🇬🇧A draft EU Parliament report published today would ban anonymous payments and donations in #cryptocurrencies such as #Bitcoin & #Ethereum. The stated aim to tackle money laundering and terrorism is only a pretext to gain more control over personal data.



@echo_pbreyer I usually agree with you. Not this time.

This is not as clear-cut as it seems to be.

Cryptocurrencies (especially the "privacy coins") are not a cash replacement, the power dynamics are different because cash has friction when used in huge amounts that cryptocurrencies lack.

This makes cryptocurrencies (and esp. "privacy coins") way more useful for organized crime, corrupt politicians, and the superrich, than cash could ever be.

The power dynamics are *opposite* to those in case of cash.

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@echo_pbreyer let me say this differently: where cash is a boon to private citizens in preserving their privacy from the rich and powerful, cryptocurrencies (esp. privacy coins) are a boon to the rich and powerful in making it more difficult to hold them to account.

The "cryptocurrencies = digital cash" false equivalence is a sham. Be careful what you support.

@rysiek @echo_pbreyer Nonsense. Electronic cash is the same as cash for all intents and purposes, and it's much easier to have HSBC launder your fiat money than it is to launder billions of EUR in cryptocurrency. You do actually have to get in and out of something like Monero if you intend to do that, because you're not going to be able to spend that in XMR or want to keep that in XMR. Which means it *is* perfectly detectable for the worst offenders, while this law would violate privacy for all.

@rysiek @echo_pbreyer Virtually all KYC/AML regulations are basically useless, as proven by studies to date, while they add severe cost to all transactions, and enable massive surveillance despite not being helpful for their intended purpose.

@raucao @echo_pbreyer the banking sector and advanced money laundering schemes, as opaque as they are, still allow for *some traceability*, again as shown by huge leaks and huge investigations.

@raucao @echo_pbreyer "cash" and "HSBC laundering" are two different things. You have to get that cash to HSBC somehow first, and that's exactly where the friction of hauling huge amounts of cash hits the hardest.

It then becomes traceable, even if with considerable difficulty. Consider: Panama Papers, Paradise Papers, and other such leaks.

(disclosure: I worked for an investigative journalism organization that was involved in publishing these leaks)

@rysiek @echo_pbreyer As explained, the same friction exists with cryptocurrencies for the amounts you actually want to follow.

@raucao @echo_pbreyer the wet dream of cryptocurrency people is that you pay directly in your cryptocurrency of choice. The idea is that they become actual currencies. And if that happens, esp. for "privacy coins", there will be way less traceability and transparency than even today, even with our current opaque banking system and money laundering schemes.

@rysiek @echo_pbreyer Not for the amounts you are talking about. You will always be able to somewhat follow on-chain transactions of that size.

@rysiek @echo_pbreyer And even then, the regulation is for solving something *now*, which the current regs already fail at.

@raucao @echo_pbreyer again, speaking from personal experience with working on publishing investigations related to this, current regulations are far from perfect, but they still do work to some extent. They should be way better, of course. But without them, we would be even more blind.

@rysiek @echo_pbreyer > compliance costs exceed recovered criminal funds more than a hundred times over, and banks, taxpayers and ordinary citizens are penalized more than criminal enterprises


Even if that's off by a factor of 10, that's highly questionable as an instrument.

@raucao @echo_pbreyer again, I agree this needs to be improved. Not sure what you're arguing for here?

Or are you saying these regulations need to be completely dismantled?

@raucao @echo_pbreyer let's keep in mind that people who benefit the most from these regulations remaining bad, or being outright dismantled, are the exact people these regulations should target and make holding accountable of possible.

And, of course, the same people that have immense power in the political system, one way or another.

@raucao @echo_pbreyer again, if you're saying we need to improve current regulations, we agree. I am, however, saying we should be very careful about anything that can make them even less effective.

@raucao @echo_pbreyer also...


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@rysiek @echo_pbreyer What's your point? You can address the content of the interview or the paper discussed or not.

@raucao @echo_pbreyer I'm going to pass on the podcast.

I skimmed the paper (will read more attentively later), it makes points that are familiar to me.

Most importantly, however, it seems to acknowledge the *need* for anti money laundering regulation, and the need to improve it. Neither surprising, nor something I disagree with.

So, again, not sure what your point in linking to this paper was? If we are both arguing for better quality anti money laundering regulations, cool, high-five!

@rysiek @echo_pbreyer You argued for adding more bad regulation on top in the form of KYCing any and all cryptocurrency payments.

@raucao @echo_pbreyer I argued against leaving cryptocurrencies unregulated.

And made it very clear that it is "not as clear-cut as it seems" that such regulation should be outright opposed.

But I asked what *your* point is. Is it that anti-money laundering regulations are needed, but currently bad, and so need to be improved? Or is it that such regulations should be completely dismantled? Or that they should be left the way they are today?

@rysiek @raucao @echo_pbreyer You are trying to argue that individuals do not benefit from using bitcoin privately, with individuals who benefit from using bitcoin privately.

@sharperguy @raucao @echo_pbreyer I never argued that. Obviously individuals might benefit from using cryptocurrencies. My worry is about who benefits the most, and in what way.

In case of physical cash, the benefits (privacy and untracability of transactions) are squarely on the side of people using small cash payments. Which is great!

In case of privacy coins, these benefits might be more on the side of the super-rich or corrupt, who might be trying to hide their wealth from accountability. Less great.

@rysiek @sharperguy @echo_pbreyer Show me a method of getting 10 million EUR cash into a privacy coin without buying BTC first (and even that's a challenge), today or within the week.

With cash, that's fairly easy for a 10% fee.

@rysiek @sharperguy @echo_pbreyer ... and then out again somewhere you can park that out of sight.

@raucao @sharperguy @echo_pbreyer I have trouble parsing your question. You are asking me to show you a way to get 10mln EUR in cash into privacy coins, and then you say it's fairly easy with cash? Really not sure what you're asking me to do here.

@rysiek @sharperguy @echo_pbreyer Sorry, had to edit. It's easy with cash to cash, not easy with cash to e.g. XMR.

@rysiek @sharperguy @echo_pbreyer ... and by "fairly easy" I merely mean possible with the right connections, not easy for us two schmocks, of course.

@rysiek @sharperguy @echo_pbreyer (By "with cash" I mean purchasing another fiat currency for example.)

@raucao @sharperguy @echo_pbreyer you are comparing apples to oranges: cash -> crypto vs. cash -> cash. Better comparison would be cash -> cash vs. crypto -> crypto.

Getting 10mln EUR in physical cash changed into 10mln USD in physical cash is doable, but has some considerable friction.

Getting 10mln EUR equivalent in crypto moved from one cryptocurrency to another is, I would guess, less trouble. Especially for us two schmucks.

@raucao @sharperguy @echo_pbreyer and that's the crux of the problem. Once money is "in" the cryptocurrency world, it can slush way more easily back end forth, regardless of the amounts. This is dangerous on the societal level if these amounts are in the high millions of EUR equivalent.

Yes, there is considerable friction *currently* in getting that monies into and out of crypto, but that's why all the NFTs and web3 bullcrap is happening. A lot of it is just money laundering.

@rysiek @sharperguy @echo_pbreyer There is nothing more easy to trace than wallets owning NFTs.

@rysiek @sharperguy @echo_pbreyer And that is exactly the point. The instruments used for actual money laundering are easy to trace and then require traditional investigation anyway. KYCing all bitcoin transactions ever is not helping with that at all.

@raucao @sharperguy @echo_pbreyer NFTs are not about untraceability, they are about laundering funds. If you have a bunch of dirty money and you want to launder them, you *want* the magical NFT thing to be traceable, so that you can say "yes Mr Taxman this is where all this money comes from: this particular pixelated ape! cross my heart, and you can trace it on Tech Blockchains!"

@rysiek @sharperguy @echo_pbreyer Yes, that's my point. How is adding more useless KYC helping at all when that's the easiest way of laundering?

@raucao @sharperguy @echo_pbreyer well, how do we tackle this, then?

We seem to agree that *some* anti money laundering regulations are needed in general (correct me if I am wrong here).

We seem to agree that NFT market is ripe with money laundering schemes, and that that is a problem that needs *some* response.

Can we find a *good* way of tackling these? I am not saying that the current draft is good, but I *am* saying we need a better response than a knee-jerking "no way!"

@rysiek @sharperguy @echo_pbreyer A "no" to bad regulation is necessary when there is no good option on the table IMO. I don't have the answer to your question. But pretending that doing something symbolic is better than doing nothing is exactly why the current regulations are failing us on a global scale and not really hurting bad actors much, in relation to how much they are hurting the rest of us.

@rysiek @sharperguy @echo_pbreyer (And yes, I agree that someone actively trying to steal a country's wealth or trying to blow up civilians should be prosecuted in some way. But if the cost/benefit ratio is off by this much already with KYC/AML regs, then I don't see how mindlessly adding more of them can be a rational act, or even be proposed in good faith.)

@raucao @sharperguy @echo_pbreyer measuring cost/benefit only by "how much money got confiscated based on this policy" is bonkers. Imagine if the policies were in fact 100% effective -- and money laundering was completely non-existent. The policy effectiveness measured using this metric would be 0! And it would still affect businesses and private people!

This is not an acceptable to measure this.

@rysiek @sharperguy @echo_pbreyer That logic is flawed. You can easily compare against current estimates of how much is being laundered and see if it went up or down, and have at least a guess about the order of magnitude. Also, there is no policy that is 100% effective, ever, unless you have 100% control over literally everything that humans do, which would be a complete nightmare (but is unfortunately the kind of thinking where this piling on ever more surveillance comes from).

@raucao @sharperguy @echo_pbreyer the "100% effective policy" was a thought experiment to show where this kind of argument leads.

I still have not received a clear answer to a yes/no question I asked a number of times already:
are we in agreement that *some* anti-money laundering regulations are needed?

Do we also agree that what needs to happen is that anti-money laundering regulations become way more effective and way less onerous to people not engaged in money laundering?

@raucao @sharperguy @echo_pbreyer the paper you yourself linked says:

> In practical terms, criminal enterprises no longer holding $3 billion of illicit assets confiscated
each year, and leaders less readily able to recapitalize illegal endeavors, are profoundly
affected. Likewise, criminal activities are frequently disrupted and thwarted. This can
be difficult to measure but may help lift success rates noted above.

@raucao @sharperguy @echo_pbreyer measuring the effectiveness of anit-money laundering policy using the amounts confiscated is like measuring the effectiveness of speeding tickets using the amounts of fines paid. The paper itself makes it clear this is a *bad* metric, and that lack of good metrics is an important part of the problem!

@rysiek @sharperguy @echo_pbreyer Show me where, and that's not KYCd already. Both cash to crypto (which you are worrying about because you are talking about laundering actual EURs) as well as crypto to crypto is next to impossible at that scale.

@raucao @echo_pbreyer so what you're saying is that because of this exchange that needs to happen, cryptocurrencies (even "privacy coins") are currently useless at preserving privacy of their users?

Well then, nothing of value would be lost!

@rysiek @echo_pbreyer I didn't say that at all. I'm saying they're useless for laundering large amounts of money, but useful for small amounts, and especially private on p2p layers like #LightningNetwork for those small amounts.

@echo_pbreyer just adding a few satoshis here: part of @rysiek's argument is that he is worried about privacy coins, but this is merely a hypothetical distant future. At present there's not enough liquidity in these coins to hide. And as @raucao said you need to go through BTC in practice. Both Monero and ZCash have fundamental scaling issues they might never fixed. Most ZCash users also don't utilise the privacy feature, at least last time I checked. Concern about "privacy coins" is premature.

@echo_pbreyer @rysiek @raucao as for the current EU proposal: it's nothing short of mass surveillance. I don't think there's _any_ problem out there, not even corruption, that justifies deploying such a draconian instrument to fight it.

I also believe the current banking system should be permitted and then forced to allow anonymous accounts and transfers (within limits). As it stands, it's already a mass surveillance system, and the EU bears a lot of responsibility for this tragic situation.

@echo_pbreyer @rysiek @raucao final point: what's the use of having financial data more easily available to investigative journalists, if the next dictator can trivially kill those very journalists by following the money trail? And don't forget we already have a couple of aspiring dictators inside the EU, as well as "regular" corrupt politicians who don't mind killing journalists.

These surveillance instruments are just too dangerous to exist.

@sjors @echo_pbreyer @raucao the counter point would be: if we get transparency right, we might be able to avoid having to deal with the next dictator in the first place. Because they will have no way to hide their money and amass their power.

And also, importantly, this is not an either-or. The amounts of money that a dictator needs to be a dictator are several orders of magnitude higher than what journalists need to operate. We *can* have privacy for journalists along with transparency for the powerful.

@sjors @echo_pbreyer @raucao the crucial point I am trying to make, in the end, is in fact that last bit.

Developers of Monero etc pretend this is impossible, as I had mentioned multiple times. But we have a system where this is already *somewhat* possible: physical cash. It's private in small amounts, but nigh-unusable in ginormous amounts.

So let's start talking about how we can replicate *that*. That would be absolutely fantastic.

@rysiek @echo_pbreyer @raucao with a centralized system like our current banking system you can have different privacy levels based on the amount. But that's subject to what Snowden calls Turnkey Totalitarianism; politics can take privacy away at any point. Decentralized systems don't have this problem, but - as Monero folks correctly state - you can't make different rules based on the amount. And I'm not volunteering to do it even if it was possible: it's open source, hire your own dev :-)

@sjors @echo_pbreyer @raucao sure, but my point is simple: solutions like Monero, without a way to provide for this kind of "friction" related to amounts, are simply *dangerous*, as they feed the very power dynamics that human rights activists (digital and otherwise) have been warning against for ages.

So if Monero cannot find a way to fix this, it is worth considering whether or not Monero is a good idea at all.

@rysiek @echo_pbreyer @raucao more generally I think you should forget about trying to negotiate with an open source distributed money system. It needs to work everywhere in the world, not just in relatively safe democracies like some EU countries. It also needs to work for all time, not just the current interbellum. There will be always be dictators and wars, it's an illusion to think we've seen the last of those. Bitcoin has to account for the worst case.

@sjors @echo_pbreyer @raucao but it very clearly doesn't account for some of the worst cases.

We need privacy for journalists, activists, and almost anyone else, that's a given.

But we also need transparency and accountability for the corrupt, the powerful, the authoritarian.

Ignoring *any* of these is just as dangerous. There are very good reasons why human rights activists push both for privacy (for regular people) and for accountability (for the powerful).

@sjors @echo_pbreyer @raucao
and I am not "negotiating with an open-source distributed money system". I am having a conversation about dangers that *will* arise from a bad implementation of such.

But thanks for the patronizing tone, I guess. 🤷‍♀️

@rysiek @echo_pbreyer @raucao I interpreted this as trying to negotiate: "Developers of Monero etc pretend this is impossible" and "So let's start talking about how we can replicate *that*."

I agree with you that Bitcoin is far from perfect. It's not private enough, but there's currently no credible technical solution for that, so it will just have to do. I don't focus on Monero because I don't think it can work at scale (which means it won't be "dangerous" either).

@rysiek @echo_pbreyer @raucao Bitcoin is designed to solve one particular problem really well: censorship resistant electronic money. It adds inflation protection as a nice bonus, though that's not very useful yet with the current volatility. It does not try to solve accountability. I'm not saying accountability isn't a serious issue, but it's just not what Bitcoin is for.

@rysiek @echo_pbreyer @raucao somehow politicians needs to take into account that things like Bitcoin and Monero exist, and deal with (perceived and real) externalities. There may be some developers and users who are _also_ interested in helping think through those issues.

But if politicians decide to attack these systems - which the EU did today - I'm predicting it will get as ugly as the war on drugs. That's a big reason why I advocate against bad legislation.

@sjors @echo_pbreyer @raucao I think we're all against bad legislation.

But I am quite frustrated by how uncritically many of us here seem to be "pro-whatever the cryptobros claim".

And if developers of Monero are not interested in thinking through potentially dangerous outcomes enabled by the system they're building, I feel it is entirely justified and reasonable to call them out on that. What they do with that feedback is, of course, up to them.

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