6 ms·

Why you can’t cash out pt 2: Bitcoin and KYC/AML

69 points by davidgerard 9y ago

gst 9y ago
Not all banks are opposed to Bitcoin. Some banks even offer integration with Coinbase so that you can see your Bitcoin transactions in their banking interface: https://blog.coinbase.com/usaa-expands-coinbase-integration-to-all-usaa-members-bd759bb836b2 https://blog.coinbase.com/usaa-expands-coinbase-integration-...
- bbrian 9y ago
  I was give 0.5 BTC at a hackathon run by an Irish bank (Ulster Bank) a few years ago. I guess when I cash out, I'll cash out with them!
  - solotronics 9y ago
    you can only bank at USAA if you are a US federal government employee or current/former armed forces. which is fascinating that they are one of the most supportive banks of the US with Bitcoin.
ckastner 9y ago
I know of one such case where the user had sold a car for bitcoins years ago, and wanted to cash in on the current bubble. The best the exchange could come up with was sending it in daily in amounts of several thousand dollars Are all Bitcoin exchanges like this? I'd be very distraught if someone wouldn't allow me to withdraw my full balance.
- thefreeman 9y ago
  It's all based on your level of verification with the exchange. At the maximum (level 4) verification on Kraken you are limited to $100,000 withdrawal per day or $500,000 per month. So while he still wouldn't be able to withdraw the full amount at once, it is not nearly as bad as the author makes it sound.
  - davidgerard 9y ago
    Lots of people can cash out, but really, lots of people can't. Money suspended in mid-air from Coinbase for an indefinite length of time is becoming a standard consumer experience. Perhaps retail investors shouldn't go near bitcoin, in which case I completely agree. I'd love to know what proportion of transfers from Coinbase end up stuck in mid-air; I did ask them, but of course they haven't time to answer email from some blogger.
    - g09980 9y ago
      FWIW, many of my friends cash out from Coinbase and GDAX regularly. I have heard of occassional delays but nothing like "you can't cash out." (Looks like about 3 days processing time from usual 1 day now for wires due to sudden spike of users: https://status.coinbase.com/ https://status.coinbase.com/)
      - Jommi 9y ago
        We're not talking about "cash out" as in few thousands of dollars. we're talking about the hundreds of thousands or millions that some "Investors" are sitting on.
        sowbug 9y ago
        What do you think would motivate them to tell you about their successes and paint a giant hacker target on their backs?
        otheotheothe 9y ago
        Thats nonsense, absolutely. They use an OTC broker like genesis or cumberland (DWR). Can easily sell up to 100 mio and receive it in cash the next day.
    - nonbel 9y ago
      Assuming you are the author, how is it that your title is "Why you can't cash out", yet you write "Lots of people can cash out"? Can you clarify who is being referred to by "you"? At first it would seem to be "everyone", but that is clearly not what you mean.
thisisit 9y ago
KYC/AML is going to be the biggest bone of contention going forward. Given the rising complexity of online transfers lot of countries are now rolling out laws which require banks to track source of funds. Any transfers which happen outside known sources is promptly reported to government authorities. Then there are transfers from high risk companies. Coinbase seems to be one of them. With the bitcoin prices going through the roof, IRS and DHS will be keenly interested in the flow of money.
- nerdponx 9y ago
  Contact your bank first. Be prepared to provide the full history of every crypto you’ve ever touched and where the money for it came from. Be prepared to give enough information to your tax office that they could reconstruct you from a nail clipping. If it’s any substantial sum, get a proper accountant. Exchanges, at least in countries like the US, could add a lot of value by offering IRS- and KYC/AML-friendly transaction history reports.
- solotronics 9y ago
  all the more reason for me to use Bitcoin as a store of value and other cryptocurrencies for quick anonymous payments ( DASH, monero, zcash )
tacon 9y ago
"But what happens when a fourth use of money is introduced, one which subordinates all the other characteristics: money as a system of control?" https://www.youtube.com/watch?v=FyK4P7ZdOK8&t=382s https://www.youtube.com/watch?v=FyK4P7ZdOK8&t=382s
psyc 9y ago
These articles raise real problems that exist, however the negative bias + the title tip the scale towards FUD. You might have trouble cashing out. You might, like me, have no trouble at all beyond having to upload a couple of images. I think if you do some research ahead of trying to cash out, your odds are pretty good.
- gruez 9y ago
  Agree. Same with the first article. I'm surprised he doesn't discuss some of the real problems (scaling) instead.
  - davidgerard 9y ago
    oh, there's plenty of series to go! I suppose I shouldn't be surprised at crypto advocates nitpicking by going "this single topic part of a series doesn't cover this other topic I like better" or thinking a tone argument is a meaningful objection ...
    - will_brown 9y ago
      David, I’m a lawyer and as others in the thread have suggested, as a lawyer I could easily facilitate the bitcoin/usd conversion and successful bank deposit process (both on and off exchange). Do you have a idea how many people are being impacted and the overall value? Assuming an exchange like Coinbase takes 5% in a sell transaction and then the seller would owe taxes (minimum 15%) what kind of fee would someone be willing to pay for a lawyer to safely convert bitcoin and deposit their funds?
    - dang 9y ago
      Please don't post flamebait comments here. The last thing we need is yet another low-rent crtyptocurrency flamewar.
  - CodeWriter23 9y ago
    See Part I
- 9y ago
gruez 9y ago
>As I detail in chapter 8 of the book, I’m pretty sure this is how the 2017 crypto bubble was kicked off — when people couldn’t get US dollars off Bitfinex, so they bought Bitcoin and other cryptos to withdraw, pushing the price up. How does that make sense? If you sold some crypto for fiat, realize you can't cash out, then buy back the crypto you just sold, isn't the effect on supply/demand net 0? I guess the only consequence is inadvertent wash trading, but I doubt that has a huge effect on the markets unless you're insane and are doing it over and over again, expecting something to change.
- Jommi 9y ago
  I think he just needed a place to peg his own book.
- davidgerard 9y ago
  The mechanism is: 1. Users have a USD account and a BTC account. They can’t sell their bitcoins and withdraw their cash, but they can buy more bitcoins using their newly-topped-up USD account – which contains trapped “dollars” which can’t be used for anything else. Think of it as a Bitfinex “USD” token, not as actual US dollars – Disneyland fun-money which can only be spent inside the theme park. The price goes up. In April, BTC on Bitfinex was often $200 higher than elsewhere. 2. With the higher price on Bitfinex, traders arbitrage by buying coins on an exchange with a lower price and selling them on Bitfinex. (Note that the USD from the sale is stuck on Bitfinex.) This raises the price on the other exchanges. 3. Expectations rise, the price gets mainstream press and more people get into Bitcoin. The bubble inflates. This works precisely because you can’t get your money out – and other exchanges were also having problems with US dollar withdrawals. Users were reluctant to remove their BTC from Bitfinex because the “price” was highest there (even if unrealisable) and because they loved it as a trading platform. The trapped “USD” tokens also got used to buy other cryptocurrencies – the price of altcoins tends to rise and fall with the price of bitcoins – and this fueled new ICOs, as people desperately looked for somewhere to put their unspendable “dollars.” This got Ethereum and ICOs into the bubble as well. FWIW, I described this to Phil Potter from Bitfinex and he thought it was plausible. I don't think they intended a bubble to start, but I do think that's what kicked it off. I'm not sure if the “USD” were Tethers at this stage, or just funbux trapped there.
Alex3917 9y ago
If you want to start trading crypto, you need to set up a separate bank account for this before you start and go through the compliance process with the bank in advance. This can take several weeks, but if you don't go through the process before you start accumulating significant amounts of crypto then you'll never be allowed to cash out. (And also there are only a handful of banks that will allow you do this, you can't just make a new account at Chase or Wells Fargo or whatever.) This is why almost all of the big ICOs still have the 'money' they've raised in crypto, because they didn't do KYC/AML and so they aren't allowed to sell their crypto and put the cash in a bank account. The only thing they can do is pay their employees in crypto, at which point it's the employees problem of how to cash out.
- psyc 9y ago
  Can you explain the “never” in this assertion? Never is a strong word.
  - Alex3917 9y ago
    It's illegal for banks to accept deposits of money without knowing how the person depositing the money got it. And this isn't just in the US, it's in every country worldwide. This means that if you're buying crypto assets behind just a couple hundred bucks to mess around with, you're going to want to work with a compliance officer, where every time you buy something you send them an email explaining exactly what you bought and how much you paid for it. Basically if you put a hundred bucks in Coinbase and you end up with a few thousand bucks then you're not going to run into any issues. But if try to drop $20M into a bank account they're going to tell you to get fucked.
ryanwaggoner 9y ago
This is so bizarre. This is a whole series on the various reasons you can’t do X, written while hundreds of thousands of people are doing X all over the world. Seriously, I’m sitting next to someone who cashed out of cryptocurrency (yes, for USD) two days ago. This is sour grapes to a new level.
- Jommi 9y ago
  Can you explain his process a bit? You could just be making this up.
  - ryanwaggoner 9y ago
    He sold his coins on Coinbase and withdrew to his bank. Done. Maybe the author’s post should have been “why a tiny fraction of cryptocurrency whales can’t cash out without a little research and upfront vetting” but I suspect that would have made for a terrible title. So he wrote a great title instead. It just doesn’t have the benefit of being true.
    - taude 9y ago
      Sold a significant amount, or like 40K worth? I'm curious about people cashing about significant values and converting to USD.
      - JumpCrisscross 9y ago
        If you’re cashing out more than $100,000 in crypto currency, you have the resources and the reason to hire a tax lawyer. They will, in addition to ensuring you don’t piss off the IRS, help you mollify any AML concerns.
        taude 9y ago
        Thanks. That's good to know. I have friends who've been surfing crypto for the past year, and they seem to a) not be worried about much, but also b) have no clue on what they're doing.
ryan-c 9y ago
If you have cryptocurrencies, you should set up accounts on exchanges well in advance, and request substantial limit increases. Also, don't keep a balance you're on actively trading with on exchanges.
wslh 9y ago
Bullshit, you can find a Bitcoin friendly financial organization that knows how to make the whole process easier. In the worst case you can use LocalBitcoins. We have used services like Bitex[1] and the exchange process work like a charm after the, obviously slow, onboarding process (e.g. paperwork). [1] https://bitex.la https://bitex.la
mdgrech23 9y ago
This is fake new. Please flag or downvote this bullshit. This person has an ulterior motive whatever that may be.
aviv 9y ago
Cryptocurrencies' weakest link are the exchangers. There is a greater than zero chance that a well known US exchanger will have their US offices raided by authorities in 2018-19 after a terror attack of some sort will be linked to cryptocurrency financing, whether true or not. Assets would then be seized indefinitely. If Bitcoin fails, it will be because of the exchangers. For this reason (and others), do not ever store your coins in an exchange wallet.
- maxerickson 9y ago
  The other side of it is that it wouldn't be at $15000 without exchange buyers.
hayksaakian 9y ago
Most of the articles shared from this website just shit talk bit coin https://news.ycombinator.com/from?site=davidgerard.co.uk https://news.ycombinator.com/from?site=davidgerard.co.uk
rboyd 9y ago
These sensationalist articles serve as indirect spam for OP's 180-pg book on Amazon. Millions of people are transacting in crypto (including trading for national currencies) every day. Bitcoin is trading on the CBOE/CME now for heaven's sake. Please apply your talents to something more constructive.

69 points by davidgerard 9y ago

gst 9y ago

Not all banks are opposed to Bitcoin. Some banks even offer integration with Coinbase so that you can see your Bitcoin transactions in their banking interface: https://blog.coinbase.com/usaa-expands-coinbase-integration-to-all-usaa-members-bd759bb836b2 https://blog.coinbase.com/usaa-expands-coinbase-integration-...

bbrian 9y ago
I was give 0.5 BTC at a hackathon run by an Irish bank (Ulster Bank) a few years ago. I guess when I cash out, I'll cash out with them!
- solotronics 9y ago
  you can only bank at USAA if you are a US federal government employee or current/former armed forces. which is fascinating that they are one of the most supportive banks of the US with Bitcoin.

ckastner 9y ago

I know of one such case where the user had sold a car for bitcoins years ago, and wanted to cash in on the current bubble. The best the exchange could come up with was sending it in daily in amounts of several thousand dollars Are all Bitcoin exchanges like this? I'd be very distraught if someone wouldn't allow me to withdraw my full balance.

thefreeman 9y ago
It's all based on your level of verification with the exchange. At the maximum (level 4) verification on Kraken you are limited to $100,000 withdrawal per day or $500,000 per month. So while he still wouldn't be able to withdraw the full amount at once, it is not nearly as bad as the author makes it sound.
- davidgerard 9y ago
  Lots of people can cash out, but really, lots of people can't. Money suspended in mid-air from Coinbase for an indefinite length of time is becoming a standard consumer experience. Perhaps retail investors shouldn't go near bitcoin, in which case I completely agree. I'd love to know what proportion of transfers from Coinbase end up stuck in mid-air; I did ask them, but of course they haven't time to answer email from some blogger.
  - g09980 9y ago
    FWIW, many of my friends cash out from Coinbase and GDAX regularly. I have heard of occassional delays but nothing like "you can't cash out." (Looks like about 3 days processing time from usual 1 day now for wires due to sudden spike of users: https://status.coinbase.com/ https://status.coinbase.com/)
    - Jommi 9y ago
      We're not talking about "cash out" as in few thousands of dollars. we're talking about the hundreds of thousands or millions that some "Investors" are sitting on.
      - sowbug 9y ago
        What do you think would motivate them to tell you about their successes and paint a giant hacker target on their backs?
      - otheotheothe 9y ago
        Thats nonsense, absolutely. They use an OTC broker like genesis or cumberland (DWR). Can easily sell up to 100 mio and receive it in cash the next day.
  - nonbel 9y ago
    Assuming you are the author, how is it that your title is "Why you can't cash out", yet you write "Lots of people can cash out"? Can you clarify who is being referred to by "you"? At first it would seem to be "everyone", but that is clearly not what you mean.

thisisit 9y ago

KYC/AML is going to be the biggest bone of contention going forward. Given the rising complexity of online transfers lot of countries are now rolling out laws which require banks to track source of funds. Any transfers which happen outside known sources is promptly reported to government authorities. Then there are transfers from high risk companies. Coinbase seems to be one of them. With the bitcoin prices going through the roof, IRS and DHS will be keenly interested in the flow of money.

nerdponx 9y ago
Contact your bank first. Be prepared to provide the full history of every crypto you’ve ever touched and where the money for it came from. Be prepared to give enough information to your tax office that they could reconstruct you from a nail clipping. If it’s any substantial sum, get a proper accountant. Exchanges, at least in countries like the US, could add a lot of value by offering IRS- and KYC/AML-friendly transaction history reports.
solotronics 9y ago
all the more reason for me to use Bitcoin as a store of value and other cryptocurrencies for quick anonymous payments ( DASH, monero, zcash )

tacon 9y ago

"But what happens when a fourth use of money is introduced, one which subordinates all the other characteristics: money as a system of control?" https://www.youtube.com/watch?v=FyK4P7ZdOK8&t=382s https://www.youtube.com/watch?v=FyK4P7ZdOK8&t=382s

psyc 9y ago

These articles raise real problems that exist, however the negative bias + the title tip the scale towards FUD. You might have trouble cashing out. You might, like me, have no trouble at all beyond having to upload a couple of images. I think if you do some research ahead of trying to cash out, your odds are pretty good.

gruez 9y ago
Agree. Same with the first article. I'm surprised he doesn't discuss some of the real problems (scaling) instead.
- davidgerard 9y ago
  oh, there's plenty of series to go! I suppose I shouldn't be surprised at crypto advocates nitpicking by going "this single topic part of a series doesn't cover this other topic I like better" or thinking a tone argument is a meaningful objection ...
  - will_brown 9y ago
    David, I’m a lawyer and as others in the thread have suggested, as a lawyer I could easily facilitate the bitcoin/usd conversion and successful bank deposit process (both on and off exchange). Do you have a idea how many people are being impacted and the overall value? Assuming an exchange like Coinbase takes 5% in a sell transaction and then the seller would owe taxes (minimum 15%) what kind of fee would someone be willing to pay for a lawyer to safely convert bitcoin and deposit their funds?
  - dang 9y ago
    Please don't post flamebait comments here. The last thing we need is yet another low-rent crtyptocurrency flamewar.
- CodeWriter23 9y ago
  See Part I
9y ago

gruez 9y ago

>As I detail in chapter 8 of the book, I’m pretty sure this is how the 2017 crypto bubble was kicked off — when people couldn’t get US dollars off Bitfinex, so they bought Bitcoin and other cryptos to withdraw, pushing the price up. How does that make sense? If you sold some crypto for fiat, realize you can't cash out, then buy back the crypto you just sold, isn't the effect on supply/demand net 0? I guess the only consequence is inadvertent wash trading, but I doubt that has a huge effect on the markets unless you're insane and are doing it over and over again, expecting something to change.

Jommi 9y ago
I think he just needed a place to peg his own book.
davidgerard 9y ago
The mechanism is: 1. Users have a USD account and a BTC account. They can’t sell their bitcoins and withdraw their cash, but they can buy more bitcoins using their newly-topped-up USD account – which contains trapped “dollars” which can’t be used for anything else. Think of it as a Bitfinex “USD” token, not as actual US dollars – Disneyland fun-money which can only be spent inside the theme park. The price goes up. In April, BTC on Bitfinex was often $200 higher than elsewhere. 2. With the higher price on Bitfinex, traders arbitrage by buying coins on an exchange with a lower price and selling them on Bitfinex. (Note that the USD from the sale is stuck on Bitfinex.) This raises the price on the other exchanges. 3. Expectations rise, the price gets mainstream press and more people get into Bitcoin. The bubble inflates. This works precisely because you can’t get your money out – and other exchanges were also having problems with US dollar withdrawals. Users were reluctant to remove their BTC from Bitfinex because the “price” was highest there (even if unrealisable) and because they loved it as a trading platform. The trapped “USD” tokens also got used to buy other cryptocurrencies – the price of altcoins tends to rise and fall with the price of bitcoins – and this fueled new ICOs, as people desperately looked for somewhere to put their unspendable “dollars.” This got Ethereum and ICOs into the bubble as well. FWIW, I described this to Phil Potter from Bitfinex and he thought it was plausible. I don't think they intended a bubble to start, but I do think that's what kicked it off. I'm not sure if the “USD” were Tethers at this stage, or just funbux trapped there.

Alex3917 9y ago

If you want to start trading crypto, you need to set up a separate bank account for this before you start and go through the compliance process with the bank in advance. This can take several weeks, but if you don't go through the process before you start accumulating significant amounts of crypto then you'll never be allowed to cash out. (And also there are only a handful of banks that will allow you do this, you can't just make a new account at Chase or Wells Fargo or whatever.) This is why almost all of the big ICOs still have the 'money' they've raised in crypto, because they didn't do KYC/AML and so they aren't allowed to sell their crypto and put the cash in a bank account. The only thing they can do is pay their employees in crypto, at which point it's the employees problem of how to cash out.

psyc 9y ago
Can you explain the “never” in this assertion? Never is a strong word.
- Alex3917 9y ago
  It's illegal for banks to accept deposits of money without knowing how the person depositing the money got it. And this isn't just in the US, it's in every country worldwide. This means that if you're buying crypto assets behind just a couple hundred bucks to mess around with, you're going to want to work with a compliance officer, where every time you buy something you send them an email explaining exactly what you bought and how much you paid for it. Basically if you put a hundred bucks in Coinbase and you end up with a few thousand bucks then you're not going to run into any issues. But if try to drop $20M into a bank account they're going to tell you to get fucked.

ryanwaggoner 9y ago

This is so bizarre. This is a whole series on the various reasons you can’t do X, written while hundreds of thousands of people are doing X all over the world. Seriously, I’m sitting next to someone who cashed out of cryptocurrency (yes, for USD) two days ago. This is sour grapes to a new level.

Jommi 9y ago
Can you explain his process a bit? You could just be making this up.
- ryanwaggoner 9y ago
  He sold his coins on Coinbase and withdrew to his bank. Done. Maybe the author’s post should have been “why a tiny fraction of cryptocurrency whales can’t cash out without a little research and upfront vetting” but I suspect that would have made for a terrible title. So he wrote a great title instead. It just doesn’t have the benefit of being true.
  - taude 9y ago
    Sold a significant amount, or like 40K worth? I'm curious about people cashing about significant values and converting to USD.
    - JumpCrisscross 9y ago
      If you’re cashing out more than $100,000 in crypto currency, you have the resources and the reason to hire a tax lawyer. They will, in addition to ensuring you don’t piss off the IRS, help you mollify any AML concerns.
      - taude 9y ago
        Thanks. That's good to know. I have friends who've been surfing crypto for the past year, and they seem to a) not be worried about much, but also b) have no clue on what they're doing.

ryan-c 9y ago

If you have cryptocurrencies, you should set up accounts on exchanges well in advance, and request substantial limit increases. Also, don't keep a balance you're on actively trading with on exchanges.

wslh 9y ago

Bullshit, you can find a Bitcoin friendly financial organization that knows how to make the whole process easier. In the worst case you can use LocalBitcoins. We have used services like Bitex[1] and the exchange process work like a charm after the, obviously slow, onboarding process (e.g. paperwork). [1] https://bitex.la https://bitex.la

mdgrech23 9y ago

This is fake new. Please flag or downvote this bullshit. This person has an ulterior motive whatever that may be.

aviv 9y ago

Cryptocurrencies' weakest link are the exchangers. There is a greater than zero chance that a well known US exchanger will have their US offices raided by authorities in 2018-19 after a terror attack of some sort will be linked to cryptocurrency financing, whether true or not. Assets would then be seized indefinitely. If Bitcoin fails, it will be because of the exchangers. For this reason (and others), do not ever store your coins in an exchange wallet.

maxerickson 9y ago
The other side of it is that it wouldn't be at $15000 without exchange buyers.

hayksaakian 9y ago

Most of the articles shared from this website just shit talk bit coin https://news.ycombinator.com/from?site=davidgerard.co.uk https://news.ycombinator.com/from?site=davidgerard.co.uk

rboyd 9y ago

These sensationalist articles serve as indirect spam for OP's 180-pg book on Amazon. Millions of people are transacting in crypto (including trading for national currencies) every day. Bitcoin is trading on the CBOE/CME now for heaven's sake. Please apply your talents to something more constructive.