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On first read I don't see anything wrong with this bill. It appears to extend a reporting requirement already applying to cash transfers to other forms of monet

On first read I don't see anything wrong with this bill. It appears to extend a reporting requirement already applying to cash transfers to other forms of monetary exchange. I don't see why transferring money via a cryptocurrency vs cash should be subject to different rules.

I_am_tiberius 5y ago
Did you read the "it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply" part? If that's not wrong I'm not sure what you expect.
- Arcuru 5y ago
  Unfortunately, saying that something is "illegal by design" is not usually an effective defense. This is just the kind of thing that cryptocurrencies need to contend with if they want to be used everywhere. Either they need to comply with the existing financial regulations or become powerful enough that they can change the financial regulations.
  - josho 5y ago
    Or where we are today raise enough attention (through articles like this) that this new requirement does not become law.
  - BitwiseFool 5y ago
    >"saying that something is "illegal by design" is not usually an effective defense." Is it though? Putting onerous requirements on something is an excellent de-facto way to effectively outlaw something when there isn't enough political will to directly ban it. Edit: Look no further than what Texas is trying to do with abortion access. They can't directly outlaw abortion but they can add a bunch of inane requirements that make getting one prohibitive. Alabama continually passes laws that put additional requirements on the staff of abortion clinics and most of them are not reasonable, unless the reason is to make operation increasingly difficult. https://www.prochoiceamerica.org/state-law/alabama/ https://www.prochoiceamerica.org/state-law/alabama/
    - Cederfjard 5y ago
      Well, I guess it boils down to whether the requirements are still reasonable or not? If yes I guess the grandparent comment stands, if not I suppose there might be reason to review them. But just because something inherently can’t comply with laws and regulations doesn’t mean it should be given exemptions.
      - deleted 5y ago
        [deleted]
  - tata71 5y ago
    Like Uber changed taxi licensing just about anywhere they flexed their wallet?
  - godelski 5y ago
    Legal also didn't mean moral. But we're also talking about making something a law or not. I'm not sure how your comment really responds to the person saying that they don't want this to become the law.
  - matheusmoreira 5y ago
    > become powerful enough that they can change the financial regulations This is what should happen.
    - bonzini 5y ago
      Until then (or for that to happen) they should focus on solving the issues that the reporting requirements are meant to solve. Sure, all transfers are visible in the blockchain, but how do you preserve that information across tumblers and/or associate wallets to tax IDs?
- fasteddie 5y ago
  That's the point, though. I could make a non-crypto based money transfer software that does not store sender or recipient information in the db. That too would make it impossible for that software comply with the law. Or the authors sculpture example. Just because the nature of the software makes it impossible to comply with particular laws doesn't make it good or bad. You need to make a value judgement if the regulation itself is valuable.
- elil17 5y ago
  Report requirements have been around for every other form of transaction. The fact that a bunch of companies went out and built products that would not be able to comply with a very foreseeable regulation is their own fault.
- fny 5y ago
  Honestly, I think this is outside the spirit of the law. Say you take your money put it in a bank account, the bank lends that money out again. Are you responsible for knowing the recipient? No. I imagine the same will be extended to putting money into a swap pool or DEX. Now say you actually send money to someone over $10k and don't report it. This is just like a 1099. Honestly, all the fear over what this is going to do is total FUD. It's not that difficult of a rule to deal with for law abiding citizens, and anyone who wants to continue using crypto to launder money or evade taxes will keep using mixer wallets.
  - nickff 5y ago
    >"Say you take your money put it in a bank account, the bank lends that money out again. Are you responsible for knowing the recipient? No. I imagine the same will be extended to putting money into a swap pool or DEX." My read of this law is that the bank or recipient of your money would be required to make the report (as they are the 'possessor'), which appears to already be the case (so-called KYC laws). I think you may be underestimating the amount of regulatory compliance that the government requires of many businesses.
    - fny 5y ago
      Exactly, the banks don't report that YOU paid money to others on a loan, the bank has it's own reporting requirements, hence you are not liable. Interestingly, financial institutions (which includes exchanges) are currently exempt from the reporting requirements in this law "the only businesses that are exempt from section 6050I are banks and financial institutions." So my take is they haven't figured out how to regulate the institutional aspect, they're simply attempting to monitor person to person transfers as a first pass. And this makes sense given the wash sales and other tricks people are trying to pull via NFTs and the like.
  - pjc50 5y ago
    > Say you take your money put it in a bank account, the bank lends that money out again The bank has a corporate identity which can be held liable.
- kiklion 5y ago
  I did read but it assumes people know what a liquidity pool is. So what is a liquidity pool? Example one indicated that a person could withdraw coins using tokens he got when he deposited coins. So pools are something you deposit coins into for LP tokens and later can surrender the tokens for coins. In example 2, they say that coins received from a liquidity pool swap cannot be traced. Why not? When the liquidity pool received the coins could it not associate the coins with where it came from? Even if not, then the liquidity pool itself is the source of the coins. When it gets coins, it needs to know who sent it, and when it sends coins it needs to know who it’s sending it to. All of this is possible. Just because they currently don’t track this information doesn’t mean it’s impossible to track. It would just require adjustments to their business to make it in compliance with regulations.
  - dboreham 5y ago
    The key thing to note is that the LP isn't a "legal entity". It's a function running on some set of blockchain nodes. Transactions on the LP are visible in the ledger, so if you want, you can construct a list of depositing and withdrawing addresses and amounts. But cryptocurrency is fungible so it doesn't make much sense to try to match up deposit transfers with withdrawals to form some concept of "who paid whom". That would be equivalent to trying to identify who's money I got when I make a cash withdrawal at my bank's ATM.
    - meheleventyone 5y ago
      Then the author/publisher is the legal entity? The code didn’t just publish itself!
      - yokem55 5y ago
        Code is speech. Edit - To expand this thought: If I exercise my freedom of speech by writing a smart contract and publish the code, how can I be liable if someone else uses that code on an actual blockchain?
        5y ago
- _jal 5y ago
  This is starting to get to the original intent of creating Bitcoin - attacking the nation state's taxation and enforcement capability. It'll be interesting to see how this plays out.
  - serverholic 5y ago
    It’s also attacking the current financial system where elites get special privileges and act irresponsibly.
  - dboreham 5y ago
    I'm not sure this was the "original intent". Perhaps an "early adopters' vision". I think the original intent was just to make a workable implementation of electronic cash, something that had been discussed in the literature (without the nation state attack aspect) for decades prior.
    - _lqaf 5y ago
      I was on the mailing list where the original paper and first implementation was released. Of course I can't speak to what was in "Satoshi"'s heart. But I am convinced that person was a member of the list, and shared the anarcho-capitalist goals/dreams that many of the members had. More generally, other attempts at digital cash were highly discussed topics in those crowds, and the interest was primarily in the ability to transact anonymously and confidentially, because of what that would do to taxation. If you're interested in what that crowd was thinking at the time, there's an exhaustive "FAQ" still available, written by one of the more vocal proponents of digital anarcho-capitalism: https://nakamotoinstitute.org/static/docs/cyphernomicon.txt https://nakamotoinstitute.org/static/docs/cyphernomicon.txt
      - int_19h 5y ago
        FWIW, reducing the power of states - and especially nation-states - is not specifically an anarcho-capitalist dream or goal. It was left-wing anarchists that started that ball rolling.
- malermeister 5y ago
  If something can't possibly be implemented in a legal way, then maybe, just maybe, it's just a bad idea? "It's impossible to comply with the ban on murder while we continue killing people" - Yes, that's the point. Stop doing what you're doing.
  - nightski 5y ago
    Except it can. This is a bill that has not passed yet. That is the entire point of the article, to argue against this new legislation. No need to equate DeFi with murder either, that's just being ridiculous.
    - malermeister 5y ago
      I think the framing of this article is super biased. It implies that there is a right to DeFi and that this law would take away that right (it also seems to imply it would do that by accident since legislators couldn't possibly do this on purpose.) There isn't a right to undermine the nation state and maybe, just maybe, the government is for once waking up and doing a useful thing by nipping this in the bud before it becomes dangerous?
      - toomuchtodo 5y ago
        Crypto proponents, painting with a broad brush, believe that code should be above nation state laws and regulations.
        malermeister 5y ago
        ... and then get outraged at anyone wanting to avoid that dystopia.
      - int_19h 5y ago
        There's a natural right to undermine the nation state - or any other actor - when said actor itself undermines natural rights. Whether you believe that freely exchanging goods and services is a natural right or not is another question.
woah 5y ago
Your comment is pretty unrelated to the article. It sounds like you're talking about a simple sending of cryptocurrency from one business or individual or another, but that's not what the article is talking about. It is impossible to report "who" you received an asset from if you received it from a smart contract that is not under the control of any one business or individual. In the cases of most defi contracts, the assets involved are pooled from many thousands of individuals and act as a sort of autonomous market maker. Cases where criminals obfuscate simple transfers are already prosecuted under money laundering laws, and they are very easy to prosecute because blockchains are a completely open record for anyone to data-mine. If research into and use of financial smart contracts should be shut down immediately in the US, let them debate and make a law about that. Don't sneak it into a monster bill and pretend that it's about something entirely different.
- pjc50 5y ago
  > smart contract that is not under the control of any one business or individual This doesn't mean it's not under control of someone or a group of people. Claiming it's not under control just means you're hiding the true controller, which might be an embargoed entity like Iran. If you have to submit a 1,000 long list of people each of whom has a fragment of control, so be it. Or spend a few dollars getting a Delaware corp.
  - woah 5y ago
    The only people who could be said to be "in control of" a smart contract are the miners or validators producing blocks. But they are just executing the code of the blockchain and the smart contract, and if any one of them didn't do it, someone else would with no interruption of the network's functioning. So it is a real logical stretch to assert that they have any control.
  - thebean11 5y ago
    Who is on that list for an ETH staking reward or BTC mining reward? You understand it would be literally impossible to comply right?

I_am_tiberius 5y ago

Did you read the "it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply" part? If that's not wrong I'm not sure what you expect.

Arcuru 5y ago
Unfortunately, saying that something is "illegal by design" is not usually an effective defense. This is just the kind of thing that cryptocurrencies need to contend with if they want to be used everywhere. Either they need to comply with the existing financial regulations or become powerful enough that they can change the financial regulations.
- josho 5y ago
  Or where we are today raise enough attention (through articles like this) that this new requirement does not become law.
- BitwiseFool 5y ago
  >"saying that something is "illegal by design" is not usually an effective defense." Is it though? Putting onerous requirements on something is an excellent de-facto way to effectively outlaw something when there isn't enough political will to directly ban it. Edit: Look no further than what Texas is trying to do with abortion access. They can't directly outlaw abortion but they can add a bunch of inane requirements that make getting one prohibitive. Alabama continually passes laws that put additional requirements on the staff of abortion clinics and most of them are not reasonable, unless the reason is to make operation increasingly difficult. https://www.prochoiceamerica.org/state-law/alabama/ https://www.prochoiceamerica.org/state-law/alabama/
  - Cederfjard 5y ago
    Well, I guess it boils down to whether the requirements are still reasonable or not? If yes I guess the grandparent comment stands, if not I suppose there might be reason to review them. But just because something inherently can’t comply with laws and regulations doesn’t mean it should be given exemptions.
    - deleted 5y ago
      [deleted]
- tata71 5y ago
  Like Uber changed taxi licensing just about anywhere they flexed their wallet?
- godelski 5y ago
  Legal also didn't mean moral. But we're also talking about making something a law or not. I'm not sure how your comment really responds to the person saying that they don't want this to become the law.
- matheusmoreira 5y ago
  > become powerful enough that they can change the financial regulations This is what should happen.
  - bonzini 5y ago
    Until then (or for that to happen) they should focus on solving the issues that the reporting requirements are meant to solve. Sure, all transfers are visible in the blockchain, but how do you preserve that information across tumblers and/or associate wallets to tax IDs?
fasteddie 5y ago
That's the point, though. I could make a non-crypto based money transfer software that does not store sender or recipient information in the db. That too would make it impossible for that software comply with the law. Or the authors sculpture example. Just because the nature of the software makes it impossible to comply with particular laws doesn't make it good or bad. You need to make a value judgement if the regulation itself is valuable.
elil17 5y ago
Report requirements have been around for every other form of transaction. The fact that a bunch of companies went out and built products that would not be able to comply with a very foreseeable regulation is their own fault.
fny 5y ago
Honestly, I think this is outside the spirit of the law. Say you take your money put it in a bank account, the bank lends that money out again. Are you responsible for knowing the recipient? No. I imagine the same will be extended to putting money into a swap pool or DEX. Now say you actually send money to someone over $10k and don't report it. This is just like a 1099. Honestly, all the fear over what this is going to do is total FUD. It's not that difficult of a rule to deal with for law abiding citizens, and anyone who wants to continue using crypto to launder money or evade taxes will keep using mixer wallets.
- nickff 5y ago
  >"Say you take your money put it in a bank account, the bank lends that money out again. Are you responsible for knowing the recipient? No. I imagine the same will be extended to putting money into a swap pool or DEX." My read of this law is that the bank or recipient of your money would be required to make the report (as they are the 'possessor'), which appears to already be the case (so-called KYC laws). I think you may be underestimating the amount of regulatory compliance that the government requires of many businesses.
  - fny 5y ago
    Exactly, the banks don't report that YOU paid money to others on a loan, the bank has it's own reporting requirements, hence you are not liable. Interestingly, financial institutions (which includes exchanges) are currently exempt from the reporting requirements in this law "the only businesses that are exempt from section 6050I are banks and financial institutions." So my take is they haven't figured out how to regulate the institutional aspect, they're simply attempting to monitor person to person transfers as a first pass. And this makes sense given the wash sales and other tricks people are trying to pull via NFTs and the like.
- pjc50 5y ago
  > Say you take your money put it in a bank account, the bank lends that money out again The bank has a corporate identity which can be held liable.
kiklion 5y ago
I did read but it assumes people know what a liquidity pool is. So what is a liquidity pool? Example one indicated that a person could withdraw coins using tokens he got when he deposited coins. So pools are something you deposit coins into for LP tokens and later can surrender the tokens for coins. In example 2, they say that coins received from a liquidity pool swap cannot be traced. Why not? When the liquidity pool received the coins could it not associate the coins with where it came from? Even if not, then the liquidity pool itself is the source of the coins. When it gets coins, it needs to know who sent it, and when it sends coins it needs to know who it’s sending it to. All of this is possible. Just because they currently don’t track this information doesn’t mean it’s impossible to track. It would just require adjustments to their business to make it in compliance with regulations.
- dboreham 5y ago
  The key thing to note is that the LP isn't a "legal entity". It's a function running on some set of blockchain nodes. Transactions on the LP are visible in the ledger, so if you want, you can construct a list of depositing and withdrawing addresses and amounts. But cryptocurrency is fungible so it doesn't make much sense to try to match up deposit transfers with withdrawals to form some concept of "who paid whom". That would be equivalent to trying to identify who's money I got when I make a cash withdrawal at my bank's ATM.
  - meheleventyone 5y ago
    Then the author/publisher is the legal entity? The code didn’t just publish itself!
    - yokem55 5y ago
      Code is speech. Edit - To expand this thought: If I exercise my freedom of speech by writing a smart contract and publish the code, how can I be liable if someone else uses that code on an actual blockchain?
      - 5y ago
_jal 5y ago
This is starting to get to the original intent of creating Bitcoin - attacking the nation state's taxation and enforcement capability. It'll be interesting to see how this plays out.
- serverholic 5y ago
  It’s also attacking the current financial system where elites get special privileges and act irresponsibly.
- dboreham 5y ago
  I'm not sure this was the "original intent". Perhaps an "early adopters' vision". I think the original intent was just to make a workable implementation of electronic cash, something that had been discussed in the literature (without the nation state attack aspect) for decades prior.
  - _lqaf 5y ago
    I was on the mailing list where the original paper and first implementation was released. Of course I can't speak to what was in "Satoshi"'s heart. But I am convinced that person was a member of the list, and shared the anarcho-capitalist goals/dreams that many of the members had. More generally, other attempts at digital cash were highly discussed topics in those crowds, and the interest was primarily in the ability to transact anonymously and confidentially, because of what that would do to taxation. If you're interested in what that crowd was thinking at the time, there's an exhaustive "FAQ" still available, written by one of the more vocal proponents of digital anarcho-capitalism: https://nakamotoinstitute.org/static/docs/cyphernomicon.txt https://nakamotoinstitute.org/static/docs/cyphernomicon.txt
    - int_19h 5y ago
      FWIW, reducing the power of states - and especially nation-states - is not specifically an anarcho-capitalist dream or goal. It was left-wing anarchists that started that ball rolling.
malermeister 5y ago
If something can't possibly be implemented in a legal way, then maybe, just maybe, it's just a bad idea? "It's impossible to comply with the ban on murder while we continue killing people" - Yes, that's the point. Stop doing what you're doing.
- nightski 5y ago
  Except it can. This is a bill that has not passed yet. That is the entire point of the article, to argue against this new legislation. No need to equate DeFi with murder either, that's just being ridiculous.
  - malermeister 5y ago
    I think the framing of this article is super biased. It implies that there is a right to DeFi and that this law would take away that right (it also seems to imply it would do that by accident since legislators couldn't possibly do this on purpose.) There isn't a right to undermine the nation state and maybe, just maybe, the government is for once waking up and doing a useful thing by nipping this in the bud before it becomes dangerous?
    - toomuchtodo 5y ago
      Crypto proponents, painting with a broad brush, believe that code should be above nation state laws and regulations.
      - malermeister 5y ago
        ... and then get outraged at anyone wanting to avoid that dystopia.
    - int_19h 5y ago
      There's a natural right to undermine the nation state - or any other actor - when said actor itself undermines natural rights. Whether you believe that freely exchanging goods and services is a natural right or not is another question.

woah 5y ago

Your comment is pretty unrelated to the article. It sounds like you're talking about a simple sending of cryptocurrency from one business or individual or another, but that's not what the article is talking about. It is impossible to report "who" you received an asset from if you received it from a smart contract that is not under the control of any one business or individual. In the cases of most defi contracts, the assets involved are pooled from many thousands of individuals and act as a sort of autonomous market maker. Cases where criminals obfuscate simple transfers are already prosecuted under money laundering laws, and they are very easy to prosecute because blockchains are a completely open record for anyone to data-mine. If research into and use of financial smart contracts should be shut down immediately in the US, let them debate and make a law about that. Don't sneak it into a monster bill and pretend that it's about something entirely different.

pjc50 5y ago
> smart contract that is not under the control of any one business or individual This doesn't mean it's not under control of someone or a group of people. Claiming it's not under control just means you're hiding the true controller, which might be an embargoed entity like Iran. If you have to submit a 1,000 long list of people each of whom has a fragment of control, so be it. Or spend a few dollars getting a Delaware corp.
- woah 5y ago
  The only people who could be said to be "in control of" a smart contract are the miners or validators producing blocks. But they are just executing the code of the blockchain and the smart contract, and if any one of them didn't do it, someone else would with no interruption of the network's functioning. So it is a real logical stretch to assert that they have any control.
- thebean11 5y ago
  Who is on that list for an ETH staking reward or BTC mining reward? You understand it would be literally impossible to comply right?