11 ms·

How the Feds bounced Binance

jfengel 3y ago
Binance will not only help the US government monitor the money flows (the argument of our book), but plausibly act act as a regulatory super-spreader, transmitting “know your customer rules” across the ecoystem like an epidemiological contagion (the argument of an important academic article on ‘viral governance’ by Gregoire Mallard and Jin Sun). Or, people will flood out to someone who hasn't been hit by that "contagion", because the entire point is to have unregulated money.
- mjr00 3y ago
  > because the entire point is to have unregulated money. For some vanishingly small percentage of crypto-faithful, maybe. For the vast majority, the point is to turn (regulated) fiat money into more (regulated) fiat money. Or lose it all trying.
  - jfengel 3y ago
    In order to make profit they need a draw. Subverting regulations is one of the few draws. So where the drug dealers go, the speculators will follow.
- toomuchtodo 3y ago
  Chainalysis monitors all public chains for law enforcement and regulators. Monero, Zcash, and other privacy focused crypto can be squeezed out under money laundering, KYC, AML laws and regulations. Interestingly, violations of law have a permanent record on an immutable blockchain. You simply need someone technical to perform data analysis and hand it over to enforcement. TLDR there is always a throat to choke in meatspace. https://en.wikipedia.org/wiki/Chainalysis https://en.wikipedia.org/wiki/Chainalysis
  - deleted 3y ago
    [deleted]
  - vlovich123 3y ago
    Don’t even need to be squeezed out. Here’s an attack on zcash: https://crypto.stanford.edu/timings/paper.pdf https://crypto.stanford.edu/timings/paper.pdf Most private crypto coins are private by declaration rather than robust mathematical proofs (often because proving the absence of side channels is very difficult)
- dsugarman 3y ago
  I don't really understand how any crypto is "unregulated money" and it's intrinsically the most tracable money store [Edited for some horrible mobile autocorrect attrocities]
  - kzrdude 3y ago
    There are fully anonymous transactions in some of the cryptocurrencies, like in Zcash I believe. I thought such innovations would overtake and make the original bitcoin obsolete, but I've been very wrong, because bitcoin is still popular.
    - I_Am_Nous 3y ago
      I think this fact points out the disparity between people using crypto for ideological reasons and them using it for investment reasons. Most people don't care about the whitepaper, just that "stonks only go up" and buy accordingly. So small, good projects aren't as reliable an investment vehicle as a larger, more established coin that is almost guaranteed to be sellable if needed.
    - anonfromsomewhe 3y ago
      Zcash is flawed lie. They are not fully anonymous or anything. There were several reports how to trace them.
      - some_furry 3y ago
        Can you link to one of them? All I can recall is "shielded isn't default" and "if you transact too quickly it's risky" from recent memory.
      - kzrdude 3y ago
        Could you elaborate on that? I wasn't able to confirm that, but I'm massively out of the loop too.
    - vlovich123 3y ago
      I’m not aware yet that any cryptocurrency has been proven fully impossible to deanonymize, especially if there’s any off ramps anywhere. For example: https://crypto.stanford.edu/timings/paper.pdf https://crypto.stanford.edu/timings/paper.pdf is for zcash and monero It’s possible that someone comes up with a robust mechanism but if you interact with any other coin (crypto or fiat) it can expose additional side channels that are impossible to close.
- wslh 3y ago
  > the argument of an important academic article on ‘viral governance’ by Gregoire Mallard and Jin Sun Great reference, I found it at: https://ens-paris-saclay.fr/sites/default/files/Laboratoires/IDHES/2023_05_23_Mallard-Sun-2022.pdf https://ens-paris-saclay.fr/sites/default/files/Laboratoires... Reading it right now.
jongjong 3y ago
My understanding of crypto (having worked in the industry for years) is that it's not about decentralisation so much as it is about reliability and transparency. The decentralization aspect was mostly necessary in the early days to avoid being shut down by government. Now that crypto is widespread, it is not as important. What is important though are things that are missing from our current fiat monetary system; transparency and reliability. While the fiat monetary system appears to be very reliable for the individual, it is in fact extremely unreliable due to its lack of transparency. Governments can easily manipulate the supply (and therefore the true value) of currency behind the scenes without your knowledge and that is one of the primary mechanisms via which it steals wealth from individuals and deprive them of opportunities. Arguments against cryptocurrency are essentially saying that these individuals who are being robbed and deprived of opportunities don't matter because the system only needs to work for rich people and fool the poor into thinking that it doesn't harm them. Unfortunately, many poor people understand exactly how the system robs them. - It devalues our salary contracts via inflation of buying power. - Centralized currency creation centralizes opportunities due to the Cantillon Effect and this creates an asymmetric playing field which unfairly benefits corporations and large organizations. - Given that income tax is levied against each transfer between individuals, newly issued currency cannot travel very far from the government money printers as each hop away from the printers incurs a significant additional tax in the remaining untaxed amount which keeps shrinking. This exacerbates the Cantillon Effect and punishes regional areas and individuals who are far from the centers of money printing. It keeps all economic activity on a very short leash which is held tightly by the government.
- dale_glass 3y ago
  > My understanding of crypto (having worked in the industry for years) is that it's not about decentralisation so much as it is about reliability and transparency. None of those have panned out. Reliability and transparency aren't there either, because the state of crypto so far is that people keep on falling for scam after scam and getting screwed. No, just like with the original concept of "Peer-to-Peer Electronic Cash System", there's very few true believers that are into it for any such reasons like decentralization, reliability or transparency. The vast, vast majority just wants to get rich. It's that simple. The technical merits or characteristics of the underlying system are completely unimportant to the vast majority.
bragr 3y ago
It is going to being very interesting to see all the prosecutions that result from this. The feds know how to make good use of the access they're about to have based what they've been able to do with other exchanges' records.
dale_glass 3y ago
> But the blockchain’s entire purpose is political. If crypto is no longer about teh magic of decentralization, then why would anyone want to use it? Making big $$$, obviously. It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up. It seemed completely clear to me that a "Peer-to-Peer Electronic Cash System" couldn't tolerate such dysfunction. Usage as cash wasn't working. In the end capacity had to be promptly increased, or obviously there'd be huge problems for everyone. The first nail in the coffin was that blocks weren't expanded. The second one was that while there were plenty alternatives, BTC retained dominance, and that even forks that theoretically were superior because they did what they were supposed to do far better, BTC still won out. So clearly I was wrong, BTC wasn't functioning as a "cash system", and this obviously didn't matter to the BTC users, and didn't matter to the world at large either. Thus eventually it dawned on me that there were maybe a few people out there that had some interest in a "Peer-to-Peer Electronic Cash System" and the "tech", but the vast majority out there were only interested in a world-wide game of hot potato, where the only point is to accumulate coins early, then sell them to some fool on the top, and cash out.
- colechristensen 3y ago
  > It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up. Decentralization was the original tech angle. Email, HTTP, the basic Internet infrastructure is all decentralized with only the minimal necessary coordination. Decentralized money is iffy when it isn't a real thing with intrinsic value like a metal coin or trading commodities directly. Everything else though can absolutely be decentralized, somebody just needs to be happy about writing open standards and giving people the means to have systems that use them.
- apantel 3y ago
  There’s an important point hidden in your comment: Bitcoin won despite better forks and alternatives, and all its issues, because it managed to achieve the main thing that is required for something to become money: enough people have to think it’s money. When enough people come to think of something as money, it becomes money. If a fork or alternative to Bitcoin doesn’t get enough people to think of it as money, then it doesn’t really matter if it is ‘superior’. It won’t win against the thing that a very large number of people think is money. Edit: punctuation.
dist-epoch 3y ago
When will Tether implode? I've been reading about how that is imminent here for 3 years now.
- deleted 3y ago
  [deleted]
- AlexandrB 3y ago
  As always, "market can stay irrational longer than you can remain solvent". I wouldn't bet on Tether collapsing at any specific time period, but there are so many unanswered questions about how that business is run that a reckoning seems broadly inevitable. We'll see I guess. Theranos seemed ultra sketchy for a long time before something actually happened.
  - wslh 3y ago
    > ... I wouldn't bet on Tether collapsing at any specific time period ... I think we are completely missing something in the discussion of stable coins such as Tether and USDC even if they are not equal: while the currency is fixed toward the dollar in the blockchain, they receive interest on the real money they have (whatever real balance it is). This could make them very profitable with time.
- charcircuit 3y ago
  Since their assets > liabilities it will wind down rather than impload unless the entire economy imploads.
  - simmerup 3y ago
    Why would you assume their assets are worth more than their liabilities
    - charcircuit 3y ago
      Tether publishes the totals daily. $94,120,164,388.60 > $90,912,507,793.55 https://tether.to/en/transparency/ https://tether.to/en/transparency/
mgaunard 3y ago
In practice people use the blockchain to move assets between accounts tied to some of the many competing centralized trading markets (of which Binance is only the biggest one). They also use it for OTC transactions, which are typically also hedged on centralized markets due to their uncertainty. The centralized markets also function as banks, where you can borrow or cross-margin your positions. So it works, it's just that only using blockchain is not good enough to deal with speculation needs and market volatility.
lulznews 3y ago
Feds are doing a stealth CBDC takeover …
tmpfs 3y ago
A lot of comments here but I have still never seen people talk about the absolutely perfect use case for a block chain. Mandate that all government spending use a block chain so that all citizens can see government spending. All public finances visible to all citizens. I think we have got it backwards trying to use the technology as untraceable peer to peer currency, instead focus on visibility into government finances to combat corruption and nepotism.
- VoodooJuJu 3y ago
  This doesn't fix corruption. Corrupt spending is often quite conspicuous, it's just people won't or can't do anything about it.
- wolverine876 3y ago
  Couldn't we just as easily publish the government's ledger?
- nradov 3y ago
  You can already see government budgets. The process is very open (except for some limited secret programs). https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder...
b33j0r 3y ago
I’m so glad I don’t remember how much money was in that wallet. Let’s just call it 5, with no units. Helps.
- junofan 3y ago
  Hah, yeah, it’s unsurprising that a new asset class isn’t very popular on a forum frequented by the government’s “workhorse” taxpayers. Especially an asset class created by people with the same skills as them, rather than guys in suits. Yes, some programmers made up money and didn’t have to work for an employer or give up half to the government. I’m not really buying the sociological/political angle in the article. The centralizing force is attention.
  - b33j0r 3y ago
    The eternal question is, “heyyyy how’d they do that? They have to pay me for that, right?” If only we could limit problems to death, and not taxes! And I got paid interest rates!
from 3y ago
Except Binance didn't make out too bad in the end anyways. CZ still has billions of dollars and is looking at a pretty good sentence given the allegations. Monitorship does not entail unlimited government access to records, it mostly means a bunch of adult hall-monitors reading off compliance checklists, making sure they are being followed, then writing to the government every quarter about the remaining items on the checklists. Yes, there's the SAR lookback, but no one reads those anyways and probably won't give the government much because criminals routinely use accounts registered with fake or stolen IDs. Binance still accepts customers from countries like Venezuela, Nigeria, Zimbabwe, etc that "respected" financial institutions wouldn't touch with a 39.5 foot pole. There are still people making $50,000 USDT -> cash transactions every day with Binance P2P.
paulpauper 3y ago
Why is this so? Consider. If a business becomes big and powerful, it becomes more vulnerable to government regulation This certainly has not been the case with 'big tech' or 'big insurance'. Regulation amounts to slaps on the wrist, fines. Not being shut down or the key people arrested.
csomar 3y ago
The article keeps confusing the blockchain tech (ie: bitcoin) with the centralized exchange business (ie: binance). In 2017-2018, crypto grew so fast that the tech couldn’t catch up. The centralized exchanges indeed won. However, a significant volume is being traded today on DEXs (ie: uniswap). The OP fails to mention that. Uniswap did around $1bn in volume on a Saturday. These amount are very hard to fake as uniswap fees are simply brutal comparing to CEXs. This means a part of the market has moved off-grid and it’s significant. I don’t think the article argument can ignore that fact.

Binance will not only help the US government monitor the money flows (the argument of our book), but plausibly act act as a regulatory super-spreader, transmitting “know your customer rules” across the ecoystem like an epidemiological contagion (the argument of an important academic article on ‘viral governance’ by Gregoire Mallard and Jin Sun). Or, people will flood out to someone who hasn't been hit by that "contagion", because the entire point is to have unregulated money.

mjr00 3y ago
> because the entire point is to have unregulated money. For some vanishingly small percentage of crypto-faithful, maybe. For the vast majority, the point is to turn (regulated) fiat money into more (regulated) fiat money. Or lose it all trying.
- jfengel 3y ago
  In order to make profit they need a draw. Subverting regulations is one of the few draws. So where the drug dealers go, the speculators will follow.
toomuchtodo 3y ago
Chainalysis monitors all public chains for law enforcement and regulators. Monero, Zcash, and other privacy focused crypto can be squeezed out under money laundering, KYC, AML laws and regulations. Interestingly, violations of law have a permanent record on an immutable blockchain. You simply need someone technical to perform data analysis and hand it over to enforcement. TLDR there is always a throat to choke in meatspace. https://en.wikipedia.org/wiki/Chainalysis https://en.wikipedia.org/wiki/Chainalysis
- deleted 3y ago
  [deleted]
- vlovich123 3y ago
  Don’t even need to be squeezed out. Here’s an attack on zcash: https://crypto.stanford.edu/timings/paper.pdf https://crypto.stanford.edu/timings/paper.pdf Most private crypto coins are private by declaration rather than robust mathematical proofs (often because proving the absence of side channels is very difficult)
dsugarman 3y ago
I don't really understand how any crypto is "unregulated money" and it's intrinsically the most tracable money store [Edited for some horrible mobile autocorrect attrocities]
- kzrdude 3y ago
  There are fully anonymous transactions in some of the cryptocurrencies, like in Zcash I believe. I thought such innovations would overtake and make the original bitcoin obsolete, but I've been very wrong, because bitcoin is still popular.
  - I_Am_Nous 3y ago
    I think this fact points out the disparity between people using crypto for ideological reasons and them using it for investment reasons. Most people don't care about the whitepaper, just that "stonks only go up" and buy accordingly. So small, good projects aren't as reliable an investment vehicle as a larger, more established coin that is almost guaranteed to be sellable if needed.
  - anonfromsomewhe 3y ago
    Zcash is flawed lie. They are not fully anonymous or anything. There were several reports how to trace them.
    - some_furry 3y ago
      Can you link to one of them? All I can recall is "shielded isn't default" and "if you transact too quickly it's risky" from recent memory.
    - kzrdude 3y ago
      Could you elaborate on that? I wasn't able to confirm that, but I'm massively out of the loop too.
  - vlovich123 3y ago
    I’m not aware yet that any cryptocurrency has been proven fully impossible to deanonymize, especially if there’s any off ramps anywhere. For example: https://crypto.stanford.edu/timings/paper.pdf https://crypto.stanford.edu/timings/paper.pdf is for zcash and monero It’s possible that someone comes up with a robust mechanism but if you interact with any other coin (crypto or fiat) it can expose additional side channels that are impossible to close.
wslh 3y ago
> the argument of an important academic article on ‘viral governance’ by Gregoire Mallard and Jin Sun Great reference, I found it at: https://ens-paris-saclay.fr/sites/default/files/Laboratoires/IDHES/2023_05_23_Mallard-Sun-2022.pdf https://ens-paris-saclay.fr/sites/default/files/Laboratoires... Reading it right now.

jongjong 3y ago

My understanding of crypto (having worked in the industry for years) is that it's not about decentralisation so much as it is about reliability and transparency. The decentralization aspect was mostly necessary in the early days to avoid being shut down by government. Now that crypto is widespread, it is not as important. What is important though are things that are missing from our current fiat monetary system; transparency and reliability. While the fiat monetary system appears to be very reliable for the individual, it is in fact extremely unreliable due to its lack of transparency. Governments can easily manipulate the supply (and therefore the true value) of currency behind the scenes without your knowledge and that is one of the primary mechanisms via which it steals wealth from individuals and deprive them of opportunities. Arguments against cryptocurrency are essentially saying that these individuals who are being robbed and deprived of opportunities don't matter because the system only needs to work for rich people and fool the poor into thinking that it doesn't harm them. Unfortunately, many poor people understand exactly how the system robs them. - It devalues our salary contracts via inflation of buying power. - Centralized currency creation centralizes opportunities due to the Cantillon Effect and this creates an asymmetric playing field which unfairly benefits corporations and large organizations. - Given that income tax is levied against each transfer between individuals, newly issued currency cannot travel very far from the government money printers as each hop away from the printers incurs a significant additional tax in the remaining untaxed amount which keeps shrinking. This exacerbates the Cantillon Effect and punishes regional areas and individuals who are far from the centers of money printing. It keeps all economic activity on a very short leash which is held tightly by the government.

dale_glass 3y ago
> My understanding of crypto (having worked in the industry for years) is that it's not about decentralisation so much as it is about reliability and transparency. None of those have panned out. Reliability and transparency aren't there either, because the state of crypto so far is that people keep on falling for scam after scam and getting screwed. No, just like with the original concept of "Peer-to-Peer Electronic Cash System", there's very few true believers that are into it for any such reasons like decentralization, reliability or transparency. The vast, vast majority just wants to get rich. It's that simple. The technical merits or characteristics of the underlying system are completely unimportant to the vast majority.

bragr 3y ago

It is going to being very interesting to see all the prosecutions that result from this. The feds know how to make good use of the access they're about to have based what they've been able to do with other exchanges' records.

dale_glass 3y ago

> But the blockchain’s entire purpose is political. If crypto is no longer about teh magic of decentralization, then why would anyone want to use it? Making big $$$, obviously. It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up. It seemed completely clear to me that a "Peer-to-Peer Electronic Cash System" couldn't tolerate such dysfunction. Usage as cash wasn't working. In the end capacity had to be promptly increased, or obviously there'd be huge problems for everyone. The first nail in the coffin was that blocks weren't expanded. The second one was that while there were plenty alternatives, BTC retained dominance, and that even forks that theoretically were superior because they did what they were supposed to do far better, BTC still won out. So clearly I was wrong, BTC wasn't functioning as a "cash system", and this obviously didn't matter to the BTC users, and didn't matter to the world at large either. Thus eventually it dawned on me that there were maybe a few people out there that had some interest in a "Peer-to-Peer Electronic Cash System" and the "tech", but the vast majority out there were only interested in a world-wide game of hot potato, where the only point is to accumulate coins early, then sell them to some fool on the top, and cash out.

colechristensen 3y ago
> It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up. Decentralization was the original tech angle. Email, HTTP, the basic Internet infrastructure is all decentralized with only the minimal necessary coordination. Decentralized money is iffy when it isn't a real thing with intrinsic value like a metal coin or trading commodities directly. Everything else though can absolutely be decentralized, somebody just needs to be happy about writing open standards and giving people the means to have systems that use them.
apantel 3y ago
There’s an important point hidden in your comment: Bitcoin won despite better forks and alternatives, and all its issues, because it managed to achieve the main thing that is required for something to become money: enough people have to think it’s money. When enough people come to think of something as money, it becomes money. If a fork or alternative to Bitcoin doesn’t get enough people to think of it as money, then it doesn’t really matter if it is ‘superior’. It won’t win against the thing that a very large number of people think is money. Edit: punctuation.

dist-epoch 3y ago

When will Tether implode? I've been reading about how that is imminent here for 3 years now.

deleted 3y ago
[deleted]
AlexandrB 3y ago
As always, "market can stay irrational longer than you can remain solvent". I wouldn't bet on Tether collapsing at any specific time period, but there are so many unanswered questions about how that business is run that a reckoning seems broadly inevitable. We'll see I guess. Theranos seemed ultra sketchy for a long time before something actually happened.
- wslh 3y ago
  > ... I wouldn't bet on Tether collapsing at any specific time period ... I think we are completely missing something in the discussion of stable coins such as Tether and USDC even if they are not equal: while the currency is fixed toward the dollar in the blockchain, they receive interest on the real money they have (whatever real balance it is). This could make them very profitable with time.
charcircuit 3y ago
Since their assets > liabilities it will wind down rather than impload unless the entire economy imploads.
- simmerup 3y ago
  Why would you assume their assets are worth more than their liabilities
  - charcircuit 3y ago
    Tether publishes the totals daily. $94,120,164,388.60 > $90,912,507,793.55 https://tether.to/en/transparency/ https://tether.to/en/transparency/

mgaunard 3y ago

In practice people use the blockchain to move assets between accounts tied to some of the many competing centralized trading markets (of which Binance is only the biggest one). They also use it for OTC transactions, which are typically also hedged on centralized markets due to their uncertainty. The centralized markets also function as banks, where you can borrow or cross-margin your positions. So it works, it's just that only using blockchain is not good enough to deal with speculation needs and market volatility.

lulznews 3y ago

Feds are doing a stealth CBDC takeover …

tmpfs 3y ago

A lot of comments here but I have still never seen people talk about the absolutely perfect use case for a block chain. Mandate that all government spending use a block chain so that all citizens can see government spending. All public finances visible to all citizens. I think we have got it backwards trying to use the technology as untraceable peer to peer currency, instead focus on visibility into government finances to combat corruption and nepotism.

VoodooJuJu 3y ago
This doesn't fix corruption. Corrupt spending is often quite conspicuous, it's just people won't or can't do anything about it.
wolverine876 3y ago
Couldn't we just as easily publish the government's ledger?
nradov 3y ago
You can already see government budgets. The process is very open (except for some limited secret programs). https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder...

b33j0r 3y ago

I’m so glad I don’t remember how much money was in that wallet. Let’s just call it 5, with no units. Helps.

junofan 3y ago
Hah, yeah, it’s unsurprising that a new asset class isn’t very popular on a forum frequented by the government’s “workhorse” taxpayers. Especially an asset class created by people with the same skills as them, rather than guys in suits. Yes, some programmers made up money and didn’t have to work for an employer or give up half to the government. I’m not really buying the sociological/political angle in the article. The centralizing force is attention.
- b33j0r 3y ago
  The eternal question is, “heyyyy how’d they do that? They have to pay me for that, right?” If only we could limit problems to death, and not taxes! And I got paid interest rates!

from 3y ago

Except Binance didn't make out too bad in the end anyways. CZ still has billions of dollars and is looking at a pretty good sentence given the allegations. Monitorship does not entail unlimited government access to records, it mostly means a bunch of adult hall-monitors reading off compliance checklists, making sure they are being followed, then writing to the government every quarter about the remaining items on the checklists. Yes, there's the SAR lookback, but no one reads those anyways and probably won't give the government much because criminals routinely use accounts registered with fake or stolen IDs. Binance still accepts customers from countries like Venezuela, Nigeria, Zimbabwe, etc that "respected" financial institutions wouldn't touch with a 39.5 foot pole. There are still people making $50,000 USDT -> cash transactions every day with Binance P2P.

paulpauper 3y ago

Why is this so? Consider. If a business becomes big and powerful, it becomes more vulnerable to government regulation This certainly has not been the case with 'big tech' or 'big insurance'. Regulation amounts to slaps on the wrist, fines. Not being shut down or the key people arrested.

csomar 3y ago

The article keeps confusing the blockchain tech (ie: bitcoin) with the centralized exchange business (ie: binance). In 2017-2018, crypto grew so fast that the tech couldn’t catch up. The centralized exchanges indeed won. However, a significant volume is being traded today on DEXs (ie: uniswap). The OP fails to mention that. Uniswap did around $1bn in volume on a Saturday. These amount are very hard to fake as uniswap fees are simply brutal comparing to CEXs. This means a part of the market has moved off-grid and it’s significant. I don’t think the article argument can ignore that fact.