We have normalized the treatment of the financial and payments systems as things that exist primarily to perform law enforcement surveillance functions. It's the same dynamic that leads to debanking of small accounts - payments firms exist on thin margins and the potential fines for inadvertently servicing a bad actor are stratospheric, so it's entirely logical to play it safe by refusing to service anyone whose profile looks even the slightest bit risky.
Debanking small accounts isn't something that I'd heard of before. But debanking "undesirables" is certainly a problem.
Over here (Belgium) we have legalized prostitution, but it's very hard for sex workers to open a bank account. There's some legislation that forces banks to offer them a basic bank account (at a steep fee) if they can prove that they've been rejected by N banks. Which is a start, I suppose.
Banks have basically become an extension of law enforcement, tax collectors, anti-terrorist operations, and morality police. Which is ironic, given how many banks brazenly break laws on the regular, how absolutely depraved parties with bankers are, etc. They're hardly paragons of virtue. Yet they get to gatekeep "virtue".
I agree; but if we're bank-bashing I'd like it to be comprehensive:
What with all the attention they have to put into cooperating with the authoritarians they also aren't particularly good at their theoretical purpose, which is pooling people's money and investing it productively. We're watching an ongoing capital crisis in the West where we've been out-invested by nominal communists; it is absurd. The banking system has sticky fingers all over that mess. Then they get political protection through financial crisises where they should be taken out by bankruptcy but the powers that be prioritise having reliable people in what is effectively law enforcement rather then putting good capital managers in charge.
So, y'know. Upside is the banks do a great job of shutting down sex workers and political activism. 10/10 mark for reporting what everyone is doing to law enforcement. Downside is that turns out to be a big distraction from all the wealth creation banking can enable.
Banks are doing a relatively bad job of capital management, but they're also doing less and less of it.
Investment funds of all sorts manage the world's money. Your retail bank might originate mortgages, but it almost certainly sells them on.
The Fed doesn't want to see an overnight switch to narrow banking, where banks sell you checking accounts and money transmission services and never make decisions about investing the deposits. It has declined to approve banks that would do that. But it seems OK with presiding over a managed decline of banking into that state.
Retail banks actually don’t ‘pool people’s money and invest it’, and for good reason. Investment banks are different from regular retail banks for a reason (which is that that creates way too much risk to deposits for everyday banking).
The main business of banking is actually leveraging the capital of their owners (shareholders) to lend. Deposits are not the main game, and are there for two reasons - firstly that lending produces deposits, so banks may as well be able to hold deposits just for that reason, but also because deposit inflows create the liquidity banks need to lever up their capital. This is the real reason why banks pay interest on deposits - to encourage people to transfer money in and not transfer as much out. Actually just having the deposits sitting there doesn’t do much for the bank, so the bank more wants you to transfer money in to increase your balance and not just hold it.
The Glass-Steagall Act, enacted in 1933, was partially repealed in 1999 by the Gramm-Leach-Bliley Act (GLBA). Specifically, the GLBA repealed sections 20 and 32 of the Glass-Steagall Act, which had prohibited affiliations and interlocks between commercial and investment banks. This allowed financial institutions to engage in both commercial and investment banking activities, which was seen as a step towards universal banking.
We might be talking past each other, but this part:
> Retail banks actually don’t ‘pool people’s money and invest it’
However, the phrase "invest it" makes it sounds like they are gambling the money on speculative investments! There are very strict rules about what securities (classes and ratings) are allowed as investments.
>Retail banks actually don’t ‘pool people’s money and invest it’,
>deposit inflows create the liquidity banks need to lever up their capital
Aren't these basically the same thing? There's complicated capital structure around how much tier 1 capital banks have to hold, and what deposits have to be backed by, but at the end of the day banks are taking money from depositors and investors, and using it to buy assets. More importantly if you deposit a dollar, that's not sitting around in a vault somewhere, it's used to buy treasuries or whatever. Most people would characterize that as "pool people’s money and invest it".
It seems like a reasonable objection, AFAIK the argument would boil down equivalently to money being a unit of measurement therefore the language is wrong - it is a bit like saying "pool people's meters" - meters are a unit of measurement as opposed to a thing. Can't pool meters, can pool meters of cloth. Especially since we don't hold the amount of wealth measured by a unit of currency steady it doesn't make sense to talk about "pooling money".
In this case though I said banking system, not retail banking system and I think the fairest reading given the ambiguity is just to treat it as "pool people's wealth" and shift to talking about the real economy.
Fiat money is a token of exchange backed up by the need for everyone in an economy to pay taxes using those tokens.
The idea it’s a measurement is appealing but incomplete, you can’t exchange abstract gallons or other measurements in the abstract only in terms of a measurement of something.
> you can’t exchange abstract gallons or other measurements in the abstract only in terms of a measurement of something.
I have an implement for doing exactly that on my desk - a cup. The people who made the cup don't know what I'm going to be filling it with but they have a very good idea of what volume it'll take up. I could go to the pub with friends and ask for a glass of something but I don't mind what. The point of a unit of measurement is it enables abstract handling of quantities. Otherwise we may as well have a unique system of measurement per thing.
And if you want a monetary example, there is barter. I can exchange $50 of work directly for $50 of food, abstracting out the money. That wouldn't be possible if the token itself were the important thing, because it isn't present anywhere in the example.
> Fiat money is a token of exchange backed up by the need for everyone in an economy to pay taxes using those tokens.
Obviously there is more than one type of money if you feel a need to add a prefix to explain what type of money you are discussing. The other types aren't backed up by a need for everyone to pay taxes, money can exist independently of a taxation system. Then it is called non-fiat money. You're focusing on the non-monetary aspects of the system, which is cool and all but missing the forest for the trees.
> I could go to the pub with friends and ask for a glass of something but ai don’t mind what
You’d very much mind you got a cup of bull sperm or diarrhea. That request is actually excluding the vast majority of possible liquids.
> if you feel the need to add a prefix
There’s only two types of money, fiat and barter.
If I’m exchanging a promissory note that I can exchange for 1 barrel of wheat or 1lb of gold or whatever that’s barter through an abstraction. If you’re using stamped gold coins people are just bartering precious metals of a known purity thus the need to weigh the coins not just count them.
> We're watching an ongoing capital crisis in the West where we've been out-invested by nominal communists
If I still had a fortune file, this would go in it!
> We're watching an ongoing capital crisis in the West where we've been out-invested by nominal communists; it is absurd.
I personally would lay far more of the blame at the feet of the slow-but-steady disassembly of a proper tax code which has rendered our Government all but unable to function from a fiscal perspective since the Reagan years. I'm curious if you would feel the banks are more responsible, and if so, how?
Everything I've read on the subject over the years pretty squarely lays it at the austerity movements that have utterly crippled most western countries but none more thoroughly than the United States, where the notion seemingly of spending any public money on anything no matter how needed that isn't Defense spending is Communist, alongside of course the general (and consequential of that) transfer of wealth from the working class to the extremely wealthy who dodge more taxes than ever before, perhaps in all of history of the practice of collecting taxes.
It's the whole system. The whole system is rotten to the core. All the individual rotting bits are symptoms of the fact the whole system is rotting.
> I personally would lay far more of the blame at the feet of the slow-but-steady disassembly of a proper tax code which has rendered our Government all but unable to function from a fiscal perspective since the Reagan years.
Federal Receipts as a Percent of GDP:
https://fred.stlouisfed.org/series/FYFRGDA188S
There is not any kind of material long-term discontinuity initiated in the Reagan years. It has been approximately flat since the end of WWII, which implies a growth in real government revenue per capita consistent with the growth in real GDP per capita.
This chart is only federal receipts, not state; the total of the two in the US is ~30%. Countries that have taxpayer-funded healthcare systems have a higher total on paper because the cost of the healthcare system is then in the accounting as government revenue rather than private insurance premiums, not because they're doing significantly more non-healthcare government spending. In reality the US government spends more on non-healthcare government expenditures than most other countries because it runs such large deficits.
> Everything I've read on the subject over the years pretty squarely lays it at the austerity movements that have utterly crippled most western countries but none more thoroughly than the United States, where the notion seemingly of spending any public money on anything no matter how needed that isn't Defense spending is Communist
What's really going on here is that the government is already extracting approximately the amount of money from the economy that maximizes medium-term government revenue given the trade off between revenue extraction and GDP growth.
But the government is thoroughly captured by lobbyists, so every dollar the government spends on something that actually benefits the population is a dollar that isn't going to a well-connected government contractor or a union that wants a wasteful boondoggle and can shift enough votes for a representative in a vulnerable district that the party will sell out the general public to secure that seat, or to vote buying from retirees that has now reached the point that US Government spending on retirement benefits consumes more than half of all federal receipts and goes disproportionately to affluent retirees.
Which makes it hard to pass useful programs because you have to fight the incumbents for the money.
> alongside of course the general (and consequential of that) transfer of wealth from the working class to the extremely wealthy who dodge more taxes than ever before, perhaps in all of history of the practice of collecting taxes.
This is also a mischaracterization of the change that happened during the Reagan years.
If you look at nominal tax rates, on paper they went down under Reagan, but then you look at federal receipts and in 1979 they were 17.6% of GDP whereas in 1989 they were... 17.6% of GDP. As opposed to today, where over the last five years it has been in the range of 16% to 18.8%. Or the 1960s and 70s where it was in the range of, well, ~16% to ~18% of GDP. It really hasn't materially changed at all.
What changed under Reagan is that prior to that, tax avoidance was much easier. People were deducting everything. When they lowered the nominal tax rates, they also closed so many loopholes that the effect of the rate reduction on government revenue was zero. Which is to say, the amount of tax dodging is much lower now than it was historically.
If the entire picture was so dark nobody would have used banks for anything, all across history. The banks were created by those having the means to open banks, not by charities, so it should be obvious that they will serve primarily their masters. You could make a similar argument for crypto: it does help some people to send money to the back of Africa, but is mostly enabling scams. My point is, the more there's money involved the darker the picture. If only we cared enough to make it better, but it's all boiling the frog.
Dictatorships (which is what communism always amounts to in the real world) are always good at big visible projects. they fail because things not on the dictators 'radar' don't get anyones attention as there is no reward for small projects that keep the world running until the dictator notices the lack. If the dictator doesn't notice the lack you have to be really good at marketing yourself if you do them otherwise you will be 'purged' for wasted effort when you do them.
Usually its just the corrupt dictators uncles 2nd nephew rerouting all the funds so basic maintenance cant be done. New projects are always "planned", there are enormous models, cgi movies of cities on endless loops and thats it. Oh at 6:00 clock the septic truck arrives.
It is a myth that dictatorships are good at big projects. Just consider the history of atomic bomb. If not the access to the spied US blueprints Soviet Union would be much delayed with own version. Then it took China about 10 years before they could test the atomic bomb even after receiving initially a significant help from Soviet Union.
Or consider sending a man to the Moon. Soviet Union eventually abandoned own efforts and was able to create a rocket with similar capabilities as Saturn V only in 1986.
Or consider that the best semiconductor production process comes from a Taiwanese company followed by South Corea and US. China is still not able to catch up despite all the efforts.
Or consider high speed trains. It was Japan and Europe that developed comprehensive network first, not China. And Soviet Union and later Russia never came close to implementing anything like that.
I never said that non-dictators cannot do big projects. I said that dictators tend to do them as well as anyone else. Big projects don't always go well for anyone, you can find plenty of big projects that fail in the US. Dictators can lose interest just as much as anyone else.
The point is dictators fail most often by ignoring things they consider small and not letting someone else take care of it.
There are counter examples, too.
The space race first astronaut (cosmonaut) was Yuri Gagarin, and Laika. Stating the space race was lost by Soviet Union is myopic at best. The Soviet Union defaulted due to being unable to compete, the costly Afghan War, and the inefficient system. But nowadays, how relevant are NASA and BMW ?
The liquidators of Chernobyl [1], to name another example. Another feat is winning the Great War. Shenzhen is also one of a kind. Where is the West's Shenzhen? China's equivalent of F-35 (J-10) shot down two Dassault Rafale a couple of days ago.
Far fetched in West? We got corruption, too. We got Boeing, and Trump.
As for train system, Russia's main transportation is via train and it is robust, but slow. That happens when your country is such a vast amount of land, without solid (direct) sea connections.
But in general, it is a myth, albeit a different one. It is part of the myth (façade) of the strongmen.
Chernobyl was a direct consequence of a dictatorship in the first place. A reactor with positive reactivity would never be designed unless ordered from top. And handling the consequences in the first hours Soviet style made things inherently worse.
As for other counter examples I do not claim that democracy is inherently better. Rather that for big projects at least it is not worse than a dictatorship.
Have you considered that (a) communism != dictatorship, while there have been many capitalist dictatorships, often U.S. sponsored and (b) succeeding in big projects is a lot easier when you're rich, which surviving ww2 unscathed and exploiting the world will make you?
It is a one direction relation: communism requires a dictatorship, but dictators often are not communist.
Every fascist regime is capitalist. Think about it. Fascism is capitalism in crisis.
Capitalism is a straw man invented by communists to mean whatever they want to tear down.
Fascism is not capitalism - fascists don't even think in economic terms except how it helps them.
I'm a classical liberal. Something like capitalism derives from liberalism, but it is derived from freedom of the individual, and not a value in itself.
Capitalism specifically means: an economy oriented around private ownership of the means of production. There is a world of implication from that simple statement.
Fascism is what happens when workers get too "uppity" and the upper classes decide it's better to let a strong man reign in the lower class via a combination of spectacular appeals, mythology, militarism, crackdowns, and external expansion. Working conditions in Nazi germany were terrible because they destroyed labor unions. Fascism to a great extent is operationalized anti-communism.
Communists like myself also value the freedom of the individual, but we value the freedom of all individuals and want to make it real, not a thing you just say and then shit on a homeless person or abuse an employee.
Freedom of the individual is not compatible with communism. You can value some freedoms but all right to property is lost - something I value. (I don't allow freedom to murder - but I still value freedom more than communism can)
fascism is not an ecconomic system, and very much can be communist - though of course none of who we think of as fascist were communists.
" fail because things not on the dictators 'radar' don't get anyone's attention"
Funny, because in the US right now, if something isn't on this one particular person's radar, then its is ignored. So by this reasoning, the US is a dictatorship right now.
How would they know someone is a sex worker? Surely any database of such is not publicly accessible, even by banks?
I've heard that in Uruguay, where marijuana is legalized, it's very hard for a legal dealer to have access to financial services.
Same in states where weed has been legalized in the USA due to it technically still being illegal because of Federal statutes
Top 1% vs bottom 1%. Amazing what one day in the shoes of another could teach a person.
Well, hopefully.
> Over here
Belgium. Edited the post to make that clearer, thanks for pointing that out.
I thought EU has a civil right to a basic bank account. (Please correct me if wrong.) Literally, if you are a convicted violent criminal, they cannot deny you for basic bank account (after released from jail). If sex work is legal and these rejections are actually happening (this is the Internet after all), I cannot believe that a Belgian law firm has not taken the case on pro-bono to sue a bunch of national banks that refuse to open accounts for sex workers. Again, if the rejections were true, it would be easy to build a case. Sure, you might be rejected at lower court levels, but then you can climb (after many years) to the European Court of Justice. I am sure they will agree: These legal sex workers have the civil right to bank in any EU jurisdiction where they are a legal resident.
I just Googled for: sex workers denied bank accounts in belgium
And found this: https://www.coe.int/en/web/commissioner/blog/2024/-/asset_pu...
> Since summer 2023, a new law has extended labour rights also to sex worker employees, including rules around working hours and payment, the right to refuse clients and the mandatory availability of emergency buttons in every room. The new law also decriminalises third parties, who will no longer be penalised for opening a bank account for sex workers or renting out accommodation, and it allows sex workers to advertise their services.
"legalized prostitution"
If legal, then why do banks have a problem offering an account. No risk of a bad actor, because it is legal.
It would be like a small business or contractor.
Probably because it's one of those industries where legalizing it still attracts a large enough black market (human trafficking is a huge thing) that it's easier to just blanket ban it than try to separate the legal from the illegal
> Banks have basically become an extension of law enforcement, tax collectors, anti-terrorist operations, and morality police. Which is ironic
Not ironic at all. This is the design.
These companies aren't public utilities, no one would complain about a US bank not doing money exchange business with entities in the Ukraine or Belarus, why would that be different for US companies offering donations over the Internet? The fact is that all platforms that facilitate cross-border money transfers between two parties without clear services or good being exchanged are used for all kinds of money laundering, and governments try to contain that for good reasons. In the end they probably don't care much about the revenue they make in these countries as it's probably negligible. Again, their good right to do so, I don't see any issue with this at all.
The article claims that funds were held after being donated. That certainly goes way beyond "not choosing to do business". The claims were refuted by BuyMeACoffee, which changes things.
But if I, as a donator, donate money to someone using your service, and you then don't give that money to its intended recipient, you've effectively defrauded me. Had you said in advance "I can't do that, because you're trying to give me money to $foo which I don't support", then that is your right as a business.
What's wrong with a US bank sending money to Ukraine? Sure, they might ask for an explanation, but I doubt they will reject. Example: You need to send money to a family member (immediate or extended), or want to donate directly to the national treasury (yes, you can do this), or another war-related non-profit. These are all legit. There is probably more risk in money transfers to Bulgaria or Romania, due to online scammers. Belarus is a wholly different matter. They are one step away from Russia-level sanctions, due to aiding Russia during the invasion of Ukraine.
The occupied parts of Ukraine are under sanctions and presumably banks are concerned they can't differentiate the precise destination in country. Safer to just blanket deny everything.
> What's wrong with [...] You need to send money to a family member (immediate or extended),
I tend to agree, but the same applies if one family member is in Belarus or Russia, and the other one is in the USA.
I.e. just because it's morally ok, it doesn't mean that it's without risk (if you lie about the purpose) and that the banks will facilitate it.
OTOH, before EO2022, I know that transfers between Russia and countries in Europe were sometimes still happening. Disappointintly (but it's not very surprising), sending small money to family would usually be impossible, but if you had to transfer substantial amounts of money, and you could prove that it was from e.g. sale of a home, that could still happen.
On one hand, that makes sense: the bigger the amount, the more it makes economic sense to allow extra time and effort to check that all the i are dotted and all the t ate crossed.
But OTOH, the people with lots of housing property are sometimes precisely using housing to launder the provenance, and they are also not necessarily the honest workers whose family end up split across borders.
> no one would complain about a US bank not doing money exchange business with entities in the Ukraine or Belarus
Frankly, it's none of my state's damn business who I exchange money with. Their beef with other states is their problem—why are they dragging us through their bullshit?
If they want to collect taxes on it, at least that has the veneer of doing their job properly, and I'm happy to pay it.
if someone, for example, exchanges funds with a foreign nation to evade sanctions while they illegally occupy another, it really is their state's business.
Only because the state asserts their existence with violence. We certainly have little-to-no say in how the states in which we live behave, but we're all subject to their whims.
Personally, I have little patience for the pretense that the geopolitical theatre we're all subjected to reflects the people who live in the states represented in such theatre. Baudrillard had it right all along.
Of course, people would complain about a bank not doing money exchanges with Ukraine or Belarus. Moreover, payment system providers, money transfer systems, and banks are to some extent public utilities, especially when there are no viable alternatives. They are essential for business.
The alternate is crypto. That will service anyone for ANY reason.
Well, that and cash.
Btw, crypto (like bitcoin) is only an alternative because of convention.
The complete history of bitcoins is globally trackable, and people could all decide that they'll pay more for bitcoins that came from Satoshi's initial hoard, or that they'll refuse to accept bitcoins that were ever seized by the FBI.
(Yes, there are mixers. But you'd just refuse to accept any bitcoin that took part in the mixer transaction, if any FBI coins were in there.)
Europe is clamping down on cash, with in some countries placing caps on cash transactions as low as €1000.
https://en.econostrum.info/europe-restricts-cash-paymentss-n...
https://www.europe-consommateurs.eu/en/shopping-internet/cas...
In the US, cash purchases became a lot less common during the pandemic for obvious reasons, and it never really bounced back. Businesses were hardly ever credit-card-only before, now it's not that uncommon, and cash-only ones are way less common than before. Maybe related, several areas raised their sales tax beyond 10%.
We also can't have >500EUR in our homes
You are allowed to travel abroad with under 10 000 euros without declaring it. As far as I know we do not have the same problem with asset forfeit laws like the US. There are no laws limiting how much cash you can have at home and while travelling. Though if you hoard millions in gold that is discovered in a police raid I think your main concern will be why the raid happend.
In the EU, laws differ by country, so I wouldn't categorically declare that it's legal everywhere to have any amount of cash at home or traveling. From incidental local news reports here in the Netherlands, I suspect that if I were found during routine checks to be traveling with multiple-10k cash in my backpack or in my car, it would be seized and be treated as illicit until I prove otherwise.
> Yes, there are mixers. But you'd just refuse to accept any bitcoin that took part in the mixer transaction, if any FBI coins were in there.
Intentional mixers aren't even the half of it. You have large exchange operators that use a single wallet. They file KYC paperwork with governments, but that's not in the blockchain. From the perspective of the blockchain their whole exchange is one big mixer. A billion dollars goes in, a hundred was tainted, a billion dollars comes back out. The only information to trace which $100 that went in is the $100 that came back out isn't in the blockchain, it's in the exchange's private accounting database.
But if you propose to taint every coin that has ever passed through a major exchange, that's pretty much all of them.
You can't send cash digitally, hence crypto.
I'd like to introduce you to Monero, which isn't globally trackable and also properly fungible so you can't refuse mixed transactions (since all transactions are protected).
Apparently "Liberty Reserve" was a (now defunct) digital cash service. As in you'd mail them cash and they'd add it to your account, and you could withdraw and they'd mail it back, minus a fee. And you could log in and transfer it.
Apparently it powered online drug marketplaces before Bitcoin existed.
You're not wrong. But Liberty Reserve was able to be shut down because it was centralized. Banking regulators in various western countries leaned on the Costa Rican authorities to shut it down.
Try doing that with crypto. Who are you going to arrest?
> Who are you going to arrest?
Every on- and off-ramp provider. EU legislation has basically created a database of real person to wallet mappings (for some subset of wallets). You can't take money from a wallet if you don't know who it belongs to (if you're an exchange anyways). The checks are a bit soft (ie. self attestation and stuff), but the public ledger part of crypto makes tracking far-far easier than with traditional banks.
The end game for this is that people in the West (and whoever they can pressure) won't be able to buy crypto to buy drugs or sell it when selling drugs, making it useless on a big scale.
> Every on- and off-ramp provider.
This is essentially the purpose of localmonero and similar offerings. Trading cash for Monero in a p2p manner is going to be extraordinarily difficult to halt.
The transaction is traced and and eventualy it goes to someone with a real bank accont and the tainted money is refused.
Assuming you mean the cash itself, tracing dollars isn't common with other kinds of small-scale illegal transactions like drugs and firearm sales.
Why do you believe it would suddenly make peer2peer cash to cryptocurrency exchanges unviable?
And if you meant tracing the Monero itself, I suggest you read up on how Monero works—and how it differs from BTC—first.
First, the chain only sees the monero side of the transaction, not the fiat side, of which it's likely that no records exist at all after a short while. It looks identical to a payment for a good or service and it also looks identical to a transfer between two of the same person's wallets.
Second, Monero is still thought to be untraceable. In fact regulated entities are banned from exchanging it in the EU precisely because they can't trace it. (Zcash is also banned under the same law, but is considered technically inferior because not all transactions are private.)
Third, what do you even mean? Do you mean they'll go back to the last time those coins passed through a regulated on-ramp, and prosecute that person? For what? Buying cryptocurrency, then buying a legal product with cryptocurrency, is not illegal, and even if the product was illegal, the government most likely couldn't prove that. Also, the on-ramp was probably in a different jurisdiction. Perhaps for something like "acting as an unlicensed money transmitter" which is a thing they have done against users of cryptocurrencies. If they prosecute that in large quantities, will it fly?
Or do you mean they'll wait until someone takes the crypto to a regulated off-ramp, and then prosecute that person? For what - undeclared income? As far as I know, trading one cryptocurrency for another is a non-taxable currency exchange, at least in some EU countries, so they can't get you for that. And what if they declared it? Again, they might try "acting as an unlicensed money transmitter" of course. What if it never gets to a regulated off-ramp and just circulates peer-to-peer forever? It's more likely tyou think, since remember, regulated off-ramps are strictly banned.
If law enforcement started arresting larger actors (traders, managers of exchanges, etc) and continued working their way down the list, it wouldn’t take long to have a chilling effect on crypto.
The difference is that with actual cash you give cash directly to someone. With "Liberty Reserve" you introduced a third-party that did this for you. These things aren't the same.
With crypto you don't hand over your coins to a third-party for safe keeping, you instead send coins directly to one another, just like with cash.
This is a major reason (maybe the major reason) crypto keeps going up. Many people want money to avoid government oversight - for reasons both benign (e.g. avoiding having money confiscated arbitrarily) and nefarious (everything from tax avoidance to funding crime and war).
Not long ago we lived in a world where currency from anywhere other than the nation you were in (or maybe somewhere close by) was impractical to use on a daily basis. Things have changed now and the government's use of money as a tool to keep control of citizens is loosening. For better and worse.
What percent of Bitcoin transactions are money laundering or other crime related? It must be astonishing.
FT Alphaville has a good article about it: "How much does cryptocrime pay?": https://www.ft.com/content/f40b7ac7-bb50-4712-aa7f-5219c2b18... (free sign-up)
To quote:
2025 Chainalysis Crypto Crime Report ... The authors have so far tracked over $40bn of crypto transfers to illicit addresses made in 2024, though they reckon the final total will be north of $51bn.
That seems like a pretty insignificant number? World GDP is more than $100T. $50B is one half of one tenth of one percent, and even that is a significant over-counting because it's a measurement of revenue rather than profit and is counting all transactions to a given address regardless of their nature and potentially double-counting them.
Some drug dealer is making $20,000/year selling drugs, but the drugs are sold for $50,000 because they had to spend $30,000 on grow lamps and electricity and rent in order to produce them. The same drug dealer also uses the same wallet to sell ordinary lawful gift cards for cryptocurrency and they only make $5000 from that but it's against revenue of $200,000 because the markup on gift cards is small.
For that they're attributing $250,000 of "crypto transfers to illicit addresses" to this person but there was only actually $20,000 of unlawful gain. Overstating the problem to demonize the target.
This seems like a big number, until you compare it to the regular economy:
"The estimated amount of money laundered annually worldwide is between 2% and 5% of global GDP, that is, something between US$ 800 billion and US$ 2 trillion."
source: https://www.unodc.org/lpo-brazil/en/frontpage/2013/10/29-uno...
Crypto isn’t an alternative to a bank. Not any crypto I’ve seen at least.
The primary purpose of a bank is to issue debt. That’s why they were created. A bank has to be able to “print” money to issue debt. This isn’t a flaw as some crypto fans like to think, it’s a very important feature. Debt issued by banks replaced the informal promise-based debt people used before we had banks. You didn’t need money on hand, or to borrow some coins from some rich dude, to get help building a barn. You got help from people in the village in exchange for some other goods or service you’d provide them in the future. Bank issued debt with “printed” money is the replacement to that, and it only works if money can be created on demand.
Crypto can’t “print” money on demand, by design. So it can’t replace banks.
One of the things banks do is to issue loans. That's fine.
Another thing banks do is, Alice is in New York and wants to pay Bob who is in Miami, or Kyiv, so instead of getting on a plane with a sack full of Benjamins she tells the bank to send money to Bob. Cryptocurrency is clearly an alternative way of doing this, with the advantage that then there is no middleman to refuse the transaction when the bank is being leaned on by a despot.
Bitcoin can't, but defi can. An entity can issue a ERC-whatever token that acts as a bond, minted in exchange for whichever other token (e.g. ETH), and redeemable for that plus interest at their discretion (e.g. you could create a redeem queue). The bonds can be traded in secondary markets immediately upon creation - no need to file for listing (you need to create a swap pool and seed it with a little of each asset though).
An important difference is that your new token can't ever be confused with base money. In banks, we have base money, and we have bank money, and we pretend they're the same thing because banks are pretty reliable (not 100% but pretty). In crypto, the system won't let you lie like that. (Though you can create another new currency backed by a mix of currencies - this is what DAI does.)
Another important difference is trust. I can easily issue bonds in the real world and then just run off with the money and not repay them. If I try, a lot of heavily armed men will hunt me down. That doesn't really happen in crypto, and as things are now it can't happen, because if you make your identity and location known and issue crypto bonds, the same armed men will hunt you down for issuing crypto bonds instead of ordinary bonds, which is a crime itself (see what happened to Kik/Kin). So you'd have to stake something else to make people trust you.
I've always found it ironic how crypto basically make it not necessary to trust, but nobody trusts it.
> The primary purpose of a bank is to issue debt. That’s why they were created
Yes
> A bank has to be able to “print” money to issue debt
Absolutely not, especially not in the context which you just said ("that's why they were created"). When the banking industry started in various Italian city states, money was state issued and backed by precious metals, and banks didn't create any new money supply. They gave loans, invested, kept deposits, etc. but without touching the money supply, which was managed by sovereigns and sovereign states.
A lot of people misunderstand what creating money means in the context of fractional reserve banking. Banks "create money" every time they make a loan backed by a deposit. They're not literally creating new money. This is how it works:
- Alice deposits $100 into the bank. The bank owes Alice $100.
- Bob wants a loan. The bank offers him a loan of $50, backed by the $100 from Alice. The bank owes Alice $100. Bob owes the bank $50.
- Bob withdraws the $50 to spend on coke and hookers. The bank uses $50 of the money deposited by Alice to give to Bob. Bob has $50. Alice still has $100 balance.
The bank has just created $50. Everyone is happy unless Alice (and everyone else) wants to withdraw their money and they aren't able to get it back from Bob. That's a bank run.
All money in the bank is created by the bank. When you deposit $100 of physical cash (money) into the bank, the bank creates a $100 bank deposit (also money) and holds $100 of physical cash (money) in its vault. There is now $200 of money.
The bank may buy a government bond with it. In that case there's $100 of physical cash (money) that the government has, a $100 government bond (also money) that the bank has, and a $100 bank deposit (also money) that you have. There is now $300 in total.
Stacking money on top of money is fundamental to the economy. Normally (and enforceably in cryptocurrency systems) the different layers may not be confused, nor may different assets at the same stacking level. But it benefits whoever is creating the higher layers when you confuse them with the lower layers. When people widely bank deposits with base money, this benefits the banks because now the money they print becomes almost as good as base money. When people widely confuse government bonds with base money, this benefits the treasury because now the money they print becomes almost as good as base money. If people were to widely confuse Apple stock with base money, it would benefit Apple and its existing investors.
(Base money doesn't have to be gold by the way. It's anything that's issued without underlying value and widely accepted as a store of value. Fed notes serve as base money just fine. They have about as much actual real-world value as gold bars, which is none.)
Another way to see it is that physical $100 has $300 of value.
But eventually, Alice wants her money back, the bank cashes in the bond, the government repays the cash.
So part of that value is the value of trust as a function of time. Trust in the bank, trust in the government, trust that they'll pay back their debts on a defined schedule. Plus interest.
What's even more funny is that in modern times the required asset to debit ratio is only 10%.
So in your example, the bank can lend $1000 to Bob, backed by Alice's $100.
Which is not necessarily a good thing.
But not necessarily a bad thing either.
If everything else fails, I know I can still have two things to pay with: cash and crypto.
This is a strange viewpoint considering that crypto is 100% reliant on some of the most complicated and high-maintenance infrastructure ever built by man: the internet.
If "everything else fails" the internet has failed, and crypto will be worthless. Gold will probably still have some value, unless shit really hits the fan.
We’re talking about different “everything else fails” scenarios. Basically, I’m concerned about my bank accounts being frozen (happened with my Revolut account for example).
The solution for that is to have redundancy via multiple bank accounts, ideally in multiple countries.
Then nothing short of planning a serious terrorist act can get you kicked out of all accounts.
Ah, yes, the classic 3-2-1 method: three accounts in two different countries, one of them being an offshore. Yeah, I’m doing all that (not the offshore part... at least not yet).
Is that really the case? Per https://www.bitsaboutmoney.com/archive/money-laundering-and-... you can be pretty much completely debanked for only a couple of SARs/STRs, and it doesn't seem particularly hard to have one filed against you.
Gold being the ultimate. Cash can be diluted and crypto has unlimited supply (via alt coins). Gold is backed by physics and minted in neutron stars!
Strictly speaking, directed energy is the ultimate. Both crypto and gold are both just embodiments of energy, gold being the physical embodiment (via mining and refinement) and crypto being the virtual embodiment.
Not really. Gold has no more energy than carbon per gram. E=MC^2. And total energy is unavailable. Carbon had more available chemical energy. (Why we can burn coal not gold).
Bitcoin doesn't store any energy.
Bitcoin is like a F1 car going around a track forever, with your name scribbled on it.
Both gold and bitcoin are a variant of "proof of wasted energy" or more euphemistically "proof of work". Why that makes it valuable is beyond me, but it isn't really a new thing considering the historic value of gold being much more than its utility as a material.
The 'value' in them is that they demonstrate that energy is currently so cheap and abundant to Us that we can waste it frivolously.
It's a sort-of flex, showing off, a demonstration of (energy) wealth. Humanities's peacock feathers.
Maybe I didn't explain it well, gold and bitcoin are the 'memory' of used energy, they are not energy sources themselves.
I think of them as representations of the idea that energy is (currently) so abundant and cheap that we can waste it on mining things like gold and crypto, a fundamentally ridiculous concept in terms of real actual human needs.
Once that stops being the case (when fossil fuel starts running out globally), the whole thing - cash, gold, crypto, stocks, bonds, property - everything falls apart.
Bitcoin isn’t valuable because of used energy. The energy here is just a way to limit the rate Bitcoin is produced, and to help prevent double spending.
Bitcoin is valuable because people accept that it’s valuable, same as with cash, gold, crypto, stocks, bonds, property. The price of an apple is $2 is because I offered it to you for $2 and you bought it.
Almost. Bitcoin energy use is a way to have a decentralised trust less network. If bitcoin was free to mine the most money would go to the most nodes. It would be proof of DDOS in a sense and would probably seize up pretty quick.
Gold is a bit different. You could stop mining it today entirely and you could still have a gold currency. Stop mining bitcoin and it all effectively disappears!
The people appreciate the value exactly because of used energy (entropy), if you want to rewrite Bitcoin history you are going to spend no less then it has boon spent. The limit of producing of bitcoins is not related to energy.
Yeah. I mean, people value the utility of it: it can be used to transfer value over the Internet, and you can’t steal it by changing values in the DB. PoW is just a means to an end here. I think we largely agree on that.
You could make eimrineCoin that's an exact clone of bitcoin, but it'd be extremely unlikely to reach a fraction of BTC's market cap, because others won't consider it valuable although it's mined with energy.
A currency has to be accepted in order to perform its role.
Good luck buying groceries or paying the mortgage with Crypto.
Which is why I have a couple bank accounts. If these banks decide they don’t want to work with me anymore (happened a couple times already), or if they decide they don’t want to send money to, say, a particular country (hint hint), I’ll have crypto as a last resort.
(You conveniently left out “cash” from your reply. Cash. I’ll buy groceries with cash, if I can’t use my card.)
There are some stores that do accept BTC, but it is not widespread. It is mostly coffee shops though, not grocery stores.
And it varies from country to country. (In any case, I wouldn’t use BTC for everyday purchases – it’s too volatile, and transfers are too expensive. As long as we’re stuck with fiat-based economy, stablecoins are the way to go, IMO.)
there is invariably a vantage point at which non-fiat payments are accepted. this may be crypto, given that there is still infrastructure available for it to operate, but that's unlikely imo.
It's like a kitchen knife. Can be good or bad.
Correct in principle but not all that insightful because it's something almost universally true. "Fentanyl! Ads! Widespread surveillance! Can be good or bad".
You have to look at the reality. Crypto has been used overwhelmingly for scams and crime.
> Crypto has been used overwhelmingly for scams and crime.
So has regular currency.
The overwhelming use of regular currency is crime? Where?
Wherever any consumer-level illegal drug transaction has happened, which is everywhere.
The overwhelming use of fiat in my town does not consist of buying and selling street pharmaceuticals.
There are transactions happening all the time in regular cash for weapons, drugs etc. Large banks have been found to be knowingly processing funds from terrorists, drugs dealers and have got fines. If you anti-war, you would also include the wars that are financed partly by the ability to print money.
These transactions while not the majority of transactions I would wager is far larger in terms of dollar value that the whole crypto ecosystem.
The reality is that criminals will find loop holes in a system and they will exploit it if it is worth exploiting. Many of the checks done in banks now impede transactions. I was buying a car (private seller) and I couldn't transfer the cash without going through a fraud check, even though I had signed the transaction with a card reader in the app. It turned a 30 minutes of test driving the vehicle and checking docs into 3 hours of wrangling on the phone. BTW I am not the only person having these problems with banks in the UK.
As for what crime we are referring to as well in this scenario needs clarifying as well. I suspect that most of crypto transactions are through darknet drug markets. These markets reduce the risk of violence to basically zero when purchasing drugs. While I am not one of these people that is pro-legalising all drugs, the reality is that people are going to buying them.
Given that Coinbase is crypto, and Coinbase was just added to the S&P500, and Coinbase has KYC, that's true only for a subset of crypto users.
The future of legitimate activity is that it will be performed on the same platforms designed to protect criminal activity, because it will be treated as criminal, despite not being so.
If BuyMeACoffee was run like a dark web drug marketplace, it could support every country.
This is one of my favourite word shifts. Back in the '70s this would have been quite the claim of sexual debauchery. I still chuckle at it.
I think at this point it would be preferable for the government to take over the payment infrastructure directly. This is often seen as dystopian, but it's a dystopia that has already come to pass for the most part. If we made it official, at least the rules for what can be blocked or refused or frozen would be out in the open.
No they wouldn't, just like the rules of who can be deported and for what aren't in the open, but often arbitrary.
Also, 100% dystopia is still worse than a "most part" one
Numerous countries are debating the creation of a digital currency:
EU: https://www.ecb.europa.eu/euro/digital_euro/html/index.en.ht...
I mean the current US govt is doing all sorts of awful things in the open, so I'm not sure this will be an improvement.
I no longer believe that "sunlight is the best disinfectant", and haven't for a long time now.
The best disinfectant doesn't kill everything. Nobody's ever managed to assemble a government that doesn't do awful things out in the open.
One of my complaints about the Trump era is people are correctly identifying a bunch of problems with how the US government operates but for some reason they're only a problem when Trump does them instead of being a more general concern even if other people are involved.
Eg, Trump is almost certainly spying on his political opponents. Using infrastructure built by Bush/Obama/Trump/Biden that everyone who took notice at the time pointed out would be used by people to spy on political opponents. This isn't a Trump problem. It is people assuming the government is always on their side despite copious quantities of evidence otherwise and regular elections.
I suspect people wouldn’t actually like the alternative. An alternative world where it’s relatively easy to get an MTL, or consequences for AML aren’t huge, looks a lot like crypto. Imagine banks and money processors doing rugpulls or going bust.
This is why I've been a hardcore crypto evangelist since before it was briefly fashionable and then wildly unfashionable. My opinion has not changed.
It’s the ‘greedy coward’ leadership model - tends to work pretty well for most businesses, until it does’t. usually all at once.