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I'm taking a Zero Trust approach to the movement of money. You have to assume there are insiders in banking and government with malicious intent. How do you p

by rapjr9 2y ago

I'm taking a Zero Trust approach to the movement of money. You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? Could cryptocurrencies be worked into a solution?

tadfisher 2y ago
> I'm taking a Zero Trust approach to the movement of money. This is begging the question. > You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? We have a system of rules in place to disincentivize certain behaviors in government. This system is written down as the U.S. Code. If you can't trust this system, you might as well write off the concept of democracy as a whole, because a lot more than our banking system depends on a very deep-seated social contract which assumes that the people trust the government they elect. > Could cryptocurrencies be worked into a solution? Of course they can. The questions are: Why would we want this? What problems do cryptocurrency solve uniquely? What trade-offs would we make by implementing such a solution? And that is why statements like this belie the fallacy of crypto proponents: you are begging the question when you ask how to integrate crypto with the financial system, and do not address any of the myriad of shortcomings of doing so.
Analemma_ 2y ago
> I'm taking a Zero Trust approach to the movement of money. One of the points Patrick stresses repeatedly in both the original article and in his response to McCauley is that providing banking services to cryptocurrency companies is not merely being a "dumb pipe" which facilitates transactions. Giving anybody (whether an individual or a business) a checking account means opening yourself up to counterparty risk, which can blow you up if you model it incorrectly. And this is not a hypothetical: he specifically points out that this is what happened to Metropolitan when they worked with Voyager. And Patrick further elaborates that crypto companies love to push this counterparty risk under the rug by heaping it onto others, then complaining when the inevitable result is that nobody wants to do business with them. The point of all the above is that "a zero trust approach to money movement" does not and cannot exist. You can pretend it exists, by finding some patsy to take the counterparty risk for you, but once you run out of suckers, reality will reassert itself and no amount of complaining about government interference will change the fact that you're an unacceptably risky customer and that's why nobody wants to give you an account.
- rapjr9 2y ago
  So models are trusted but algorithms are not? Just asking, I really don't know. In the case of debanking it seems that those who were debanked didn't consider their own counterparty risk, this is a two-way street. Businesses using multiple banks seems to be newly popular. Perhaps loans need to be considered separately from bank accounts? I'm also suggesting creating a new kind of payment system for the US federal government, so in that there is a large risk for the people that try to misuse it. Perhaps a payment system is more amenable to automation than a bank account?
  - tadfisher 2y ago
    How do you encode in a smart contract that the counterparty is not a fraudster and is not funneling money for fraudsters? That is the core risk that banks are exposed to, because they are the ones who are on the hook for stolen funds. Secondary risks are those enforced by regulators: KYC, AML, BSA. The government does not want your bank handling money for sanctioned individuals, countries, or terrorists. How do you encode in a smart contract that the counterparty does not represent one of these categories?
cyanydeez 2y ago
I'm assuming crypto only exists either as a fraud or a nefarious activity to undermine global banking. I'm 50/50 on that and the current US president makes that a hardship

by rapjr9 2y ago

tadfisher 2y ago

> I'm taking a Zero Trust approach to the movement of money. This is begging the question. > You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? We have a system of rules in place to disincentivize certain behaviors in government. This system is written down as the U.S. Code. If you can't trust this system, you might as well write off the concept of democracy as a whole, because a lot more than our banking system depends on a very deep-seated social contract which assumes that the people trust the government they elect. > Could cryptocurrencies be worked into a solution? Of course they can. The questions are: Why would we want this? What problems do cryptocurrency solve uniquely? What trade-offs would we make by implementing such a solution? And that is why statements like this belie the fallacy of crypto proponents: you are begging the question when you ask how to integrate crypto with the financial system, and do not address any of the myriad of shortcomings of doing so.

Analemma_ 2y ago

> I'm taking a Zero Trust approach to the movement of money. One of the points Patrick stresses repeatedly in both the original article and in his response to McCauley is that providing banking services to cryptocurrency companies is not merely being a "dumb pipe" which facilitates transactions. Giving anybody (whether an individual or a business) a checking account means opening yourself up to counterparty risk, which can blow you up if you model it incorrectly. And this is not a hypothetical: he specifically points out that this is what happened to Metropolitan when they worked with Voyager. And Patrick further elaborates that crypto companies love to push this counterparty risk under the rug by heaping it onto others, then complaining when the inevitable result is that nobody wants to do business with them. The point of all the above is that "a zero trust approach to money movement" does not and cannot exist. You can pretend it exists, by finding some patsy to take the counterparty risk for you, but once you run out of suckers, reality will reassert itself and no amount of complaining about government interference will change the fact that you're an unacceptably risky customer and that's why nobody wants to give you an account.

rapjr9 2y ago
So models are trusted but algorithms are not? Just asking, I really don't know. In the case of debanking it seems that those who were debanked didn't consider their own counterparty risk, this is a two-way street. Businesses using multiple banks seems to be newly popular. Perhaps loans need to be considered separately from bank accounts? I'm also suggesting creating a new kind of payment system for the US federal government, so in that there is a large risk for the people that try to misuse it. Perhaps a payment system is more amenable to automation than a bank account?
- tadfisher 2y ago
  How do you encode in a smart contract that the counterparty is not a fraudster and is not funneling money for fraudsters? That is the core risk that banks are exposed to, because they are the ones who are on the hook for stolen funds. Secondary risks are those enforced by regulators: KYC, AML, BSA. The government does not want your bank handling money for sanctioned individuals, countries, or terrorists. How do you encode in a smart contract that the counterparty does not represent one of these categories?

cyanydeez 2y ago

I'm assuming crypto only exists either as a fraud or a nefarious activity to undermine global banking. I'm 50/50 on that and the current US president makes that a hardship