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Is there such a thing as legitimate bitcoin? How much of the value of bitcoins is tied up in some form of money laundering, be it from criminal proceeds or just

Is there such a thing as legitimate bitcoin? How much of the value of bitcoins is tied up in some form of money laundering, be it from criminal proceeds or just to transfer value out of a jurisdictions against prevailing regulations? The rest, "innocent" investors or enthusiasts, when not trying to scalp each other, just seem to provide liquidity and a fig leaf for the dark bitcoins.

rom-antics 4y ago
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 > For example, illegal transactions, scams and gambling together make up less than 3% of volume. (Note that this quote is talking specifically about bitcoin, not crypto as a whole.)
- bayesian_horse 4y ago
  That would actually be worse because then bitcoin is really mostly about "investors" trying to scalp each other, and very close even to a Ponzi-scheme. "Large concentrated players" don't need blockchains as "legitimate tender" or for the anonymity or whatever, they mostly use it for investment purposes. If everybody is just investing, and nobody is actually generating value above investing in actual currencies, then that should scare the living shit out of anyone involved in that. And I don't really believe that it is possible to estimate the amount of "dark" trading. Those investors may very well be providing the necessary market liquidity which the actual criminals appreciate very much.
datadata 4y ago
A lot of bitcoins associated with known crimes or sanctioned owners are flagged, and actually blocked by exchanges, for example there is an OFAC sanction list of bitcoin addresses. One problem with such approaches however is "dusting attacks". The owner of a blocked address could send tiny amounts to vast number of innocent addresses, thus tainting them as well. Seized bitcoins from crime have also many times been auctioned directly from authorities. So coins sold in that manner in some sense become 'legitimate' again. [1] In any money system, maintaining fungibility is really important. You wouldn't want the distant history of a bitcoin or dollar bills to be of concern to someone transacting with it. You could probably say something similar about dollars, for example there is the famous finding that 25% of US Bills have traces of cocaine on them [2]. This doesn't make me personally feel like by using dollars I am providing liquidity to drug cartels. [1]: https://www.cnbc.com/2021/12/19/what-the-us-government-does-with-its-secret-bitcoin-stockpile.html https://www.cnbc.com/2021/12/19/what-the-us-government-does-... [2]: https://en.wikipedia.org/wiki/Contaminated_currency https://en.wikipedia.org/wiki/Contaminated_currency
kube-system 4y ago
Almost all use of bitcoin is speculative investment.

rom-antics 4y ago

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 > For example, illegal transactions, scams and gambling together make up less than 3% of volume. (Note that this quote is talking specifically about bitcoin, not crypto as a whole.)

bayesian_horse 4y ago
That would actually be worse because then bitcoin is really mostly about "investors" trying to scalp each other, and very close even to a Ponzi-scheme. "Large concentrated players" don't need blockchains as "legitimate tender" or for the anonymity or whatever, they mostly use it for investment purposes. If everybody is just investing, and nobody is actually generating value above investing in actual currencies, then that should scare the living shit out of anyone involved in that. And I don't really believe that it is possible to estimate the amount of "dark" trading. Those investors may very well be providing the necessary market liquidity which the actual criminals appreciate very much.

datadata 4y ago

A lot of bitcoins associated with known crimes or sanctioned owners are flagged, and actually blocked by exchanges, for example there is an OFAC sanction list of bitcoin addresses. One problem with such approaches however is "dusting attacks". The owner of a blocked address could send tiny amounts to vast number of innocent addresses, thus tainting them as well. Seized bitcoins from crime have also many times been auctioned directly from authorities. So coins sold in that manner in some sense become 'legitimate' again. [1] In any money system, maintaining fungibility is really important. You wouldn't want the distant history of a bitcoin or dollar bills to be of concern to someone transacting with it. You could probably say something similar about dollars, for example there is the famous finding that 25% of US Bills have traces of cocaine on them [2]. This doesn't make me personally feel like by using dollars I am providing liquidity to drug cartels. [1]: https://www.cnbc.com/2021/12/19/what-the-us-government-does-with-its-secret-bitcoin-stockpile.html https://www.cnbc.com/2021/12/19/what-the-us-government-does-... [2]: https://en.wikipedia.org/wiki/Contaminated_currency https://en.wikipedia.org/wiki/Contaminated_currency

kube-system 4y ago

Almost all use of bitcoin is speculative investment.