6 ms·

How do you convert big amounts of bitcoins into cash, even over time, without leaving a trace? Isn't there bank account information involved leading to individu

by frevd 11y ago

How do you convert big amounts of bitcoins into cash, even over time, without leaving a trace? Isn't there bank account information involved leading to individuals, which a criminal investigation could request?

JoeAltmaier 11y ago
Fundamentally, Bitcoin is about not having any of that info. If it were a responsible financial institution, then there would have been federal regulations regarding reporting, reserves etc. But the miracle of bitcoins is, somehow it isn't subject to any reasonable oversight.
- 07d046 11y ago
  Yes, almost all of the advantages of Bitcoin are because it currently has practically no regulatory oversight. If it was to get mainstream usage, regulation would also grow, and at least if you want to play in licit channels, it would be almost exactly the same as what already exists. Being your own bank is much too hard and risky for the average consumer, and payment systems that provide useful consumer protections like chargebacks would be formed, so in the end, most people would be doing their banking at BitChase and using a BitVisa credit card.
  - yc1010 11y ago
    I like how the reason for "chargebacks" is often touted as "consumer protection" when the real reason it to line the pockets of the credit card duopoly and ensure the merchant always gets screwed. In many developed countries there are consumer protection laws which entitle the buyer to Replacement, Repair, Refund (in that order usually), so a merchant not adhering to these laws could endup in serious legal trouble as is. Bitcoin at least gives a choice to both buyers and sellers just like plain old cash does Bitcoin, Cash and Traditional Banking (SEPA etc) provide an alternative for commerce where one is free from Visa/Mastecard stupidities and ensure that the Visa/Mastercard duopoly is actually forced to compete and not grow into a more dominant and more abusive entities than they already are. They provide an alternative to being tracked and data-mined and having personal information sold to god knows who :( People do not value their privacy until they lose it, and by then its too late. * Cash allows me to pay (quite anonymously and without fear of being an entry in some datamine) for things locally * SEPA bank transfer allows me to pay EUwide for goods and services reasonably quickly and for no fees (thank you EU! credit card duopoly must hate SEPA) * Bitcoin allows me to instantly pay world wide with ultralow fees, its basically electronic Cash (credit card duopoly do hate bitcoin with a passion, just yesterday they prevented neteller from bridging bitcoin and credit card worlds which IMHO is anticompetitive! http://blog.neteller.com/2015/04/new-deposit-option-bitcoin/ http://blog.neteller.com/2015/04/new-deposit-option-bitcoin/) I forgot the last time I had to use a credit card (or paypal and their "consumer protection") in the last year, and my life both personal and business is easier and better for it.
    - chimeracoder 11y ago
      > to line the pockets of the credit card duopoly and ensure the merchant always gets screwed. First, in the US there are four companies, not two (or three, if you don't want to count Discover). And chargebacks aren't the reason that there are so few players - they're far from the biggest barrier to entry for an upstart, aspiring credit card provider. > In many developed countries there are consumer protection laws which entitle the buyer to Replacement, Repair, Refund (in that order usually), so a merchant not adhering to these laws could endup in serious legal trouble as is. That's not what chargebacks are generally for, and in fact using a chargeback for any of those three things is oftentimes considered misuse of the chargeback system. Chargebacks are for handling disputes regarding the actual goods or services promised or rendered. Furthermore, having laws in place means nothing if it's prohibitively expensive for consumers to actually get them to be enforced in all but the largest disputes. Chargebacks are a tool that consumers can (and do) use to ensure that merchants adhere to these agreements. No individual is going to go to court with a merchant over a few hundred dollars on a disputed credit card charge. The consumer delegates this authority to the credit card company, who is more than happy to aggregate this risk across multiple customers, in exchange for a cut[0]. This is not a problem; it is the system working as intended! I'm saying this both as a consumer and as a merchant who has gotten screwed over by one of the four (not two) major credit card companies[1] - chargebacks suck, but they provide an essential protection for consumers that the judicial system cannot. (All of this is separate from fraud, which is a different matter entirely.) > I forgot the last time I had to use a credit card (or paypal and their "consumer protection") in the last year, and my life both personal and business is easier and better for it. I've had to make a few chargebacks in my life. The largest was for almost $2000. Even though the vendor was clearly in the wrong (and I had the written contract to prove it), it would have been way too expensive to actually try and get our money back through the judicial system. Fortunately, my credit card company was more than happy to settle the matter for us. [0] The consumer doesn't pay for this service directly, but they do indirectly (which isn't fundamentally different from many other products and services, in which the actual cashflow is invisible to the end consumer - this can be problematic in its own right, but that's a separate matter of discussion). [1] I have plenty of chargeback horror stories as a merchant, but that's the topic of another post. And that doesn't mean I don't see the value in chargebacks in general.
  - IkmoIkmo 11y ago
    Bitcoin companies in e.g. the US have quite a lot of regulatory oversight. Not sure where you're coming from. Chargebacks are a different topic, I know it's a cop out but I can't be bothered right now. I'll just say they're not as nice as people make them out to be, they're a big cost factor, they invite quite a bit of fraud, carry an awkward burden of proof, and socialise the costs (which I normally don't mind, but in this particular case it makes little sense). I agree it's not unlikely that we'll still use institutions with bitcoin. The difference is that unlike something silly like Swift, we can have an open money protocol that is global, works with currency-agnostic tokens (bitcoins) that can present any value given the right derivatives market. It's more global, cheaper, faster, but perhaps most importantly more open and democratic, even with regulations in play. It's a bit like the Internet, even if companies individually are regulated, an open network is massively important. Anyway I won't stretch that comparison too far, most people dislike comparisons of something that's still very small to something grand. In addition to that, an open money protocol that is not proprietary or regional is a lot easier to disintermediate with software solutions. Even if institutions will still play a role, they'll be more software companies than brick & mortar administrative financial companies.
    - 07d046 11y ago
      There are plenty of people who recommend against using those US companies like Coinbase because of they follow the regulations. This is on the front page of /r/Bitcoin at the moment: https://www.reddit.com/r/Bitcoin/comments/335lqi/coinbase_flagged_transactions/ https://www.reddit.com/r/Bitcoin/comments/335lqi/coinbase_fl...
      - IkmoIkmo 11y ago
        So, did you change your point and agree with me, or does this somehow refute what I said? I don't follow.
- wyager 11y ago
  >If it were a responsible financial institution Are you under the impression that it's an institution at all? The whole reason Bitcoin is interesting is that it's not under the control of a company, group, or government.
  - yc1010 11y ago
    While Bitcoin use is currently small the actual concept of a working "electronic cash" that negates the need for the credit card network with the use of cryptography and maths must be a serious threat to Visa/Mastercard since it provides yet another alternative to their duopoly when it comes to commerce. No wonder they do everything in their power to spread fud about bitcoin, seed doubt and make life difficult for cryptotechnology related startups. Some banks (especially in UK) are in a similar boat. Somewhat how traditional car companies were schizophrenic when it came to electric cars and have done everything to kill them despite posing little threat being such a small market until Tesla came along at shown that electric cars are 1) better in many ways and 2) actually profitable
  - JoeAltmaier 11y ago
    And yet, Mt. Gox.
    - wyager 11y ago
      What about Mt. Gox?
  - Nursie 11y ago
    >> The whole reason Bitcoin is interesting is that it's not under the control of a company, group, or government. In reality it's under the control of the lead developers and the people that run the very few large mining pools. As shown by their collusion to fix blockchain forks etc etc.
    - wyager 11y ago
      >In reality it's under the control of the lead developers Only because they've done nothing wrong (thus far). If there was any hint of foul play, they would be out. The people that run the mining pools don't "control" bitcoin to any substantial degree. And, again, if they seriously abused their power, a trivial software fix would be to change the proof-of-work algorithm, instantly obsoleting the miners' equipment.
- IkmoIkmo 11y ago
  Bitcoin is pretty much digital cash. There is no institution that governs the transfer of cash, as in if you pay at a store with cash, or pay a friend cash, or pay a criminal cash, or buy some drugs with cash, there's no 3rd party involved here like say a Paypal or bank transfer. Bitcoin is like that. But like bitcoin and cash, institutions are part of the ecosystem. You likely get paid by regulated organisations such as an employer or company, you may store your cash with a third party like Paypal, a bank or a bitcoin wallet service like Coinbase. You may exchange your cash into a different currency, or have a company send your cash somewhere, and institutions are involved just like with bitcoin. And all these organisations are generally subject to the same, or stricter regulatory oversight. In most states for example, bitcoin companies are considered money transmitters and subject to your regular money transmitter laws. And in some states like New York, actual bitlicenses are being designed to specifically provide bitcoin/cryptocurrency regulations in addition to these laws, not replacing them. The fact that not everyone uses institutions, or that some illegal institutions exist (just like how some use cash without using banks see [0], or use illegal organisations for their financial services (e.g. Hawala remittance services instead of Western Union, illegal in many countries), is no different from people using bitcoin without involving an institution, or using bitcoin services that don't follow their regulatory obligations. (the minority of popular wallet companies, exchanges etc, btw). So... no miracle here. It's extremely similar to cash as we know it. Not exactly similar of course.
- wongarsu 11y ago
  Bitcoin exchanges are requiring more and more information to conform to money laundering regulations. In most countries Bitcoins are regulated either as currency, foreign currency or investment similar to stock. Some countries haven't quite made up their mind yet, but the real reason for the lack of comprehensive oversight is that it's so easy to operate a bitcoin business anonymously, escaping all regulation.
hypron 11y ago
The only "trace" that you could find would be a wire transfer from an exchange to a bank account, and even that isn't too suspicious, because I would imagine that large exchanges do that regularly. You could also sell the bitcoins for cash in person over time, and avoid any traces.
belorn 11y ago
Selling publicly known stolen bitcoins seems to me as a rather difficult task. Exchanges could refuse dealing with those addresses, and researchers would surely jump if they noticed a set of dormant addresses suddenly starting to see usage. It seems as the same problem as art thieves have, as even if their identity can be hidden, the goods they try to sell are inherently identifiable.
- navait 11y ago
  There have been some efforts out there to provide completely anonymous bitcoin transactions, namely ZeroCoin and bitcoin mixers like Silk Road used. After these services are used, t becomes impossible to track the coins origins. http://isi.jhu.edu/~mgreen/ZerocoinOakland.pdf http://isi.jhu.edu/~mgreen/ZerocoinOakland.pdf
- bduerst 11y ago
  Exchanges could but they definitely don't have a black list of dormant/fraudulent addresses somewhere. These people could also tumble the bitcoins, where they convert it to an alt coin or other currency before converting back to a different address. That's how money launderers currently use bitcoin now and bypass the whole "public record" thing.
  - IkmoIkmo 11y ago
    I wouldn't say 'definitely'. I think it's actually quite likely. Some reports have already surfaced of this. Some reports have surfaced about their reporting obligations. Both because they're controversial. i.e. the fungibility of bitcoins is very important for many reasons. The moment we have 'tarred' bitcoins, we get different bitcoins with different histories, and with different values. So a stolen $1 is suddenly worth $0.50, forever, because it's got a blockchain history associated with theft. That is not a workable long-term system, so it has received a lot of backlash from the community, which is why these stories usually get out. And it's known that many companies do a lot of analysis and tracking and have lists, so the biggest bitcoin company in the world for example (close to half a billion valuation), Coinbase, is known to close down and flag accounts who's bitcoins have been traced to e.g. relatively innocuous sports gambling websites, because of its compliance obligations. So the notion of black lists is not unlikely. What is unlikely is that (without gov. pressure), they will be eager to employ them. Again, fungibility gets destroyed and bitcoin takes a big hit, might not be workable that way. And two, they cut into their own business to block customers. And three, institutions blocking blacklisted coins goes against the privacy spirit and non-reliance on 3rd party permission of bitcoin, which is something that makes you popular. It also appears government hasn't asked for this yet and that they prioritise innovation and rapid growth over implementing crushing regulations in a tiny ecosystem. But that might change. Although if this happens (government requiring black lists etc) I think it's more likely that exchanges will get extra reporting duties, allow the sale of bitcoins, and that banks will be the ones freezing the fiat accounts. That'll give the government easily seizable assets, and proof of laundering, yet allows the bitcoin ecosystem to continue on as usual.
IkmoIkmo 11y ago
Not much different from other stolen goods like jewellery. It has value, people want to pay for it ignorant or disregarding of its (stolen) origins. You do it in person. The buyer has limited culpability. In addition, after some time (I don't know the English legal term for this), ownership transfers from the victim to whoever possesses it for long enough. (i.e. if B steals a bike from A, and sells it to C, then C possesses the bike but doesn't legally own it, ownership is still with A. But after a while, ownership transfers to C. At least in many legal systems). The sale occurs in cash and identities are generally not registered. In other words, the banking system is circumvented and everything is done with cash. The other option is to employ the banking system in a way that is also used for business fraud in general: use throw away accounts from socioeconomically fragile and 'disposable' people. Criminals will approach someone who is (semi) homeless, or a minor in high school. They probably have a bank account with $50 on it. You pay them $100 for their ATM card & bank account and promise more with some story, e.g. employment as 'jr. financial controller' in the criminals' non-existent company. The victims (who fall for it) argue to themselves "I have $50, I get $100, and have been promised $500 more, what do I have to lose?" Will there be people who deny this opportunity? Yes, probably most. Will there be people who won't? Yes. And you only need a single card and you can run 3-5 days of scams on it before the account gets reported, flagged and blocked. And you can run thousands of dollars of money through in that period. The criminal now has a regulated bank account on which he can receive payments without it leading back to his identity. At this point you can scam people on Craigslist (send me $200 for the Playstation and I'll send it to you asap, do it at 3AM and it won't get deleted manually by an admin, and you'll find 3-4 people who'll fall for a too good to be true price because they're desperate), or indeed actually sell stolen bitcoins at 95% of market value (inviting arbitrage who will buy up everything you have). You then go to the bank, use your card to withdraw everything, and disappear. The guy who gave you his card gets a call from the police and tells his story. Sometimes he gets a minor fine, but generally he is a victim, too and has no means of covering any damage. Will there be people who deny stolen bitcoins? Yes. Will there be people who either have no clue at all which bitcoins were recently stolen or not, or if they do, not care? Yes. It's really messed up and pretty fool-proof. The big criminals get caught eventually. (they leak information to friends who report them. They run $500k of scams through Craigslist and get priority and get traced via their ISP, usually they barely know what an IP is). Or they do this + a bunch of other stuff like break ins and get caught when the police finds $100k in cash at their home. Or they get reported trying to recruit lots of kids for their debit cards etc. But I'd bet if you did it small-time/smartly you could easily get away with it.
keypusher 11y ago
Not necessarily. You could easily funnel the coins through multiple addresses, and then use them to pay for illicit goods, which would then be sold on the black market. Or you could use them at a gambling site which returns real money. Techniques like these are often used by organized crime to launder money, I imagine with btc it is even easier.

by frevd 11y ago

JoeAltmaier 11y ago

Fundamentally, Bitcoin is about not having any of that info. If it were a responsible financial institution, then there would have been federal regulations regarding reporting, reserves etc. But the miracle of bitcoins is, somehow it isn't subject to any reasonable oversight.

07d046 11y ago
Yes, almost all of the advantages of Bitcoin are because it currently has practically no regulatory oversight. If it was to get mainstream usage, regulation would also grow, and at least if you want to play in licit channels, it would be almost exactly the same as what already exists. Being your own bank is much too hard and risky for the average consumer, and payment systems that provide useful consumer protections like chargebacks would be formed, so in the end, most people would be doing their banking at BitChase and using a BitVisa credit card.
- yc1010 11y ago
  I like how the reason for "chargebacks" is often touted as "consumer protection" when the real reason it to line the pockets of the credit card duopoly and ensure the merchant always gets screwed. In many developed countries there are consumer protection laws which entitle the buyer to Replacement, Repair, Refund (in that order usually), so a merchant not adhering to these laws could endup in serious legal trouble as is. Bitcoin at least gives a choice to both buyers and sellers just like plain old cash does Bitcoin, Cash and Traditional Banking (SEPA etc) provide an alternative for commerce where one is free from Visa/Mastecard stupidities and ensure that the Visa/Mastercard duopoly is actually forced to compete and not grow into a more dominant and more abusive entities than they already are. They provide an alternative to being tracked and data-mined and having personal information sold to god knows who :( People do not value their privacy until they lose it, and by then its too late. * Cash allows me to pay (quite anonymously and without fear of being an entry in some datamine) for things locally * SEPA bank transfer allows me to pay EUwide for goods and services reasonably quickly and for no fees (thank you EU! credit card duopoly must hate SEPA) * Bitcoin allows me to instantly pay world wide with ultralow fees, its basically electronic Cash (credit card duopoly do hate bitcoin with a passion, just yesterday they prevented neteller from bridging bitcoin and credit card worlds which IMHO is anticompetitive! http://blog.neteller.com/2015/04/new-deposit-option-bitcoin/ http://blog.neteller.com/2015/04/new-deposit-option-bitcoin/) I forgot the last time I had to use a credit card (or paypal and their "consumer protection") in the last year, and my life both personal and business is easier and better for it.
  - chimeracoder 11y ago
    > to line the pockets of the credit card duopoly and ensure the merchant always gets screwed. First, in the US there are four companies, not two (or three, if you don't want to count Discover). And chargebacks aren't the reason that there are so few players - they're far from the biggest barrier to entry for an upstart, aspiring credit card provider. > In many developed countries there are consumer protection laws which entitle the buyer to Replacement, Repair, Refund (in that order usually), so a merchant not adhering to these laws could endup in serious legal trouble as is. That's not what chargebacks are generally for, and in fact using a chargeback for any of those three things is oftentimes considered misuse of the chargeback system. Chargebacks are for handling disputes regarding the actual goods or services promised or rendered. Furthermore, having laws in place means nothing if it's prohibitively expensive for consumers to actually get them to be enforced in all but the largest disputes. Chargebacks are a tool that consumers can (and do) use to ensure that merchants adhere to these agreements. No individual is going to go to court with a merchant over a few hundred dollars on a disputed credit card charge. The consumer delegates this authority to the credit card company, who is more than happy to aggregate this risk across multiple customers, in exchange for a cut[0]. This is not a problem; it is the system working as intended! I'm saying this both as a consumer and as a merchant who has gotten screwed over by one of the four (not two) major credit card companies[1] - chargebacks suck, but they provide an essential protection for consumers that the judicial system cannot. (All of this is separate from fraud, which is a different matter entirely.) > I forgot the last time I had to use a credit card (or paypal and their "consumer protection") in the last year, and my life both personal and business is easier and better for it. I've had to make a few chargebacks in my life. The largest was for almost $2000. Even though the vendor was clearly in the wrong (and I had the written contract to prove it), it would have been way too expensive to actually try and get our money back through the judicial system. Fortunately, my credit card company was more than happy to settle the matter for us. [0] The consumer doesn't pay for this service directly, but they do indirectly (which isn't fundamentally different from many other products and services, in which the actual cashflow is invisible to the end consumer - this can be problematic in its own right, but that's a separate matter of discussion). [1] I have plenty of chargeback horror stories as a merchant, but that's the topic of another post. And that doesn't mean I don't see the value in chargebacks in general.
- IkmoIkmo 11y ago
  Bitcoin companies in e.g. the US have quite a lot of regulatory oversight. Not sure where you're coming from. Chargebacks are a different topic, I know it's a cop out but I can't be bothered right now. I'll just say they're not as nice as people make them out to be, they're a big cost factor, they invite quite a bit of fraud, carry an awkward burden of proof, and socialise the costs (which I normally don't mind, but in this particular case it makes little sense). I agree it's not unlikely that we'll still use institutions with bitcoin. The difference is that unlike something silly like Swift, we can have an open money protocol that is global, works with currency-agnostic tokens (bitcoins) that can present any value given the right derivatives market. It's more global, cheaper, faster, but perhaps most importantly more open and democratic, even with regulations in play. It's a bit like the Internet, even if companies individually are regulated, an open network is massively important. Anyway I won't stretch that comparison too far, most people dislike comparisons of something that's still very small to something grand. In addition to that, an open money protocol that is not proprietary or regional is a lot easier to disintermediate with software solutions. Even if institutions will still play a role, they'll be more software companies than brick & mortar administrative financial companies.
  - 07d046 11y ago
    There are plenty of people who recommend against using those US companies like Coinbase because of they follow the regulations. This is on the front page of /r/Bitcoin at the moment: https://www.reddit.com/r/Bitcoin/comments/335lqi/coinbase_flagged_transactions/ https://www.reddit.com/r/Bitcoin/comments/335lqi/coinbase_fl...
    - IkmoIkmo 11y ago
      So, did you change your point and agree with me, or does this somehow refute what I said? I don't follow.
wyager 11y ago
>If it were a responsible financial institution Are you under the impression that it's an institution at all? The whole reason Bitcoin is interesting is that it's not under the control of a company, group, or government.
- yc1010 11y ago
  While Bitcoin use is currently small the actual concept of a working "electronic cash" that negates the need for the credit card network with the use of cryptography and maths must be a serious threat to Visa/Mastercard since it provides yet another alternative to their duopoly when it comes to commerce. No wonder they do everything in their power to spread fud about bitcoin, seed doubt and make life difficult for cryptotechnology related startups. Some banks (especially in UK) are in a similar boat. Somewhat how traditional car companies were schizophrenic when it came to electric cars and have done everything to kill them despite posing little threat being such a small market until Tesla came along at shown that electric cars are 1) better in many ways and 2) actually profitable
- JoeAltmaier 11y ago
  And yet, Mt. Gox.
  - wyager 11y ago
    What about Mt. Gox?
- Nursie 11y ago
  >> The whole reason Bitcoin is interesting is that it's not under the control of a company, group, or government. In reality it's under the control of the lead developers and the people that run the very few large mining pools. As shown by their collusion to fix blockchain forks etc etc.
  - wyager 11y ago
    >In reality it's under the control of the lead developers Only because they've done nothing wrong (thus far). If there was any hint of foul play, they would be out. The people that run the mining pools don't "control" bitcoin to any substantial degree. And, again, if they seriously abused their power, a trivial software fix would be to change the proof-of-work algorithm, instantly obsoleting the miners' equipment.
IkmoIkmo 11y ago
Bitcoin is pretty much digital cash. There is no institution that governs the transfer of cash, as in if you pay at a store with cash, or pay a friend cash, or pay a criminal cash, or buy some drugs with cash, there's no 3rd party involved here like say a Paypal or bank transfer. Bitcoin is like that. But like bitcoin and cash, institutions are part of the ecosystem. You likely get paid by regulated organisations such as an employer or company, you may store your cash with a third party like Paypal, a bank or a bitcoin wallet service like Coinbase. You may exchange your cash into a different currency, or have a company send your cash somewhere, and institutions are involved just like with bitcoin. And all these organisations are generally subject to the same, or stricter regulatory oversight. In most states for example, bitcoin companies are considered money transmitters and subject to your regular money transmitter laws. And in some states like New York, actual bitlicenses are being designed to specifically provide bitcoin/cryptocurrency regulations in addition to these laws, not replacing them. The fact that not everyone uses institutions, or that some illegal institutions exist (just like how some use cash without using banks see [0], or use illegal organisations for their financial services (e.g. Hawala remittance services instead of Western Union, illegal in many countries), is no different from people using bitcoin without involving an institution, or using bitcoin services that don't follow their regulatory obligations. (the minority of popular wallet companies, exchanges etc, btw). So... no miracle here. It's extremely similar to cash as we know it. Not exactly similar of course.
wongarsu 11y ago
Bitcoin exchanges are requiring more and more information to conform to money laundering regulations. In most countries Bitcoins are regulated either as currency, foreign currency or investment similar to stock. Some countries haven't quite made up their mind yet, but the real reason for the lack of comprehensive oversight is that it's so easy to operate a bitcoin business anonymously, escaping all regulation.

hypron 11y ago

The only "trace" that you could find would be a wire transfer from an exchange to a bank account, and even that isn't too suspicious, because I would imagine that large exchanges do that regularly. You could also sell the bitcoins for cash in person over time, and avoid any traces.

belorn 11y ago

Selling publicly known stolen bitcoins seems to me as a rather difficult task. Exchanges could refuse dealing with those addresses, and researchers would surely jump if they noticed a set of dormant addresses suddenly starting to see usage. It seems as the same problem as art thieves have, as even if their identity can be hidden, the goods they try to sell are inherently identifiable.

navait 11y ago
There have been some efforts out there to provide completely anonymous bitcoin transactions, namely ZeroCoin and bitcoin mixers like Silk Road used. After these services are used, t becomes impossible to track the coins origins. http://isi.jhu.edu/~mgreen/ZerocoinOakland.pdf http://isi.jhu.edu/~mgreen/ZerocoinOakland.pdf
bduerst 11y ago
Exchanges could but they definitely don't have a black list of dormant/fraudulent addresses somewhere. These people could also tumble the bitcoins, where they convert it to an alt coin or other currency before converting back to a different address. That's how money launderers currently use bitcoin now and bypass the whole "public record" thing.
- IkmoIkmo 11y ago
  I wouldn't say 'definitely'. I think it's actually quite likely. Some reports have already surfaced of this. Some reports have surfaced about their reporting obligations. Both because they're controversial. i.e. the fungibility of bitcoins is very important for many reasons. The moment we have 'tarred' bitcoins, we get different bitcoins with different histories, and with different values. So a stolen $1 is suddenly worth $0.50, forever, because it's got a blockchain history associated with theft. That is not a workable long-term system, so it has received a lot of backlash from the community, which is why these stories usually get out. And it's known that many companies do a lot of analysis and tracking and have lists, so the biggest bitcoin company in the world for example (close to half a billion valuation), Coinbase, is known to close down and flag accounts who's bitcoins have been traced to e.g. relatively innocuous sports gambling websites, because of its compliance obligations. So the notion of black lists is not unlikely. What is unlikely is that (without gov. pressure), they will be eager to employ them. Again, fungibility gets destroyed and bitcoin takes a big hit, might not be workable that way. And two, they cut into their own business to block customers. And three, institutions blocking blacklisted coins goes against the privacy spirit and non-reliance on 3rd party permission of bitcoin, which is something that makes you popular. It also appears government hasn't asked for this yet and that they prioritise innovation and rapid growth over implementing crushing regulations in a tiny ecosystem. But that might change. Although if this happens (government requiring black lists etc) I think it's more likely that exchanges will get extra reporting duties, allow the sale of bitcoins, and that banks will be the ones freezing the fiat accounts. That'll give the government easily seizable assets, and proof of laundering, yet allows the bitcoin ecosystem to continue on as usual.

IkmoIkmo 11y ago

Not much different from other stolen goods like jewellery. It has value, people want to pay for it ignorant or disregarding of its (stolen) origins. You do it in person. The buyer has limited culpability. In addition, after some time (I don't know the English legal term for this), ownership transfers from the victim to whoever possesses it for long enough. (i.e. if B steals a bike from A, and sells it to C, then C possesses the bike but doesn't legally own it, ownership is still with A. But after a while, ownership transfers to C. At least in many legal systems). The sale occurs in cash and identities are generally not registered. In other words, the banking system is circumvented and everything is done with cash. The other option is to employ the banking system in a way that is also used for business fraud in general: use throw away accounts from socioeconomically fragile and 'disposable' people. Criminals will approach someone who is (semi) homeless, or a minor in high school. They probably have a bank account with $50 on it. You pay them $100 for their ATM card & bank account and promise more with some story, e.g. employment as 'jr. financial controller' in the criminals' non-existent company. The victims (who fall for it) argue to themselves "I have $50, I get $100, and have been promised $500 more, what do I have to lose?" Will there be people who deny this opportunity? Yes, probably most. Will there be people who won't? Yes. And you only need a single card and you can run 3-5 days of scams on it before the account gets reported, flagged and blocked. And you can run thousands of dollars of money through in that period. The criminal now has a regulated bank account on which he can receive payments without it leading back to his identity. At this point you can scam people on Craigslist (send me $200 for the Playstation and I'll send it to you asap, do it at 3AM and it won't get deleted manually by an admin, and you'll find 3-4 people who'll fall for a too good to be true price because they're desperate), or indeed actually sell stolen bitcoins at 95% of market value (inviting arbitrage who will buy up everything you have). You then go to the bank, use your card to withdraw everything, and disappear. The guy who gave you his card gets a call from the police and tells his story. Sometimes he gets a minor fine, but generally he is a victim, too and has no means of covering any damage. Will there be people who deny stolen bitcoins? Yes. Will there be people who either have no clue at all which bitcoins were recently stolen or not, or if they do, not care? Yes. It's really messed up and pretty fool-proof. The big criminals get caught eventually. (they leak information to friends who report them. They run $500k of scams through Craigslist and get priority and get traced via their ISP, usually they barely know what an IP is). Or they do this + a bunch of other stuff like break ins and get caught when the police finds $100k in cash at their home. Or they get reported trying to recruit lots of kids for their debit cards etc. But I'd bet if you did it small-time/smartly you could easily get away with it.

keypusher 11y ago

Not necessarily. You could easily funnel the coins through multiple addresses, and then use them to pay for illicit goods, which would then be sold on the black market. Or you could use them at a gambling site which returns real money. Techniques like these are often used by organized crime to launder money, I imagine with btc it is even easier.