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After learning about how expensive stolen art is exchanged as a proxy for cash from "This is a robbery" on Netflix I started to wonder if laundering is really n

After learning about how expensive stolen art is exchanged as a proxy for cash from "This is a robbery" on Netflix I started to wonder if laundering is really needed with crypto. There are probably clever ways to just exchange wallet ownership instead.

vmception 5y ago
Yep. Anybody that is watching funds move across addresses has no idea what they are doing. They rely on assuming that the funds still have the same ultimate beneficial owner (UBO) who is trying to hide, when that couldn’t be further from the truth. Anybody that claims they know is just trying to scam a government for a lucrative blockchain analysis contract. Just another crypto entrepreneur aiming to leak fiat out of the system, even while pretending to act like an adversary to crypto users. The reality is that: A) the UBO either isn't trying to hide because they can acquire the goods and services they want without laundering (other tokens, governance control of a crypto network, passive income, digital art, using the dirty funds to pump other tokens that they already own with clean money allowing them to derive entrepreneurial or trading genius benefits) B) the UBO know they can launder whenever they feel like it or get around to it C) the funds have already changed UBOs to people that were not involved and shouldn't be tracked, because A) and B) already happened onchain or offchain
- takeda 5y ago
  The thing is that wallet is digital. If I hand you an USB stick with the wallet, that doesn't mean I no longer have it. The USB could be a copy of it and I could still withdraw the money. To be sure that doesn't happen the new owner would need to transfer money to another wallet. Unless there's a high trust that this won't be done.
  - vmception 5y ago
    Yes, crypto can operate in a temporarily trusted environment. What I was describing here wasn't that, I am referring to onchain transfers in trade for goods and services. (Part C could also be hand to hand trusted transfer of a wallet/private key) Chain analysis still assumes that its the same owner or related guilty beneficiary all the way to a centralized exchange.
DennisP 5y ago
The trouble is, there's no way to know that the seller threw away their copy of the private key.
- vmception 5y ago
  The point is that crypto can operate in a temporarily trusted environment. The subsequent owner does need to rotate addresses as soon as possible. It is the blockchain analysis that can't tell the difference between the prior owner moving to another address that prior owner controls, or a different owner moving addresses.
  - DennisP 5y ago
    There's little practical difference between: a) I give you my wallet, and you immediately send the coins to a new address to protect against my (potential) copy of the wallet, or b) I just send the coins to your new address myself. Either way, the blockchain records a transfer from my address to your new address.
    - vmception 5y ago
      The difference is in the liability incurred. So you're the blockchain analysis firm for the Department of Justice, and you're like "omg omg look the coins are moving! omg omg look its going to a centralized exchange account lets go subpoena the records and find out who has the KYC and identifying information behind that account." DOJ busts down the door "aha! got you!" If it was the person that actually hacked or did drug trafficking, then they found that person and charge them with that, wire fraud, money laundering etc. If it was just the recipient then the investigation is still ongoing and much lesser charges are possible. The DOJ would at best case try to find out who the "kingpin" is by overcharging the second person, but the primary observation is that the DOJ has not stopped any particular activity. Either way, its still not quite what happens: The reality is that it is many hops between unrelated people before it hits a centralized exchange that is subpoena-able at all. People.don't.need.or.want.fiat. Especially not a lot of it at any given time. Even hedge funds take in-kind investments of crypto to create a new limited partner. People don't need to cash out first and then invest that cash.
derefr 5y ago
Laundering is needed if you want to (enable the people you trade with to) ever spend the black-market money on white-market goods. Without that, your trading partner ends up holding a "dirty" wallet — just as if you gave them a suitcase full of marked bills. That wallet still holds value — all dirty money does — but it's a lot less value than cleaned money. Databases of stolen credit card numbers sell for not-much money. It's not just because you need stuff set up to drain the cards; it's because the money you drain from the cards is dirty. The dirty money is worth only about as much as the database itself. It's when you clean it that it attains "face value."
- rokobobo 5y ago
  And the idea with stolen art is that "dirty art" should theoretically always trade at roughly the same discount to "clean art," and in fact, over time, as gaps in the provenance become easier to patch up through fabrication, the discount should reduce. In that sense, "dirty art" is an investment, so the immoral of the super-rich are fine holding it forever. Also, no need to pay estate taxes if it's already an undisclosed asset on a yacht somewhere.

vmception 5y ago

Yep. Anybody that is watching funds move across addresses has no idea what they are doing. They rely on assuming that the funds still have the same ultimate beneficial owner (UBO) who is trying to hide, when that couldn’t be further from the truth. Anybody that claims they know is just trying to scam a government for a lucrative blockchain analysis contract. Just another crypto entrepreneur aiming to leak fiat out of the system, even while pretending to act like an adversary to crypto users. The reality is that: A) the UBO either isn't trying to hide because they can acquire the goods and services they want without laundering (other tokens, governance control of a crypto network, passive income, digital art, using the dirty funds to pump other tokens that they already own with clean money allowing them to derive entrepreneurial or trading genius benefits) B) the UBO know they can launder whenever they feel like it or get around to it C) the funds have already changed UBOs to people that were not involved and shouldn't be tracked, because A) and B) already happened onchain or offchain

takeda 5y ago
The thing is that wallet is digital. If I hand you an USB stick with the wallet, that doesn't mean I no longer have it. The USB could be a copy of it and I could still withdraw the money. To be sure that doesn't happen the new owner would need to transfer money to another wallet. Unless there's a high trust that this won't be done.
- vmception 5y ago
  Yes, crypto can operate in a temporarily trusted environment. What I was describing here wasn't that, I am referring to onchain transfers in trade for goods and services. (Part C could also be hand to hand trusted transfer of a wallet/private key) Chain analysis still assumes that its the same owner or related guilty beneficiary all the way to a centralized exchange.

DennisP 5y ago

The trouble is, there's no way to know that the seller threw away their copy of the private key.

vmception 5y ago
The point is that crypto can operate in a temporarily trusted environment. The subsequent owner does need to rotate addresses as soon as possible. It is the blockchain analysis that can't tell the difference between the prior owner moving to another address that prior owner controls, or a different owner moving addresses.
- DennisP 5y ago
  There's little practical difference between: a) I give you my wallet, and you immediately send the coins to a new address to protect against my (potential) copy of the wallet, or b) I just send the coins to your new address myself. Either way, the blockchain records a transfer from my address to your new address.
  - vmception 5y ago
    The difference is in the liability incurred. So you're the blockchain analysis firm for the Department of Justice, and you're like "omg omg look the coins are moving! omg omg look its going to a centralized exchange account lets go subpoena the records and find out who has the KYC and identifying information behind that account." DOJ busts down the door "aha! got you!" If it was the person that actually hacked or did drug trafficking, then they found that person and charge them with that, wire fraud, money laundering etc. If it was just the recipient then the investigation is still ongoing and much lesser charges are possible. The DOJ would at best case try to find out who the "kingpin" is by overcharging the second person, but the primary observation is that the DOJ has not stopped any particular activity. Either way, its still not quite what happens: The reality is that it is many hops between unrelated people before it hits a centralized exchange that is subpoena-able at all. People.don't.need.or.want.fiat. Especially not a lot of it at any given time. Even hedge funds take in-kind investments of crypto to create a new limited partner. People don't need to cash out first and then invest that cash.

derefr 5y ago

Laundering is needed if you want to (enable the people you trade with to) ever spend the black-market money on white-market goods. Without that, your trading partner ends up holding a "dirty" wallet — just as if you gave them a suitcase full of marked bills. That wallet still holds value — all dirty money does — but it's a lot less value than cleaned money. Databases of stolen credit card numbers sell for not-much money. It's not just because you need stuff set up to drain the cards; it's because the money you drain from the cards is dirty. The dirty money is worth only about as much as the database itself. It's when you clean it that it attains "face value."

rokobobo 5y ago
And the idea with stolen art is that "dirty art" should theoretically always trade at roughly the same discount to "clean art," and in fact, over time, as gaps in the provenance become easier to patch up through fabrication, the discount should reduce. In that sense, "dirty art" is an investment, so the immoral of the super-rich are fine holding it forever. Also, no need to pay estate taxes if it's already an undisclosed asset on a yacht somewhere.