
|
| Do you think nobody thought of this in the millennia we used
| cash and commodity money?
| iameli wrote:
| Using it to actually launder money would be illegal, sure.
| What crime am I committing by deploying the contract?
| MacsHeadroom wrote:
| Private transactions are not illegal and neither is creating
| or cloning a tool which facilitates them.
|
| Failing to disclose the commercial effects of those
| transactions on your own tax liability to the IRS is illegal.
| But that's orthogonal to cloning or using a tool which
| facilitates transaction privacy.
| formerkrogemp wrote:
| When the regulations catch up, the crypto scams won't have as
| much traction, and billions will still have been scammed and
| laundered.
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