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Security / Re: is buying and then selling bitcoins anonymously money laundering?
« on: April 13, 2012, 11:37 am »Quote
A bitcoin mixer simply swaps your Bitcoins for someone else's. It is true that it makes it close to impossible to detect the passage of Bitcoins through a network from one person to another. It's also true to say that Bitcoin mixing services can be used (and are!) for money laundering services. This said, running an exchange of this nature is no more illegal than exchanging any other kind of virtual currency for another, for which a licence is not required.
Bitcoin mixing is clearly money laundering, particularly since you need to split the coins over multiple accounts to hide input/output correlations. Splitting finances over multiple accounts to avoid being investigated for money laundering is pretty much the textbook definition of account structuring, which is in itself chargeable under money laundering statutes. Not to mention bitcoin mixes exist for the sole purpose of obfuscating the source and or destination of money, which is essentially the textbook definition of money laundering.
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No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508— [...] (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
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As I said before however the point is moot in any case as Bitcoins are designed to be used anonymously. KYC procedures would rather defeat the point of the exercise.
First I would like to say that bitcoin was not designed with anonymity in mind. If they wanted to they could have built anonymity right into the protocol, but they didn't for whatever reason (possibly in an attempt to make it less blatantly money laundering) and anonymity needs to be layered on with third party mixing services. Bitcoin is actually very much not anonymous, the entire transaction history is viewable by anyone and it is entirely non-obfuscated. Using Tor with Bitcoin can give you network layer anonymity, but that is because Tor was designed for anonymity and has next to nothing to do with Bitcoin. Bitcoins primary design goal appears to be censorship resistance, it will be infinitely harder to end Bitcoin versus centralized E-currency companies like E-gold. Bitcoin also aimed to be seizure/forfeiture resistant, since you control your own keys which control your bitcoins, third parties can't steal them from you. Bitcoin also of course aims to do all the things that any other E-currency aims to, let you send and receive value over the internet. Alas, anonymity is not a property of bitcoin.
Second, I would like to point out that the government doesn't give a flying fuck what bitcoin was designed to do, if you don't follow know your customer rules and run a financial exchange it isn't going to do a bit of good to argue that the software you use was designed for anonymity and that following the governments know your customer rules would be counter productive to this end goal. Running any sort of financial exchange without following the applicable know your customer and licensing rules is illegal.