5 ms·

Could someone please ELI5 if I was a very wealthy Russian criminal involved, say, in counterfeit, drugs, human trafficking and/or technological scams, how exact

Could someone please ELI5 if I was a very wealthy Russian criminal involved, say, in counterfeit, drugs, human trafficking and/or technological scams, how exactly can bitcoin help me "launder" my wealth?

pdq 13y ago
Drug dealers have tons of cash they can't put in a bank, per government regulations on disclosure. People with tons of bitcoins may want to cash out a part of their nest egg. They get together and trade cash for BTC. Now the dealers can go on any exchange, and convert the BTC back to digital currency, then can transfer into their bank.
- new_test 13y ago
  That doesn't make sense to me. You're saying the banks won't let the criminal put their cash in the bank, but if the criminal converts the cash to bitcoins and back to real money they somehow will? Either way I don't think places like Dubai or Switzerland have any problem with Russian drug money.
  - acgourley 13y ago
    It's easier to drip out as you need it, which is less suspicious
    - shiftpgdn 13y ago
      Or exchange for goods outside the traditional financial system.
  - rdl 13y ago
    Physical cash to local bitcoins (placement); send bitcoins abroad and/or invest them in a bitcoin related busines (layering, integration), report bitcoin profits in that jurisdiction and bring them into banking system (integration).
- tlrobinson 13y ago
  then can transfer into their bank. I agree with you until this point. Banks will still be able to apply the same safeguards they use when customers deposit large amounts of cash (reporting large transactions, "suspicious" activity, etc) Same goes with certain type of merchants such as precious metal dealers. I don't know if other merchants that deal with large transactions need to report large cash transactions (casinos, car dealerships, etc?) Bitcoin is really no different than cash in this respect, except it's easier to move but actually more traceable since the blockchain is entirely public.
negamax 13y ago
Actually it's very easy. And interesting thought experiment. Biggest advantage of Bitcoin is to be able to transfer money outside the current banking system. Have you noticed the news how major banks are to screen customers etc. Pretty obvious that state agencies can easily notice any large transfer and investigate it further. With Bitcoin it's impossible. Let's go step by step 1. I have some cash which I want to stash away from government. 2. My options are a) Buy property (India's property boom) b) Buy gold c) Store the cash somewhere (say inside mattress) For a) I can be identified or property can be lost. As can't buy it on my name b) Can't easily transfer internationally. Theft fears etc. c) Inflation, fire, water With Bitcoin. I buy Bitcoins in cash (localbitcoins). Or use third party accounts (same used for buying gold or property). 1. I have full access to the money 2. Can take it anywhere and convert it to local currency Only downside would be if Bitcoin crashes i.e. loses all value or a lot of value within short span. But if more and more businesses start using it. Virgin, Overstock etc. then chances of that happening would get lesser and lesser.
- new_test 13y ago
  Ok, I think I get it. So bitcoin is basically an alternative investment that is more liquid than, say, art. I guess a follow up question, then. Internet geeks seem to really be pro- bitcoin. Do you think money laundering is not a big deal compared to the benefits of bitcoin? Do you think there is anything that should be done to try to fight it?
  - negamax 13y ago
    I give you an alternative view instead of answer to your question. Most of the black money exists because of money's fiat nature. Money is printed in large quantities. Counterfeits are added to the circulation. Banker/Politician/Bureaucracy nexus often takes cuts from the supply. I think Bitcoin can fix this. Money with every transaction identifiable. Which can't be counterfeited. Can't be created out of thin air. From where I see, it solves more problems (or other problems). If some criminal elements run away with the money. Solution will be to dedicate huge amount of resources to find them and recover the money. Instead of creating new money, which is like tax on everyone else holding it.

pdq 13y ago

Drug dealers have tons of cash they can't put in a bank, per government regulations on disclosure. People with tons of bitcoins may want to cash out a part of their nest egg. They get together and trade cash for BTC. Now the dealers can go on any exchange, and convert the BTC back to digital currency, then can transfer into their bank.

new_test 13y ago
That doesn't make sense to me. You're saying the banks won't let the criminal put their cash in the bank, but if the criminal converts the cash to bitcoins and back to real money they somehow will? Either way I don't think places like Dubai or Switzerland have any problem with Russian drug money.
- acgourley 13y ago
  It's easier to drip out as you need it, which is less suspicious
  - shiftpgdn 13y ago
    Or exchange for goods outside the traditional financial system.
- rdl 13y ago
  Physical cash to local bitcoins (placement); send bitcoins abroad and/or invest them in a bitcoin related busines (layering, integration), report bitcoin profits in that jurisdiction and bring them into banking system (integration).
tlrobinson 13y ago
then can transfer into their bank. I agree with you until this point. Banks will still be able to apply the same safeguards they use when customers deposit large amounts of cash (reporting large transactions, "suspicious" activity, etc) Same goes with certain type of merchants such as precious metal dealers. I don't know if other merchants that deal with large transactions need to report large cash transactions (casinos, car dealerships, etc?) Bitcoin is really no different than cash in this respect, except it's easier to move but actually more traceable since the blockchain is entirely public.

negamax 13y ago

Actually it's very easy. And interesting thought experiment. Biggest advantage of Bitcoin is to be able to transfer money outside the current banking system. Have you noticed the news how major banks are to screen customers etc. Pretty obvious that state agencies can easily notice any large transfer and investigate it further. With Bitcoin it's impossible. Let's go step by step 1. I have some cash which I want to stash away from government. 2. My options are a) Buy property (India's property boom) b) Buy gold c) Store the cash somewhere (say inside mattress) For a) I can be identified or property can be lost. As can't buy it on my name b) Can't easily transfer internationally. Theft fears etc. c) Inflation, fire, water With Bitcoin. I buy Bitcoins in cash (localbitcoins). Or use third party accounts (same used for buying gold or property). 1. I have full access to the money 2. Can take it anywhere and convert it to local currency Only downside would be if Bitcoin crashes i.e. loses all value or a lot of value within short span. But if more and more businesses start using it. Virgin, Overstock etc. then chances of that happening would get lesser and lesser.

new_test 13y ago
Ok, I think I get it. So bitcoin is basically an alternative investment that is more liquid than, say, art. I guess a follow up question, then. Internet geeks seem to really be pro- bitcoin. Do you think money laundering is not a big deal compared to the benefits of bitcoin? Do you think there is anything that should be done to try to fight it?
- negamax 13y ago
  I give you an alternative view instead of answer to your question. Most of the black money exists because of money's fiat nature. Money is printed in large quantities. Counterfeits are added to the circulation. Banker/Politician/Bureaucracy nexus often takes cuts from the supply. I think Bitcoin can fix this. Money with every transaction identifiable. Which can't be counterfeited. Can't be created out of thin air. From where I see, it solves more problems (or other problems). If some criminal elements run away with the money. Solution will be to dedicate huge amount of resources to find them and recover the money. Instead of creating new money, which is like tax on everyone else holding it.