3 ms·

This is not fundamentally possible in peer to peer permissionless blockchains. The law as it is currently defined is not compatible with the technology and will

This is not fundamentally possible in peer to peer permissionless blockchains. The law as it is currently defined is not compatible with the technology and will need to be revised if the law wishes to consider NFT as high value art sale.

closewith 4y ago
> This is not fundamentally possible in peer to peer permissionless blockchains. That's nonsense. There's nothing preventing KYC for any business transaction. It won't happen on the blockchain, but entities operating in the EU who forgo compliance will end up subject to investigation when they interact with the financial system, as may have happened in this case (again, I'm not supposing that the OP did anything wrong). > The law as it is currently defined is not compatible with the technology and will need to be revised if the law wishes to consider NFT as high value art sale. This is complete nonsense. The medium of transaction is neither inherently compatible or incompatible with the law, and entities which try to use it as an excuse to avoid their compliance obligations will find themselves subject to government investigation and sanction. The idea that you can pretend that a technical implementation can exempt you the law is so outlandish and absurd that I wonder if you're trolling?
- muffinthem 4y ago
  I am not saying KYC is not possible - I am saying the requirement that the seller does KYC - such as an invoice with customer details - on every transaction is not possible. Once an NFT is listed for sale through a permissionless contract, there is no way the seller can block a particular buyer, or demand an invoice or their private details before or after the sale. The buyer's tokens may have originated from a KYC-d exchange such as Coinbase or Kraken, but that information is not available to the NFT seller, and this is where the problem is with the OP website. > The idea that you can pretend that a technical implementation can exempt you the law is so outlandish and absurd that I wonder if you're trolling? I am not suggesting this exempts anybody from the law, I am suggesting the law is outdated and not compatible with current technology. If the law is that you must handle KYC upon receiving $10K USD in tokens, and an anonymous wallet sends you 10ETH in tokens, you should not automatically become a criminal and have your assets seized because of a law that was written before permissionless blockchain networks existed.
  - closewith 4y ago
    What you are describing is the use of permissionless contracts to avoid AML/KYC compliance law, which is partly what the Directives are designed to criminalise. > I am not suggesting this exempts anybody from the law, I am suggesting the law is outdated and not compatible with current technology. AML 5 came into law on the 10th January 2020 (with an enforcement window for transposition into national laws). The law is, as said before, partly designed to close loopholes in the previous Directives that allow high-values transactions to avoid regulation. The law is - for better or worse - keeping up to date. It's simply the case that you don't like the regulation being imposed. > If the law is that you must handle KYC for > 10ETH purchase, and an anonymous wallet sends you 10ETH in tokens, you should not automatically become a criminal and have your assets seized because of a law that was written before permissionless blockchain networks existed. I think this really puts your bias front and centre.
    - muffinthem 4y ago
      > What you are describing is the use of permissionless contracts to avoid AML/KYC compliance law, which is partly what the Directives are designed to criminalise. The goal of this is not to avoid the KYC laws. Unfortunately the technology makes it impossible to comply with them as the laws do not account for permissionless smart contract functionality. Many artists and corporations are now selling NFTs without the ability to get KYC on every transaction, because this data does not exist on the blockchain and cannot be acquired unless you are a legal authority that has the ability to request private data from a CEX. Saying it “must” be acquired for 10K+ transfers is basically saying those transfers must be criminalized. NFT sales were not on anybody’s radar before 2021, especially not EU lawmakers. In the next few years it seems likely there will be more regulatory clarity so that people can make taxable income on NFTs without being treated as criminals as in the OP case. > I think this really puts your bias front and centre. How so? It is clear to me this law is not compatible with the way the blockchain works and the OP being criminalized for selling art is a good example of how it will hurt regular citizens. Meanwhile corporations and brands selling NFTs probably will be fine as they have larger legal teams and regulators are less likely to try and fight them. The solution to this AML law is either to treat all these blockchain transactions as illegal and continue to criminalize the behaviour, as you are suggesting, or to define new laws that take into consideration the way that blockchain transactions do not allow sellers to request KYC, and instead push that AML reporting requirement on the CEXes.

closewith 4y ago

> This is not fundamentally possible in peer to peer permissionless blockchains. That's nonsense. There's nothing preventing KYC for any business transaction. It won't happen on the blockchain, but entities operating in the EU who forgo compliance will end up subject to investigation when they interact with the financial system, as may have happened in this case (again, I'm not supposing that the OP did anything wrong). > The law as it is currently defined is not compatible with the technology and will need to be revised if the law wishes to consider NFT as high value art sale. This is complete nonsense. The medium of transaction is neither inherently compatible or incompatible with the law, and entities which try to use it as an excuse to avoid their compliance obligations will find themselves subject to government investigation and sanction. The idea that you can pretend that a technical implementation can exempt you the law is so outlandish and absurd that I wonder if you're trolling?

muffinthem 4y ago
I am not saying KYC is not possible - I am saying the requirement that the seller does KYC - such as an invoice with customer details - on every transaction is not possible. Once an NFT is listed for sale through a permissionless contract, there is no way the seller can block a particular buyer, or demand an invoice or their private details before or after the sale. The buyer's tokens may have originated from a KYC-d exchange such as Coinbase or Kraken, but that information is not available to the NFT seller, and this is where the problem is with the OP website. > The idea that you can pretend that a technical implementation can exempt you the law is so outlandish and absurd that I wonder if you're trolling? I am not suggesting this exempts anybody from the law, I am suggesting the law is outdated and not compatible with current technology. If the law is that you must handle KYC upon receiving $10K USD in tokens, and an anonymous wallet sends you 10ETH in tokens, you should not automatically become a criminal and have your assets seized because of a law that was written before permissionless blockchain networks existed.
- closewith 4y ago
  What you are describing is the use of permissionless contracts to avoid AML/KYC compliance law, which is partly what the Directives are designed to criminalise. > I am not suggesting this exempts anybody from the law, I am suggesting the law is outdated and not compatible with current technology. AML 5 came into law on the 10th January 2020 (with an enforcement window for transposition into national laws). The law is, as said before, partly designed to close loopholes in the previous Directives that allow high-values transactions to avoid regulation. The law is - for better or worse - keeping up to date. It's simply the case that you don't like the regulation being imposed. > If the law is that you must handle KYC for > 10ETH purchase, and an anonymous wallet sends you 10ETH in tokens, you should not automatically become a criminal and have your assets seized because of a law that was written before permissionless blockchain networks existed. I think this really puts your bias front and centre.
  - muffinthem 4y ago
    > What you are describing is the use of permissionless contracts to avoid AML/KYC compliance law, which is partly what the Directives are designed to criminalise. The goal of this is not to avoid the KYC laws. Unfortunately the technology makes it impossible to comply with them as the laws do not account for permissionless smart contract functionality. Many artists and corporations are now selling NFTs without the ability to get KYC on every transaction, because this data does not exist on the blockchain and cannot be acquired unless you are a legal authority that has the ability to request private data from a CEX. Saying it “must” be acquired for 10K+ transfers is basically saying those transfers must be criminalized. NFT sales were not on anybody’s radar before 2021, especially not EU lawmakers. In the next few years it seems likely there will be more regulatory clarity so that people can make taxable income on NFTs without being treated as criminals as in the OP case. > I think this really puts your bias front and centre. How so? It is clear to me this law is not compatible with the way the blockchain works and the OP being criminalized for selling art is a good example of how it will hurt regular citizens. Meanwhile corporations and brands selling NFTs probably will be fine as they have larger legal teams and regulators are less likely to try and fight them. The solution to this AML law is either to treat all these blockchain transactions as illegal and continue to criminalize the behaviour, as you are suggesting, or to define new laws that take into consideration the way that blockchain transactions do not allow sellers to request KYC, and instead push that AML reporting requirement on the CEXes.