16 ms·

Tornado cash takedown and its repercussions

128 points by whoami_nr 4y ago

mullingitover 4y ago
This fiasco really shines a spotlight the fundamental defect of crypto, which is that (if you're using it directly and not having a third party hold your assets) it's extremely not anonymous unless you behave exactly like a money launderer.
fabiofzero 4y ago
- fabiofzero 4y ago
  - glerk 4y ago
  - klyrs 4y ago
    I lean anti-crypto but I flagged you. This kind of comment doesn't belong here.
colinsane 4y ago
> What happens to the FOSS developers who contributed to the project? Are they sanctioned as well? devs were mostly anonymous, IIRC. Coindesk says “Tornado Cash developer Roman Semenov's GitHub was suspended.” [1] > What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH) indeed. the feds haven’t seized any money. the 10,000s of TC users still have anonymized possession of decent sums of money and have effectively been told “you can’t legally use this for goods and services”. have the feds just created a bunch of $1000 coupons for DNMs? > What happens to the protocols/pools/(d)apps which interacted with it? contract still live, i assume. i think it was governed by a DAO so if they haven’t/don’t hurry up and lock that down there’s risk of a malicious takeover as the TORN token devalues. if you blacklisted everything that these tokens interact with you'd blacklist like 10% of crypto. AMMs and bridges are in some sense just a much more diffuse tumbling service. i guess it works for now because most people running Ren nodes (for example) don't understand that they're helping people launder, whereas the TC service is much more in-your-face. Tornado Cash published their UI a month ago. their GitHub’s been taken down but i expect mirrors will surface. it should be totally possible to keep using the service — expect significantly decreased liquidity — and the fun part (for me) will be to sit and watch to what degree the decreased normie use of TC kills the thing v.s. just slows it down. the GitHub ban is a warning to me though. i’m in (non-crypto) circles where we largely host our own repos, but few of us publicly mirror the software we build upon. makes me think i should start doing so in advance. [1]: https://www.coindesk.com/policy/2022/08/08/crypto-mixing-service-tornado-cash-blacklisted-by-us-treasury/ https://www.coindesk.com/policy/2022/08/08/crypto-mixing-ser...
- chrisco255 4y ago
  > contract still live, i assume. i think it was governed by a DAO so if they haven’t/don’t hurry up and lock that down Most smart contracts are deployed in such a way as to be immutable. They can also be cloned trivially. The source has already been backed up to IPFS. They might as well ban elliptic curves. Also, someone already used TC to send 0.1ETH to dozens of celebs such as Jimmy Fallon and Dave Chappelle, because crypto works like email. You can't prevent someone from sending something and you can't prove it was or wasn't them that initiated it.
  - amluto 4y ago
    But you can refuse to allow those tainted ETH to be exchanged for anything off the Ethereum blockchain.
    - chrisco255 4y ago
      If I send you 0.1 ETH and your wallet already had 8.76 ETH then you engage in 100 transactions and trades and in the process you zero out the account a few times and you refund the account a few times. Which 0.1 ETH is sanctioned? At which address? When it was swapped in a Uniswap liquidity pool for a defi token which was provided as collateral on Aave then borrowed against in RAI only to be swapped for NFTs that were flipped for a profit and distributed to 27 different addresses?
      - spinny 4y ago
        I believe that the most used is the FIFO method (https://arxiv.org/pdf/1906.05754.pdf https://arxiv.org/pdf/1906.05754.pdf)
      - deleted 4y ago
        [deleted]
- carlosdp 4y ago
  > contract still live, i assume. i think it was governed by a DAO Just chiming in to make it clear that the protocols that have to do with the core service are not governed by a DAO and are fully immutable. Nobody can change or shutdown those smart contracts without the blockchain itself manipulating things, which is for all intents and purposes impossible.
paulpauper 4y ago
What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH) This is why crypto was never fungible or useful for privacy purposes. Gold and other precious medals can be melted. Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed. The only way to mix is to generate a huge amount of noise. This was inevitable. For the past 2 years or so years hackers would process their loot with Tornado. There is no way the govt. would stand for this. It's similar to how the Wanna Cry hack , in 2017, made KYC much more common because the hackers used exchanges to convert stolen BTC into monero. All it takes is a handful of people to abuse a service for it to be tainted/ruined for everyone else.
- aaaaaaaaata 4y ago
  > generate a huge amount of noise. Monero?
- chrisco255 4y ago
  > Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed. Yes, you can. Particularly with zero knowledge proofs and zero knowledge rollups.
  - paulpauper 4y ago
    I should have said "most". This shows how hard it is even when using various methods such as cross chains: https://www.wired.com/story/bitcoin-seizure-record-doj-crypto-tracing-monero/ https://www.wired.com/story/bitcoin-seizure-record-doj-crypt...
  - giblfiz 4y ago
    Yep, which is actually specifically what tornado.cash was. It was a zk based mixer. As you say: You absolutely CAN seamlessly mix crypto, but it will show a point in it's history where it says "this is where the crypto was seamlessly mixed"
    - 4y ago
jeroenhd 4y ago
> This also might be the first time where a piece of code got sanctioned. It's not, though. The project got sanctioned and by extension the services it provides. The blockchain implementation of said service is rather unique, but I don't think this is technically any different from projects like Popcorn time being sued/shut down despite their p2p systems. The difficulty with smart contracts is that it's hard to take those services down. After all, you can't take a smart contract out of ethereum. The legal ramifications of this are interesting: the undeletable nature of blockchains and their capacity to store arbitrary data or execute arbitrary code could taint the entire blockchain when bad actors unleash services that cannot possible be taken down, causing anyone participating in the blockchain system to be an accomplice. Or perhaps the governments of the world will look at this more pragmatically and simply consider the contract dead, only sanctioning new people who call upon the contract to execute transactions. This indestructibility of the blockchain is often sold as a benefit, a way to stick it to the government, but the real world doesn't care about your technical implementations when the police tells you to shut it down. Designing a system that you cannot control or shut down may not be a great idea, especially if interactions with said system are logged permanently and publicly.
- carlosdp 4y ago
  > It's not, though... any different from projects like Popcorn time being sued/shut down An OFAC sanction is orders of magnitude more serious than Popcorn Time being taken down via DMCA requests and lobbying. I don't think that's a fair comparison.
  - rhodorhoades 4y ago
    You initially say it’s not any different than Popcorn time, then go onto explain all the reasons why it’s completely different than popcorn time.
    - simonjgreen 4y ago
      That's a quote from the parent comment
  - 4y ago
MisterBastahrd 4y ago
Am I supposed to feel terrible for people who got caught up in a money laundering scheme because they worked on the technology but maybe didn't actually launder any money? Because that's not going to happen. Anyone with a brain knew what Tornado Cashs' primary use case was, and they also had to know that governments are not fond of money laundering schemes. Leopards eat faces all the time.
- chrisco255 4y ago
  Primary use case is privacy. Just like "right to be forgotten" in Europe, as part of GDPR, which is a law on the books. Blockchains cannot forget, and everything is traced, so the only way to be forgotten on chain is via a mixer of some sort.
  - amanaplanacanal 4y ago
    So perhaps don't do business on chain if you are looking to be anonymous.
    - lowkey 4y ago
      Also stay off the internet if you don't live in the EU and wish to stay anonymous.
    - chrisco255 4y ago
      That's my right as a sovereign, free man, to decide how I do my business. And it's not for you or anyone else to decide what math or algorithms I use to achieve that.
  - tick_tock_tick 4y ago
    That is a good point at present most blockchains are almost certainly illegal in the EU. Wonder which country is going to jump on that first.
    - irusensei 4y ago
olalonde 4y ago
> What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH) 1) The sanctions only apply to U.S. persons. 2) My understanding is that it's fine to accept "tainted" ETH as long as it doesn't directly come from one of the Tornado Cash contract addresses[0]. [0] https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/...
- sofixa 4y ago
  > The sanctions only apply to U.S. persons Are you sure? That's usually not how US sanctions work - they claim extraordinary jurisdiction. E.g. BNP Paribas were fined for transacting with Iran even though they're a French bank and France has not sanctioned Iran (to that extent).
  - olalonde 4y ago
    That's what the OFAC press release explicitly claimed[0]. There are plenty of countries outside the U.S. doing business with Iran by the way, see this thread[1]. The press release I found on the Paribas case states that they were using the U.S. financial system to violate sanctions[2]. [0] https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/... [1] https://news.ycombinator.com/item?id=32054821 https://news.ycombinator.com/item?id=32054821 [2] https://www.justice.gov/opa/pr/bnp-paribas-sentenced-conspiring-violate-international-emergency-economic-powers-act-and https://www.justice.gov/opa/pr/bnp-paribas-sentenced-conspir...
    - JumpCrisscross 4y ago
      > what the OFAC press release explicitly claimed You linked to [1]. Better links might be [2][3]. Broadly speaking, if you're an SDN (a) U.S. persons are prohibited from doing business with you and (b) your assets under U.S. jurisdiction are subject to seizure. That second bit is the problematic one. Because due to secondary sanctions, even a non-U.S. person interacting with an SDN can be subject to asset seizure. So in practice, anyone who has a U.S. nexus will stop doing business with you. (Or the U.S. can take their stuff. Also, everyone who doesn't want the U.S. to take their stuff will stop doing business with them.) [1] https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/... [2] https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists https://home.treasury.gov/policy-issues/financial-sanctions/... [3] https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Control#Authority_and_activities https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Contr...
game-of-throws 4y ago
For those who think this is a good thing: can you explain why people should have access to HTTPS and Tor (web privacy), PGP and Signal (communication privacy), but not Tornado Cash (financial privacy)?
- deleted 4y ago
  [deleted]
- brk 4y ago
  I'm not an expert on this, but I think it comes down to Tornado being primarily associated with fraud/crime related transactions. Similar to Silk Road being shut down while Amazon was left to grow. Both had some percentage of fraudulent products, but only one was viewed as existing primarily to facilitate fraud/crime.
  - TarasBob 4y ago
    No. Tornado is not primarily associated with fraud or crime.
  - whatisweb3 4y ago
    Tor is primarily associated with crime. Doesn’t mean we should throw away privacy tools and submit to surveillance state.
    - ricochet11 4y ago
      id take the bet that 10x more crime happens over WhatsApp chats than tor and ethereum combined
  - Zamiel_Snawley 4y ago
    According to this source, about ~20% of the value that has gone through tornado cash is thought to be criminal proceeds. [1] https://techcrunch.com/2022/08/08/treasury-tornado-cash-laundering-stolen-crypto/ https://techcrunch.com/2022/08/08/treasury-tornado-cash-laun...
potatototoo99 4y ago
The US has been hostile to the businesses around crypto for some time now, this is just one more reason to keep it away from the eyes of the US govmt if you are in their jurisdiction.
MBCook 4y ago
So the article says the blockchain is, by design as a public ledger, a privacy nightmare. And we have to use it (for some unstated reason). So the only solution must be to enable money laundering so people can get their privacy back. My take: that seems kind of backwards. How about we just don’t use the thing that purposely exposes everyone data? If people want privacy then that seems like a design flaw. Enabling (maybe limited) money laundering is not a good solution. It’s a very odd band-aid on the real problem. This is a false dilemma. We have more choices than “enable money laundering” and “no one has privacy”.
- baobob 4y ago
  If a technology makes money laundering a prerequisite to privacy, the technology itself is bullshit. There's no need to spend words to justify this further. In no other industry would you find for example, "we made a better hammer, but when you use it to drive nails as a minor side effect, it may/may not fund the abuse of children and development of nuclear weapons by rogue states" If you truly believe in privacy, it's okay to simply say the technology is fundamentally broken by design and seek a better alternative.
  - stickfigure 4y ago
    That $5 hammer you bought at Harbor Freight unquestionably contributes in a tiny way to human rights abuses by an authoritarian regime.
  - celticninja 4y ago
    That's a terrible analogy.
  - cowtools 4y ago
    money-laundering is obviously a consequence of any technology that enhances the privacy of financial transctions. You might as well say that any technology should be thrown out if somewhere, somehow, hypothetical bad guys could use it. Build a better hammer that is great at hitting nails, but can't be used to bash someone's skull in.
yuan43 4y ago
This is why you don't publish addresses. Ever. You use them once and toss them. Any system that requires otherwise is subject to the same fate as Tornado eventually. That said, blacklists are an asinine idea cooked up by people eager to score PR points. All it takes is one single conduit out to render the list useless in achieving its stated goal.
- frozencell 4y ago
  > You use them once and toss them How do you cash out anonymously then?
whatisweb3 4y ago
The US sanctioning Tornado Cash and the resulting repercussions is deeply concerning. Whether or not you like crypto, you should not be supporting this if you are a researcher, academic, technologist, cryptographer, or privacy advocate. The code for Tornado Cash is a series of cryptographic and mathematical functions that can be repurposed for a variety of applications unrelated to privatizing user wallets. The protocol itself is designed for one reason: to give users privacy through end to end and zero knowledge cryptography. Allowing it to remain open source and accessible as a tool for blockchain privacy and codebase for cryptographic research is a net benefit for the entire world. A comparison would be that US decides to sanction the open Matrix protocol along with any user, developer, source host, or sponsor that has ever contributed to it in the past - because it can facilitate end-to-end encrypted terrorist communication.
- twoodfin 4y ago
  In US Constitutional law, bare communication has significantly greater protections than the non-speech-related transfer of money from one party to another.
  - yata69420 4y ago
    I thought we had previously sorted out that money is speech?
    - twoodfin 4y ago
      If that money is funding speech, especially political speech, yes. If it’s being used in some random commercial transaction, not so much.
      - deleted 4y ago
        [deleted]
      - f38zf5vdt 4y ago
        If North Korea donates stolen money to American political campaigns, is that protected free speech?
TarasBob 4y ago
Let's say you're a business that accepts crypto and what if someone sends you ETH or some coins like USDC. Is it your job to check that these coins didn't come from Tornado? It's quite hard to do that. What if account A got their ETH from Tornado, then sent it to account B, which then exchanged the ETH to USDC on Uniswap, which then sent the USDC to account C, which then sent the USDC to you. This is a problem for Bitcoin as well. What if someone got ETH from Tornado. Then converted the ETH to renBTC (https://renproject.io/ https://renproject.io/) on Uniswap. Then converted the renBTC to BTC. Are those Bitcoins now somehow tainted? This new law makes crypto essentially unusable (at least for US persons).
- paulpauper 4y ago
  Are those Bitcoins now somehow tainted? Possibly. It depends on who the recipient is. Coinbase may not want the coins but others will not care.
- nl 4y ago
  This has been the case for a long time, especially on BTC. There are APIs for companies that do this taint tracking for you, eg: https://bitquery.io/products/coinpath https://bitquery.io/products/coinpath, https://www.chainalysis.com/chainalysis-kyt/ https://www.chainalysis.com/chainalysis-kyt/, etc
blurbleblurble 4y ago
TCtETH is not a thing... Ethereum is not using a UTXO model and even if it was some serious off chain analysis would be required to make something like that work
from 4y ago
It seems strange to me that there is a consensus on this site that communications privacy is a human right but that financial privacy is a terrible evil. In fact all of the arguments pro/con (terrorists, drug dealers, etc can benefit from it) are basically identical yet there exists this double standard. The truth is that these now-sacred laws that ended financial privacy really only started being enforced in America in the 80s and their European equivalents in the late 90s. Are we really any safer now than we were then? The proponents of these laws always claim that if only they could close the loopholes they would be successful. First it was bearer shares, then it was "shell banks", then it was money orders, now it's gift cards, luxury real estate, and cryptocurrency. I am skeptical that closing all these supposed loopholes will actually move the needle on crime. As long as you can 10x your money bringing cocaine from Colombia to America or robocalling grandmas, people are going to do it and new reporting requirements or whatever may make them pay 25% for laundering instead of 10% but it won't put them out of business.
- nrb 4y ago
  I have to believe the motivation is much more likely placed with the treasury having the most complete view of everyone’s finances, seeing as basically every dollar earned in the US was done so on the shoulders of tax revenue-directed infrastructure, projects, research, and defense apparatus. Something like this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt, so (in their eyes) why not just stomp out the promising ones with whatever justification is easiest?
  - JumpCrisscross 4y ago
    > the treasury having the most complete view of everyone’s finances, seeing as basically every dollar earned in the US Have you followed a financial-crimes investigation? Nobody knows where jack is. The American payment system is essentially decentralized [1]. Each bank maintains its own books and records and periodically compares parts of them with others and a summary with the central bank to promote consistency. The IRS and Treasury don't systematically share records. (Bureaucratic imperatives, after all.) That's why when the FBI or the CIA or whomever want financial records they have to quietly subpoena banks. To assemble records they do not have. > this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt Wall Street has enthusiastically embraced crypto. It's cheaper to run, permits higher fee loading and is regulatory greenspace, which tends to favor sharks. Nothing about crypto makes taxes or debt impossible. Taxes were collected and debt raised for the millennia when cash and commodity money reigned. Crypto is easier to track than either of those. [1] Aside: the difference between crypto and traditional rails isn't decentralization. It's eager evaluation. The blockchain is always current everywhere. Bank records are not. The latter is computationally cheaper, but at the cost of more error. Centralized banking would involve everyone having an account at the Fed. It has been suggested [a]. [a] https://econreview.berkeley.edu/fed-accounts-and-the-right-to-save/ https://econreview.berkeley.edu/fed-accounts-and-the-right-t...
yata69420 4y ago
Vitalik came out as a TC user earlier: https://twitter.com/VitalikButerin/status/1556925602233569280 https://twitter.com/VitalikButerin/status/155692560223356928... He apparently used it to donate to Ukraine.
pcthrowaway 4y ago
If $1B collectively were to be donated to the democratic and republican parties via Tornado Cash (and they had to use TC to claim it), I suspect we'd see a pretty fast reversal of this sanction. Sad state of affairs
kyle-rb 4y ago
>Any (d)app you use will instantly know your entire transaction history >Imagine you sign up with your email on a random website and they suddenly now have access to your entire bank statement. Higher medical insurance premiums because they know that you transacted often in an online pharmacy. Expensive delivery charges because they know you can afford it. Isn't this a major issue with Ethereum-SSO whether or not Tornado Cash is sanctioned? If you need to use a mixer to avoid any site you sign into gauging your net worth, isn't it kind of broken by default?
- TimJRobinson 4y ago
  Most people have many accounts for this reason.
- em_te 4y ago
  Yes and this is a case where the best technology doesn't win, but the first technology to come to market or the first technology with the first killer app. But this bug can be viewed as a feature. Give a person a hammer and everything becomes a nail.
- cowtools 4y ago
  There are other cryptocurrencies that use ring signatures or zero-knowlege-proofs to obscure sender history without the need for centralized mixing services.
bandrami 4y ago
Call me crazy but I always thought a mandatory unalterable public record was an impediment to privacy rather than an enabler of it.
nemo44x 4y ago
This is why they want to hire 80k more IRS agents.
Rackedup 4y ago
Financial privacy should be a thing... It's very similar to what cash brings.
deleted 4y ago
[deleted]
komali2 4y ago
> Higher medical insurance premiums because they know that you transacted often in an online pharmacy. Expensive delivery charges because they know you can afford it. Sometimes I manage to forget how depressing the healthcare system in the USA is, but am always jarringly reminded in the most unexpected of places
phantomathkg 4y ago
> I really hope that the political authorities dig deeper and technically understand services like Tornado cash and come to a realisation that criminal behaviour exists everywhere and cannot be blanket banned by shutting down legitimate services. You can’t just end up banning hard cash just because its used by criminals and for money laundering. (They tried this in India but it didn’t go as expected). I think sadly, Israel just did ban hard cash for large transaction. See https://news.ycombinator.com/item?id=32281151 https://news.ycombinator.com/item?id=32281151
joshfraser 4y ago
There are a ton of legitimate, non-criminal reasons to use Tornado Cash. Maybe it just feels weird for random strangers on the internet to be able to figure out your net worth when that's not something you share with my family and closest friends. The real thing at stake here is freedom of speech. Following this OFAC announcement the code was immediately censored from Github. This is because OFAC violations can land you in jail for up to 30 years. This means that code, which is clearly just speech, is being censored. Either first amendment, free speech rights will be eroded or governments will have to relinquish their control when it comes to who deciding how you can spend your money. Governments clearly aren't going to give up their control without a fight. Sometimes there's a political and ideological aspect to our work as software engineers. I'm reminded of brave heroes like Martin Hellman and Phil Zimmermann who risked going to prison over our right to access cryptography. The internet as we know it today only exists because they were willing to break the law at immense personal risk. We need people with that kind of courage more than ever today.
- Jensson 4y ago
  "Free speech" means you are free to express opinions, code isn't speech in this context. Otherwise it would be impossible to prosecute those who distribute viruses, as viruses are "just code".
  - joshfraser 4y ago
    What if I stand on the street corner and read the code for that virus out loud to everyone passing by? Is that speech?
RandomLensman 4y ago
I think the domestic aspect of AML vs dealing with unfriendly state actors might need to be separate discussions at least in parts.
sgt101 4y ago
Cash is a necessary mechanism in the economy. The good thing is that it's become a "hobby" mechanism. Imagine the scenario where you come into £1m in cash by "finding" it. What are you going to do with it? You can't buy a house, you can't put it in the bank, you can't invest it in stock or a pension. You could subsidize your lifestyle a bit - but not vastly due to the risk of someone noticing. The best idea that I can come up with is to start a cash business and launder the money through that; for example a burger van or something... Probably you could build that to about 100k a year and get away with it, just, maybe. Quite a lot of work and inconvenience to do it. Of course you could try and get it laundered in a criminal conspiracy (a-la breaking bad) but you will just get robbed. Maybe used cars would work as well. Maybe you could drive round and buy up some nice wine or something like that that keeps for a long time... I think you can pay cash for a couple of hundred without attracting too much attention. You are on the clock as well - every 5 years or so the notes change and stop being accepted. The point is that cash works well for the low end informal economy, builders and plumbers and window cleaners can make their businesses work with it. It doesn't work so well for oligarchs. Crypto does. That's just one reason it's so bad and I don't mourn for this. The state will not give up it's monopoly on money or violence. Anyone who challenges either of these will find the other deployed against them.
- capableweb 4y ago
  > You are on the clock as well - every 5 years or so the notes change and stop being accepted. In what country are you basing this comment on? I haven't heard of any cash notes becoming "outdated" or "expired" after five years in any country I frequent. > It doesn't work so well for oligarchs It does work well as long as everyone is inside the gray/black markets, as they won't ask questions where you got your £1m cash from when you buy a property in the dark from them. How do you think most large shipments of drugs are being sold/bought? Trading cash for the drugs, almost exclusively. That's why when the police does busts of large shipments, they often come across large cash stashes as well, if the deal was just made.
  - pjc50 4y ago
    Five years is too short for an average, but demonetization and replacement does happen, and not just in India. The UK is in the process of phasing out paper notes, for example: https://www.bankofengland.co.uk/banknotes/exchanging-old-banknotes https://www.bankofengland.co.uk/banknotes/exchanging-old-ban... A more spectacular example happened in the Northern Bank robbery when a significant fraction of all the bank's notes in circulation were stolen from its vaults; the bank decided to replace them making all the stolen but unlaundered ones worthless. The US is unusual in not explicitly withdrawing old note series from circulation, despite their lacking modern anti-counterfeiting features. To a great extent all this AML is because of the "war on drugs" and the extensive use of large amounts of cash in drug dealing. Financial sanctions are a more recent reason.
hnbad 4y ago
> While it is no secret that this service was used by criminals (like DPRK) to launder their money, there are some legitimate use cases for such a product as well. It's funny how digital asset enthusiasts always conflate money laundering and private exchange of cash. There are fixed legal limits of cash transfers. When crossing borders you literally have to declare cash exceeding certain amounts. In the US the police can even confiscate suspicious amounts of cash. When they talk about private cash transactions as an equivalent of crypto money laundering, they pretend they're talking about putting a $20 bill in a Birthday gift card, buying a copy of Sports Illustrated at the bodega or tipping the neighbor's kid for mowing your lawn. These aren't scenarios where cryptocurrencies are currently useful and as long as cryptocurrencies behave more like a speculative asset (which doesn't seem to change any time soon) these will still be better served by cash. What cryptocurrencies instead currently supplant are transactions that would otherwise be handled by bank transfers, credit card payments or online payment processors who have to follow very strict auditing requirements to explicitly prevent money laundering. If you provide a slower, more expensive, less widely used option whose main advantage is "privacy from government surveillance", it will attract exactly the kind of transactions that people don't want to do on systems designed to prevent money laundering. In other words: money laundering. If you want digital cash that's hard to trace, scammers have long since found a tool for that: gift cards.
Smithalicious 4y ago
First we had "drugs", then we had "terrorists", then we had "pedophiles", and now we have "money laundering". All of these things really do exist and really are bad, but their negative impact on society is strategically overstated and the measures taken against them are mostly ineffective against the thing they are purported to combat, yet cause significant amounts of "collateral" damage to the privacy and freedom of all of us.

128 points by whoami_nr 4y ago

This fiasco really shines a spotlight the fundamental defect of crypto, which is that (if you're using it directly and not having a third party hold your assets) it's extremely not anonymous unless you behave exactly like a money launderer.

fabiofzero 4y ago

fabiofzero 4y ago
- glerk 4y ago
- klyrs 4y ago
  I lean anti-crypto but I flagged you. This kind of comment doesn't belong here.

colinsane 4y ago

> What happens to the FOSS developers who contributed to the project? Are they sanctioned as well? devs were mostly anonymous, IIRC. Coindesk says “Tornado Cash developer Roman Semenov's GitHub was suspended.” [1] > What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH) indeed. the feds haven’t seized any money. the 10,000s of TC users still have anonymized possession of decent sums of money and have effectively been told “you can’t legally use this for goods and services”. have the feds just created a bunch of $1000 coupons for DNMs? > What happens to the protocols/pools/(d)apps which interacted with it? contract still live, i assume. i think it was governed by a DAO so if they haven’t/don’t hurry up and lock that down there’s risk of a malicious takeover as the TORN token devalues. if you blacklisted everything that these tokens interact with you'd blacklist like 10% of crypto. AMMs and bridges are in some sense just a much more diffuse tumbling service. i guess it works for now because most people running Ren nodes (for example) don't understand that they're helping people launder, whereas the TC service is much more in-your-face. Tornado Cash published their UI a month ago. their GitHub’s been taken down but i expect mirrors will surface. it should be totally possible to keep using the service — expect significantly decreased liquidity — and the fun part (for me) will be to sit and watch to what degree the decreased normie use of TC kills the thing v.s. just slows it down. the GitHub ban is a warning to me though. i’m in (non-crypto) circles where we largely host our own repos, but few of us publicly mirror the software we build upon. makes me think i should start doing so in advance. [1]: https://www.coindesk.com/policy/2022/08/08/crypto-mixing-service-tornado-cash-blacklisted-by-us-treasury/ https://www.coindesk.com/policy/2022/08/08/crypto-mixing-ser...

chrisco255 4y ago
> contract still live, i assume. i think it was governed by a DAO so if they haven’t/don’t hurry up and lock that down Most smart contracts are deployed in such a way as to be immutable. They can also be cloned trivially. The source has already been backed up to IPFS. They might as well ban elliptic curves. Also, someone already used TC to send 0.1ETH to dozens of celebs such as Jimmy Fallon and Dave Chappelle, because crypto works like email. You can't prevent someone from sending something and you can't prove it was or wasn't them that initiated it.
- amluto 4y ago
  But you can refuse to allow those tainted ETH to be exchanged for anything off the Ethereum blockchain.
  - chrisco255 4y ago
    If I send you 0.1 ETH and your wallet already had 8.76 ETH then you engage in 100 transactions and trades and in the process you zero out the account a few times and you refund the account a few times. Which 0.1 ETH is sanctioned? At which address? When it was swapped in a Uniswap liquidity pool for a defi token which was provided as collateral on Aave then borrowed against in RAI only to be swapped for NFTs that were flipped for a profit and distributed to 27 different addresses?
    - spinny 4y ago
      I believe that the most used is the FIFO method (https://arxiv.org/pdf/1906.05754.pdf https://arxiv.org/pdf/1906.05754.pdf)
    - deleted 4y ago
      [deleted]
carlosdp 4y ago
> contract still live, i assume. i think it was governed by a DAO Just chiming in to make it clear that the protocols that have to do with the core service are not governed by a DAO and are fully immutable. Nobody can change or shutdown those smart contracts without the blockchain itself manipulating things, which is for all intents and purposes impossible.

paulpauper 4y ago

What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH) This is why crypto was never fungible or useful for privacy purposes. Gold and other precious medals can be melted. Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed. The only way to mix is to generate a huge amount of noise. This was inevitable. For the past 2 years or so years hackers would process their loot with Tornado. There is no way the govt. would stand for this. It's similar to how the Wanna Cry hack , in 2017, made KYC much more common because the hackers used exchanges to convert stolen BTC into monero. All it takes is a handful of people to abuse a service for it to be tainted/ruined for everyone else.

aaaaaaaaata 4y ago
> generate a huge amount of noise. Monero?
chrisco255 4y ago
> Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed. Yes, you can. Particularly with zero knowledge proofs and zero knowledge rollups.
- paulpauper 4y ago
  I should have said "most". This shows how hard it is even when using various methods such as cross chains: https://www.wired.com/story/bitcoin-seizure-record-doj-crypto-tracing-monero/ https://www.wired.com/story/bitcoin-seizure-record-doj-crypt...
- giblfiz 4y ago
  Yep, which is actually specifically what tornado.cash was. It was a zk based mixer. As you say: You absolutely CAN seamlessly mix crypto, but it will show a point in it's history where it says "this is where the crypto was seamlessly mixed"
  - 4y ago

jeroenhd 4y ago

> This also might be the first time where a piece of code got sanctioned. It's not, though. The project got sanctioned and by extension the services it provides. The blockchain implementation of said service is rather unique, but I don't think this is technically any different from projects like Popcorn time being sued/shut down despite their p2p systems. The difficulty with smart contracts is that it's hard to take those services down. After all, you can't take a smart contract out of ethereum. The legal ramifications of this are interesting: the undeletable nature of blockchains and their capacity to store arbitrary data or execute arbitrary code could taint the entire blockchain when bad actors unleash services that cannot possible be taken down, causing anyone participating in the blockchain system to be an accomplice. Or perhaps the governments of the world will look at this more pragmatically and simply consider the contract dead, only sanctioning new people who call upon the contract to execute transactions. This indestructibility of the blockchain is often sold as a benefit, a way to stick it to the government, but the real world doesn't care about your technical implementations when the police tells you to shut it down. Designing a system that you cannot control or shut down may not be a great idea, especially if interactions with said system are logged permanently and publicly.

carlosdp 4y ago
> It's not, though... any different from projects like Popcorn time being sued/shut down An OFAC sanction is orders of magnitude more serious than Popcorn Time being taken down via DMCA requests and lobbying. I don't think that's a fair comparison.
- rhodorhoades 4y ago
  You initially say it’s not any different than Popcorn time, then go onto explain all the reasons why it’s completely different than popcorn time.
  - simonjgreen 4y ago
    That's a quote from the parent comment
- 4y ago

MisterBastahrd 4y ago

Am I supposed to feel terrible for people who got caught up in a money laundering scheme because they worked on the technology but maybe didn't actually launder any money? Because that's not going to happen. Anyone with a brain knew what Tornado Cashs' primary use case was, and they also had to know that governments are not fond of money laundering schemes. Leopards eat faces all the time.

chrisco255 4y ago
Primary use case is privacy. Just like "right to be forgotten" in Europe, as part of GDPR, which is a law on the books. Blockchains cannot forget, and everything is traced, so the only way to be forgotten on chain is via a mixer of some sort.
- amanaplanacanal 4y ago
  So perhaps don't do business on chain if you are looking to be anonymous.
  - lowkey 4y ago
    Also stay off the internet if you don't live in the EU and wish to stay anonymous.
  - chrisco255 4y ago
    That's my right as a sovereign, free man, to decide how I do my business. And it's not for you or anyone else to decide what math or algorithms I use to achieve that.
- tick_tock_tick 4y ago
  That is a good point at present most blockchains are almost certainly illegal in the EU. Wonder which country is going to jump on that first.
  - irusensei 4y ago

olalonde 4y ago

> What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH) 1) The sanctions only apply to U.S. persons. 2) My understanding is that it's fine to accept "tainted" ETH as long as it doesn't directly come from one of the Tornado Cash contract addresses[0]. [0] https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/...

sofixa 4y ago
> The sanctions only apply to U.S. persons Are you sure? That's usually not how US sanctions work - they claim extraordinary jurisdiction. E.g. BNP Paribas were fined for transacting with Iran even though they're a French bank and France has not sanctioned Iran (to that extent).
- olalonde 4y ago
  That's what the OFAC press release explicitly claimed[0]. There are plenty of countries outside the U.S. doing business with Iran by the way, see this thread[1]. The press release I found on the Paribas case states that they were using the U.S. financial system to violate sanctions[2]. [0] https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/... [1] https://news.ycombinator.com/item?id=32054821 https://news.ycombinator.com/item?id=32054821 [2] https://www.justice.gov/opa/pr/bnp-paribas-sentenced-conspiring-violate-international-emergency-economic-powers-act-and https://www.justice.gov/opa/pr/bnp-paribas-sentenced-conspir...
  - JumpCrisscross 4y ago
    > what the OFAC press release explicitly claimed You linked to [1]. Better links might be [2][3]. Broadly speaking, if you're an SDN (a) U.S. persons are prohibited from doing business with you and (b) your assets under U.S. jurisdiction are subject to seizure. That second bit is the problematic one. Because due to secondary sanctions, even a non-U.S. person interacting with an SDN can be subject to asset seizure. So in practice, anyone who has a U.S. nexus will stop doing business with you. (Or the U.S. can take their stuff. Also, everyone who doesn't want the U.S. to take their stuff will stop doing business with them.) [1] https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/... [2] https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists https://home.treasury.gov/policy-issues/financial-sanctions/... [3] https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Control#Authority_and_activities https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Contr...

game-of-throws 4y ago

For those who think this is a good thing: can you explain why people should have access to HTTPS and Tor (web privacy), PGP and Signal (communication privacy), but not Tornado Cash (financial privacy)?

deleted 4y ago
[deleted]
brk 4y ago
I'm not an expert on this, but I think it comes down to Tornado being primarily associated with fraud/crime related transactions. Similar to Silk Road being shut down while Amazon was left to grow. Both had some percentage of fraudulent products, but only one was viewed as existing primarily to facilitate fraud/crime.
- TarasBob 4y ago
  No. Tornado is not primarily associated with fraud or crime.
- whatisweb3 4y ago
  Tor is primarily associated with crime. Doesn’t mean we should throw away privacy tools and submit to surveillance state.
  - ricochet11 4y ago
    id take the bet that 10x more crime happens over WhatsApp chats than tor and ethereum combined
- Zamiel_Snawley 4y ago
  According to this source, about ~20% of the value that has gone through tornado cash is thought to be criminal proceeds. [1] https://techcrunch.com/2022/08/08/treasury-tornado-cash-laundering-stolen-crypto/ https://techcrunch.com/2022/08/08/treasury-tornado-cash-laun...

potatototoo99 4y ago

The US has been hostile to the businesses around crypto for some time now, this is just one more reason to keep it away from the eyes of the US govmt if you are in their jurisdiction.

MBCook 4y ago

So the article says the blockchain is, by design as a public ledger, a privacy nightmare. And we have to use it (for some unstated reason). So the only solution must be to enable money laundering so people can get their privacy back. My take: that seems kind of backwards. How about we just don’t use the thing that purposely exposes everyone data? If people want privacy then that seems like a design flaw. Enabling (maybe limited) money laundering is not a good solution. It’s a very odd band-aid on the real problem. This is a false dilemma. We have more choices than “enable money laundering” and “no one has privacy”.

baobob 4y ago
If a technology makes money laundering a prerequisite to privacy, the technology itself is bullshit. There's no need to spend words to justify this further. In no other industry would you find for example, "we made a better hammer, but when you use it to drive nails as a minor side effect, it may/may not fund the abuse of children and development of nuclear weapons by rogue states" If you truly believe in privacy, it's okay to simply say the technology is fundamentally broken by design and seek a better alternative.
- stickfigure 4y ago
  That $5 hammer you bought at Harbor Freight unquestionably contributes in a tiny way to human rights abuses by an authoritarian regime.
- celticninja 4y ago
  That's a terrible analogy.
- cowtools 4y ago
  money-laundering is obviously a consequence of any technology that enhances the privacy of financial transctions. You might as well say that any technology should be thrown out if somewhere, somehow, hypothetical bad guys could use it. Build a better hammer that is great at hitting nails, but can't be used to bash someone's skull in.

yuan43 4y ago

This is why you don't publish addresses. Ever. You use them once and toss them. Any system that requires otherwise is subject to the same fate as Tornado eventually. That said, blacklists are an asinine idea cooked up by people eager to score PR points. All it takes is one single conduit out to render the list useless in achieving its stated goal.

frozencell 4y ago
> You use them once and toss them How do you cash out anonymously then?

whatisweb3 4y ago

The US sanctioning Tornado Cash and the resulting repercussions is deeply concerning. Whether or not you like crypto, you should not be supporting this if you are a researcher, academic, technologist, cryptographer, or privacy advocate. The code for Tornado Cash is a series of cryptographic and mathematical functions that can be repurposed for a variety of applications unrelated to privatizing user wallets. The protocol itself is designed for one reason: to give users privacy through end to end and zero knowledge cryptography. Allowing it to remain open source and accessible as a tool for blockchain privacy and codebase for cryptographic research is a net benefit for the entire world. A comparison would be that US decides to sanction the open Matrix protocol along with any user, developer, source host, or sponsor that has ever contributed to it in the past - because it can facilitate end-to-end encrypted terrorist communication.

twoodfin 4y ago
In US Constitutional law, bare communication has significantly greater protections than the non-speech-related transfer of money from one party to another.
- yata69420 4y ago
  I thought we had previously sorted out that money is speech?
  - twoodfin 4y ago
    If that money is funding speech, especially political speech, yes. If it’s being used in some random commercial transaction, not so much.
    - deleted 4y ago
      [deleted]
    - f38zf5vdt 4y ago
      If North Korea donates stolen money to American political campaigns, is that protected free speech?

TarasBob 4y ago

Let's say you're a business that accepts crypto and what if someone sends you ETH or some coins like USDC. Is it your job to check that these coins didn't come from Tornado? It's quite hard to do that. What if account A got their ETH from Tornado, then sent it to account B, which then exchanged the ETH to USDC on Uniswap, which then sent the USDC to account C, which then sent the USDC to you. This is a problem for Bitcoin as well. What if someone got ETH from Tornado. Then converted the ETH to renBTC (https://renproject.io/ https://renproject.io/) on Uniswap. Then converted the renBTC to BTC. Are those Bitcoins now somehow tainted? This new law makes crypto essentially unusable (at least for US persons).

paulpauper 4y ago
Are those Bitcoins now somehow tainted? Possibly. It depends on who the recipient is. Coinbase may not want the coins but others will not care.
nl 4y ago
This has been the case for a long time, especially on BTC. There are APIs for companies that do this taint tracking for you, eg: https://bitquery.io/products/coinpath https://bitquery.io/products/coinpath, https://www.chainalysis.com/chainalysis-kyt/ https://www.chainalysis.com/chainalysis-kyt/, etc

blurbleblurble 4y ago

TCtETH is not a thing... Ethereum is not using a UTXO model and even if it was some serious off chain analysis would be required to make something like that work

from 4y ago

It seems strange to me that there is a consensus on this site that communications privacy is a human right but that financial privacy is a terrible evil. In fact all of the arguments pro/con (terrorists, drug dealers, etc can benefit from it) are basically identical yet there exists this double standard. The truth is that these now-sacred laws that ended financial privacy really only started being enforced in America in the 80s and their European equivalents in the late 90s. Are we really any safer now than we were then? The proponents of these laws always claim that if only they could close the loopholes they would be successful. First it was bearer shares, then it was "shell banks", then it was money orders, now it's gift cards, luxury real estate, and cryptocurrency. I am skeptical that closing all these supposed loopholes will actually move the needle on crime. As long as you can 10x your money bringing cocaine from Colombia to America or robocalling grandmas, people are going to do it and new reporting requirements or whatever may make them pay 25% for laundering instead of 10% but it won't put them out of business.

nrb 4y ago
I have to believe the motivation is much more likely placed with the treasury having the most complete view of everyone’s finances, seeing as basically every dollar earned in the US was done so on the shoulders of tax revenue-directed infrastructure, projects, research, and defense apparatus. Something like this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt, so (in their eyes) why not just stomp out the promising ones with whatever justification is easiest?
- JumpCrisscross 4y ago
  > the treasury having the most complete view of everyone’s finances, seeing as basically every dollar earned in the US Have you followed a financial-crimes investigation? Nobody knows where jack is. The American payment system is essentially decentralized [1]. Each bank maintains its own books and records and periodically compares parts of them with others and a summary with the central bank to promote consistency. The IRS and Treasury don't systematically share records. (Bureaucratic imperatives, after all.) That's why when the FBI or the CIA or whomever want financial records they have to quietly subpoena banks. To assemble records they do not have. > this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt Wall Street has enthusiastically embraced crypto. It's cheaper to run, permits higher fee loading and is regulatory greenspace, which tends to favor sharks. Nothing about crypto makes taxes or debt impossible. Taxes were collected and debt raised for the millennia when cash and commodity money reigned. Crypto is easier to track than either of those. [1] Aside: the difference between crypto and traditional rails isn't decentralization. It's eager evaluation. The blockchain is always current everywhere. Bank records are not. The latter is computationally cheaper, but at the cost of more error. Centralized banking would involve everyone having an account at the Fed. It has been suggested [a]. [a] https://econreview.berkeley.edu/fed-accounts-and-the-right-to-save/ https://econreview.berkeley.edu/fed-accounts-and-the-right-t...

yata69420 4y ago

Vitalik came out as a TC user earlier: https://twitter.com/VitalikButerin/status/1556925602233569280 https://twitter.com/VitalikButerin/status/155692560223356928... He apparently used it to donate to Ukraine.

pcthrowaway 4y ago

If $1B collectively were to be donated to the democratic and republican parties via Tornado Cash (and they had to use TC to claim it), I suspect we'd see a pretty fast reversal of this sanction. Sad state of affairs

kyle-rb 4y ago

>Any (d)app you use will instantly know your entire transaction history >Imagine you sign up with your email on a random website and they suddenly now have access to your entire bank statement. Higher medical insurance premiums because they know that you transacted often in an online pharmacy. Expensive delivery charges because they know you can afford it. Isn't this a major issue with Ethereum-SSO whether or not Tornado Cash is sanctioned? If you need to use a mixer to avoid any site you sign into gauging your net worth, isn't it kind of broken by default?

TimJRobinson 4y ago
Most people have many accounts for this reason.
em_te 4y ago
Yes and this is a case where the best technology doesn't win, but the first technology to come to market or the first technology with the first killer app. But this bug can be viewed as a feature. Give a person a hammer and everything becomes a nail.
cowtools 4y ago
There are other cryptocurrencies that use ring signatures or zero-knowlege-proofs to obscure sender history without the need for centralized mixing services.

bandrami 4y ago

Call me crazy but I always thought a mandatory unalterable public record was an impediment to privacy rather than an enabler of it.

nemo44x 4y ago

This is why they want to hire 80k more IRS agents.

Rackedup 4y ago

Financial privacy should be a thing... It's very similar to what cash brings.

deleted 4y ago

[deleted]

komali2 4y ago

> Higher medical insurance premiums because they know that you transacted often in an online pharmacy. Expensive delivery charges because they know you can afford it. Sometimes I manage to forget how depressing the healthcare system in the USA is, but am always jarringly reminded in the most unexpected of places

phantomathkg 4y ago

> I really hope that the political authorities dig deeper and technically understand services like Tornado cash and come to a realisation that criminal behaviour exists everywhere and cannot be blanket banned by shutting down legitimate services. You can’t just end up banning hard cash just because its used by criminals and for money laundering. (They tried this in India but it didn’t go as expected). I think sadly, Israel just did ban hard cash for large transaction. See https://news.ycombinator.com/item?id=32281151 https://news.ycombinator.com/item?id=32281151

joshfraser 4y ago

There are a ton of legitimate, non-criminal reasons to use Tornado Cash. Maybe it just feels weird for random strangers on the internet to be able to figure out your net worth when that's not something you share with my family and closest friends. The real thing at stake here is freedom of speech. Following this OFAC announcement the code was immediately censored from Github. This is because OFAC violations can land you in jail for up to 30 years. This means that code, which is clearly just speech, is being censored. Either first amendment, free speech rights will be eroded or governments will have to relinquish their control when it comes to who deciding how you can spend your money. Governments clearly aren't going to give up their control without a fight. Sometimes there's a political and ideological aspect to our work as software engineers. I'm reminded of brave heroes like Martin Hellman and Phil Zimmermann who risked going to prison over our right to access cryptography. The internet as we know it today only exists because they were willing to break the law at immense personal risk. We need people with that kind of courage more than ever today.

Jensson 4y ago
"Free speech" means you are free to express opinions, code isn't speech in this context. Otherwise it would be impossible to prosecute those who distribute viruses, as viruses are "just code".
- joshfraser 4y ago
  What if I stand on the street corner and read the code for that virus out loud to everyone passing by? Is that speech?

RandomLensman 4y ago

I think the domestic aspect of AML vs dealing with unfriendly state actors might need to be separate discussions at least in parts.

sgt101 4y ago

Cash is a necessary mechanism in the economy. The good thing is that it's become a "hobby" mechanism. Imagine the scenario where you come into £1m in cash by "finding" it. What are you going to do with it? You can't buy a house, you can't put it in the bank, you can't invest it in stock or a pension. You could subsidize your lifestyle a bit - but not vastly due to the risk of someone noticing. The best idea that I can come up with is to start a cash business and launder the money through that; for example a burger van or something... Probably you could build that to about 100k a year and get away with it, just, maybe. Quite a lot of work and inconvenience to do it. Of course you could try and get it laundered in a criminal conspiracy (a-la breaking bad) but you will just get robbed. Maybe used cars would work as well. Maybe you could drive round and buy up some nice wine or something like that that keeps for a long time... I think you can pay cash for a couple of hundred without attracting too much attention. You are on the clock as well - every 5 years or so the notes change and stop being accepted. The point is that cash works well for the low end informal economy, builders and plumbers and window cleaners can make their businesses work with it. It doesn't work so well for oligarchs. Crypto does. That's just one reason it's so bad and I don't mourn for this. The state will not give up it's monopoly on money or violence. Anyone who challenges either of these will find the other deployed against them.

capableweb 4y ago
> You are on the clock as well - every 5 years or so the notes change and stop being accepted. In what country are you basing this comment on? I haven't heard of any cash notes becoming "outdated" or "expired" after five years in any country I frequent. > It doesn't work so well for oligarchs It does work well as long as everyone is inside the gray/black markets, as they won't ask questions where you got your £1m cash from when you buy a property in the dark from them. How do you think most large shipments of drugs are being sold/bought? Trading cash for the drugs, almost exclusively. That's why when the police does busts of large shipments, they often come across large cash stashes as well, if the deal was just made.
- pjc50 4y ago
  Five years is too short for an average, but demonetization and replacement does happen, and not just in India. The UK is in the process of phasing out paper notes, for example: https://www.bankofengland.co.uk/banknotes/exchanging-old-banknotes https://www.bankofengland.co.uk/banknotes/exchanging-old-ban... A more spectacular example happened in the Northern Bank robbery when a significant fraction of all the bank's notes in circulation were stolen from its vaults; the bank decided to replace them making all the stolen but unlaundered ones worthless. The US is unusual in not explicitly withdrawing old note series from circulation, despite their lacking modern anti-counterfeiting features. To a great extent all this AML is because of the "war on drugs" and the extensive use of large amounts of cash in drug dealing. Financial sanctions are a more recent reason.

hnbad 4y ago

> While it is no secret that this service was used by criminals (like DPRK) to launder their money, there are some legitimate use cases for such a product as well. It's funny how digital asset enthusiasts always conflate money laundering and private exchange of cash. There are fixed legal limits of cash transfers. When crossing borders you literally have to declare cash exceeding certain amounts. In the US the police can even confiscate suspicious amounts of cash. When they talk about private cash transactions as an equivalent of crypto money laundering, they pretend they're talking about putting a $20 bill in a Birthday gift card, buying a copy of Sports Illustrated at the bodega or tipping the neighbor's kid for mowing your lawn. These aren't scenarios where cryptocurrencies are currently useful and as long as cryptocurrencies behave more like a speculative asset (which doesn't seem to change any time soon) these will still be better served by cash. What cryptocurrencies instead currently supplant are transactions that would otherwise be handled by bank transfers, credit card payments or online payment processors who have to follow very strict auditing requirements to explicitly prevent money laundering. If you provide a slower, more expensive, less widely used option whose main advantage is "privacy from government surveillance", it will attract exactly the kind of transactions that people don't want to do on systems designed to prevent money laundering. In other words: money laundering. If you want digital cash that's hard to trace, scammers have long since found a tool for that: gift cards.

Smithalicious 4y ago

First we had "drugs", then we had "terrorists", then we had "pedophiles", and now we have "money laundering". All of these things really do exist and really are bad, but their negative impact on society is strategically overstated and the measures taken against them are mostly ineffective against the thing they are purported to combat, yet cause significant amounts of "collateral" damage to the privacy and freedom of all of us.