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sgp_ | 5 years ago

Creator of the Breaking Monero series and a compliance analyst at a cryptocurrency OTC desk here.

This mixer was penalized for running an unlicensed MSB. This is far more about that then it is about banning privacy technologies generally. For traditional Bitcoin mixers as in this case, someone receives money from users and then transmits money to many users. This is money transmission and requires registration with FinCEN and sometimes requires registration with states (though some states have exemptions for completely crypto to crypto transmission that doesn't touch USD or other fiat).

Mixing in this case is interactive where there is a clear money transmitter. In Monero's case, the ring signature "mixing" (mixing is a terrible/misleading way to refer to ring signatures) is non-interactive, and there is no intermediary (eg: a mixer) acting as a money transmitter. Thus, there is nothing to fear from this specific enforcement action.

I'm happy to answer other questions as well. But for money transmission to occur, an intermediary needs to accept customer funds. For a Monero transfer, there is no intermediary. Someone could build an MSB on Monero itself which would require registration, but using Monero to send funds directly to a merchant for one's own purchase, for example, is not money transmission.

discuss

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hn_throwaway_99|5 years ago

I don't necessarily disagree with you that the specifics of this case may not be exactly applicable to Monero. However, I think people are being woefully naive if they think that the US Government will be OK with people sending large sums of money anonymously. Whether it be through finding existing laws that can be applied, or just flat out changing the law to explicitly ban these types of transactions, I can guarantee that when people think they have found a technical loophole the law usually comes down on the side of "does what you're doing constitute behavior that the original legislation was meant to prohibit". Just look at what happened with Aereo [1], I think the same thing will (at least eventually) happen with cryptocurrencies where the ledger isn't fully traceable.

[1] https://en.wikipedia.org/wiki/Aereo

rjzzleep|5 years ago

There has been so much legislation going on in the past couple of years to make sure a lot of financial reporting happens to the US, to an extent that some chinese instutions flat out refused taking payments from US based payment providers simply to avoid that reporting burden.

We would be kidding ourselves if we denied the geopolitical implications of that reporting burden. For Taiwan for example every single international transaction is proxied through a US bank.

I believe the geopolitics behind it is to ensure that the US is able to enforce their international sanctions. Anything bypassing that definitely a thorn in their eyes.

However we shouldn't forget that there are those that would like to reduce the reliance on those systems. So while US banks may cut off access other countries may not.

EDIT: yes, the US is not the only country doing that. Iran for example while bartering with China also completely banned cryptocurrencies for the longest time. Then finally allowed blockchain applications but only if they are used for non payment purposes.

chris_wot|5 years ago

Indeed, it wouldn’t take much for them to legislate to make the whole ring signature mechanism illegal.

dcolkitt|5 years ago

I wholeheartedly agree with your assessment. But at the end of the day, this defense is predicated on making a US federal judge understand all those technical details.

I think the most commonsense reform is to have computer crime handled by specialized courts, much the same as tax law currently is. These domains are simply too complex to have them handled by legal generalists, who are expected to learn it all from first principles on each and every case.

pas|5 years ago

Can't tax law cases eventually make it to the Supreme Court anyway?

bottled_poe|5 years ago

What do you think this is? Some kind of meritocracy?

onetimemanytime|5 years ago

>>But for money transmission to occur, an intermediary needs to accept customer funds. For a Monero transfer, there is no intermediary. Someone could build an MSB on Monero itself which would require registration, but using Monero to send funds directly to a merchant for one's own purchase, for example, is not money transmission.

They are huge fines and decades in jail sentences at play in money laundering. How sure are you? Not that anyone is going to do X or Y because someone in a thread said so, but things aren't as simple sometimes. Add the potential penalties and...

A4ET8a8uTh0|5 years ago

This.

It should also be noted that government does not seem to know how to deal with privacy oriented coins ( ref#1 - discussion of current regime for crypto as seen by US AG ). That said, they seem to suggest ( page 41 ) that using Monero is inherently risky and prone to illicit activity and businesses allowing its use "should consider the increased risks". Knowing how banks read those types of documents, you can safely bet banks will simply refuse to bank anyone if there is even a whiff of transaction with Monero, Zcash, Dash.

Ref#1:https://www.justice.gov/ag/page/file/1326061/download

edit: Disclaimer. Do not be an idiot. I am just a guy on the internet. If in doubt, hire an actual lawyer.

akimball|5 years ago

Gemini exchange seems to have no difficulty with banking. Coinbase seems to have no difficulty with banking.

3np|5 years ago

I understand the argument with interactiveness, but even so, do you think it'd be unreasonable to think that Monero miners/node operators could be targeted?

trevyn|5 years ago

>I'm happy to answer other questions as well.

>This is money transmission and requires registration with FinCEN

Could you clarify the practical constraints on this assertion? If I am an alien living on the moon and connected to the Internet with lasers, who is enforcing any "requirement" and how?

3np|5 years ago

Do you see CoinJoins as implemented by Samourai and Wasabi to be possibly liable in the same way?

beervirus|5 years ago

Is this legal advice about the definition of "money transmitter"? It sure reads that way.

sgp_|5 years ago

Obviously not legal advice, but FinCEN's guidance is quite easy to follow here:

https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20...

> Providers of anonymizing services, commonly referred to as “mixers” or “tumblers,” are either persons that accept CVCs and retransmit them in a manner designed to prevent others from tracing the transmission back to its source (anonymizing services provider), or suppliers of software a transmittor would use for the same purpose (anonymizing software provider).

> An anonymizing services provider is a money transmitter under FinCEN regulations. The added feature of concealing the source of the transaction does not change that person’s status under the BSA.

> An anonymizing software provider is not a money transmitter. FinCEN regulations exempt from the definition of money transmitter those persons providing “the delivery, communication, or network access services used by a money transmitter to support money transmission services.” This is because suppliers of tools (communications, hardware, or software) that may be utilized in money transmission, like anonymizing software, are engaged in trade and not money transmission.

Another resource: https://www.perkinscoie.com/en/news-insights/anti-money-laun...

gamblor956|5 years ago

Legal advice is regulated where it means applying the law to the specific facts of another person's case, because that is considered the "practice" of law.

Applying the law to a generic set of facts, or to your own facts, is fine.

0xffff2|5 years ago

Nothing posted on a pseudo-anonymous internet forum is ever legal advice.

wolco2|5 years ago

Have you paid for this advice? Are you a client? Was this directed at you?

If not then this is opinion.