
US Senate bill on “any digital exchanger or tumbler of digital currency” - fcanesin
https://www.congress.gov/bill/115th-congress/senate-bill/1241/text#toc-idea0e9489fc8f46379f95bb56c8bbbda5
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haser_au
For me (not from or in the US), I see this as US Congress legitimising
cryptocurrencies. If not fully, at least partially.

Keeping legislation up to date with the latest methods of money laundering is
their job. Digital currencies (in all of their forms) are the latest methods
used. Therefore, including them specifically in legislation will help law
enforcement combat money laundering.

This will mean exchanges will need to cooperate with US agencies, if they
operate any business in the US, and provide records of holders and balances,
etc.

This reduces risk for the businesses and individuals. At the moment, it's like
the wild west (e.g. bankruptcies at Mt Gox and Cryptsy, large scale wallet
thefts, WannaCry, etc.). Enabling US law enforcement to subpoena records from
these exchanges will mean the 'dark money' moves out, and legitimacy takes
it's place.

I see this as a good thing. For those of us NOT laundering money through
cryptocurrencies, this adds to the argument that they are legitimate
replacements for the existing currencies of the world to perform transactions.

That's how I see it from a completely external perspective.

~~~
aaron-lebo
You're probably right, but it could just as easily be signs that authorities
finally are starting to understand them and it's step one in a crackdown.

I'll admit, that's partially due to a bias due to Bitcoin enthusiasts turning
every event into a positive. Mt. Gox disaster? Oh well it's just the community
policing itself. It's the sign of a healthy economy. To the moon!

Sounds like an exaggeration, but checkout r/bitcoin and you'll know that
sentiment.

The really fun part about this is without tumblers or with regulated tumblers,
you've now got a currency where every single transaction is globally available
and traceable. Hits money launderers but hope you like the government tracking
you. Cash transactions don't seem so bad after all.

~~~
cl0rkster
That is almost true. However, transferring value between cryptos is trivial
and at least Monero and zcash allow you to tumble your transactions and
essentially completely disguise the inputs and outputs from anyone trying to
search the public ledger.

~~~
wmf
But do the latest regulations essentially ban Monero and ZCash?

~~~
Phlarp
Only to the extent to which any government can ban math.

~~~
vidarh
The difference here being that the next step can easily be to impose
requirements on merchants to do checks, and require them to refuse to honour
transactions where payments comes from known tumblers etc.

In the UK, if you apply for a mortgage now, for example, your solicitor and
mortgage provider will ask questions about where your deposit is coming from,
and require documentation if it looks like it's not from regular savings or
the like. Today that is manual and paper based, and so only viable for large
purchases like a house, and additional documentation is only requested if
there are indications of fairly large payments in your last 6 months of bank
statements. My ex was bitten by this when buying a house recently, as she
received part of her dads estate via bank transfer from abroad, and had to
chase down documentation from the executor to demonstrate that it was a
legitimate source.

With crypto coins they could require execution of automated analysis of far
more transactions going far further back in time.

Won't stop it from being used for crime, and won't prevent people from finding
ways of making transactions anonymous, but the point is they don't need to
"ban math" because that maths intersects with physical actions taken by humans
on a regular basis.

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reilly3000
I think this is mostly targeted at prepaid Visa cards which are very commonly
used for money laundering.

I keep my wallets in a private cloud. I don't see how a border agent could
know they exist.

I think the bigger question is 'does dark money enable crime?'. If the answer
is yes, then we as a tech community need to consider the impact of
legitimizing cryptocurrent and enabling unfettered criminal enterprise.

~~~
mrb
_Any_ technology enables crime. Have you considered the impact of legitimizing
cars, weapons, phones, audio recorders, drones, etc?

Edit: not sure how to interpret the replies to my post ("currency enables
crime"). Yes the dollar/euro/pound/cryptocurrency enable crime. Should we ban
them all? No. Both government-controlled currencies and cryptocurrencies
enable economic activity, hence create wealth, and are a net benefit to
society. Besides more illegal activity is conducted (in absolute and relative
numbers) in fiat than in cryptocurrency so that's even less of a reason to ban
cryptocurrency.

~~~
senectus1
Any _Currency_ enables crime.

in fact I'd go as far as to say that it's a driving force for Crime...

------
bobcallme
I don't see why everyone here would be in favor of this bill. Not only does it
expand civil forfeiture, it also turns almost everyone who works or runs a
legitimate business into a criminal. Everyone here seems to want more
government, laws and regulations that will be used against regular people who
would otherwise be law abiding citizens.

~~~
petre
They got tricked by gov't propaganda into thinking that only criminals
_launder_ money when in fact _money laundering_ has ben extended to saving
over $10k in cash under your matress. If you do that then you're obviously a
criminal and your cash can be confiscated, your bank accounts can be frozen
without due trial or a court order. The hunt for money is on.

~~~
coding123
It's very true. the good get punished.

------
arthur_trudeau
Money laundering in practical terms means whatever the government wants it to
mean. It has been successfully prosecuted as the simple deposit of funds the
government doesn't like the origins of. The obstacle isn't law, it's the
resources required to bring a successful case.

~~~
cinquemb
> _The obstacle isn 't law, it's the resources required to bring a successful
> case._

I think this is understated in this thread.

In order to have effective governance on any level, you need people to "buy"
into it willingly. It will only become easier for those who want to opt out of
such despite the assumed risks of doing so.

The resources [human, capital] are only getting more expensive for governance
systems to use to effectively go after such on any meaningful level.

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tjpaudio
This is clearly going after services like shapeshift.io. If you are unaware,
shapeshift lets you transact between various cryptocurrencies on an exchange.
The exchange doesn't hold record of the transactions, so you could
legitimately buy BTC with a coinbase account linked to your bank account,
exchange it to lite coin (or any other currency to) and have it deposited in a
wallet you created anonymously, then exchange it back to BTC but to yet again
an anonymously created wallet. At most it nips away a couple of percent, and
now your BTC cannot be traced back to you even though you bought it with a
bank account linked to your name. Its the easiest laundering that has ever
existed. This bill would force shapeshift IO to maintain transaction records,
game over.

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jpatokal
I wonder if this applies to the latest generation of anonymous
cryptocurrencies like Monero and Zcash, where the "exchanger or tumbler" is
built in. Monero, in particular, supports _only_ anonymous transactions:
sender, receiver and amount are all hidden.

[https://en.wikipedia.org/wiki/Monero_(cryptocurrency)#Privac...](https://en.wikipedia.org/wiki/Monero_\(cryptocurrency\)#Privacy)

------
iandanforth
Reading this is painful, is there any way to turn

"inserting before the semicolon at the end the following: “, or any digital
exchanger or tumbler of digital currency”;

into a proper diff?

~~~
declan
I tried here:
[https://news.ycombinator.com/item?id=14567005](https://news.ycombinator.com/item?id=14567005)

------
declan
This is a far-reaching bill that gives the Feds much more discretionary
authority over digital currencies. The reason it's so far reaching is that it
tweaks definitions that are embedded in thousands of pages of existing laws
and regulations. It's like changing stdio.h in C--one tweak could have a big
impact throughout an entire system.

So let's wade through it.

Federal law (31 USC 5312) currently regulates "financial institutions," which
are defined as including banks, credit card companies, insurance companies,
securities dealers, loan issuers--and that's not even an exhaustive list! One
of the categories that's _currently_ regulated is: "an issuer, redeemer, or
cashier of travelers’ checks, checks, money orders, or similar instruments."

The legislation would rewrite that definition to include:

    
    
      (K) an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, prepaid access devices, digital currency, or similar instruments, or any digital exchanger or tumbler of digital currency;
    

Another definition that gets changed is "monetary instruments," which expands
to include prepaid access devices:

    
    
      as the Secretary may prescribe by regulation, coins and currency of a foreign country, travelers’ checks, bearer negotiable instruments, bearer investment securities, bearer securities, stock on which title is passed on delivery, prepaid access devices, and similar material...
    

Prepaid access devices is a term of art that would now be defined broadly as:

    
    
      an electronic device or vehicle, such as a card, plate, code, number, electronic serial number, mobile identification number, personal identification number, or other instrument, that provides a portal to funds or the value of funds that have been paid in advance and can be retrievable and transferable at some point in the future.
    

I don't know what the good senators are intending, but that seems pretty
broad, and likely broader than necessary if their goal was to target prepaid
Visa cards. Is a Bitcoin wallet "paid in advance" and "retrievable and
transferable at some point in the future?" I'm not saying it necessarily is--
what I am saying is that it's like wildcard matching when doing an 'rm -f',
always a little dangerous. Better to be specific than something like any
"portal to funds."

Fincen (part of Treasury) said in 2013 that "A person's acceptance and/or
transmission of convertible virtual currency cannot be characterized as
providing or selling prepaid access because prepaid access is limited to real
currencies." But that was based on the old definition, not the newly broadened
one. ([https://www.fincen.gov/resources/statutes-
regulations/guidan...](https://www.fincen.gov/resources/statutes-
regulations/guidance/application-fincens-regulations-persons-administering))

Now let's walk through some of the existing laws that reference these new
definitions. A good start is the long list of existing Title 31 regulations
primarily aimed at banks that would now get levied on any "issuer" or
"redeemer" or "exchanger" of digital currency. That includes the obligation
to:

 _- "Verify[] the identity of any person seeking to open an account" (31 USC
5318)

\- "Maintain[] records of the information used to verify a person’s identity,
including name, address, and other identifying information" (31 USC 5318)

\- "Report any suspicious transaction" to the Feds (31 USC 5318)

\- "Establish anti-money laundering programs, including, at a minimum"
developing internal policies, compliance officer, training program, and
independent audits (31 USC 5318)

\- File reports on transactions (31 USC 5313)

\- "Maintain appropriate procedures to ensure compliance with this subchapter
and regulations prescribed under this subchapter" (31 USC 5318)

\- "Guard against money laundering" (31 USC 5318)

\- Allow the examination of "any books, papers, records, or other data of
domestic financial institutions" related to reporting requirements (31 USC
5318)

\- Be summoned by Treasury to "produce such books, papers, records, or other
data" and give testimony under oath up to 500 miles away (31 USC 5318)_

Note that many of the above sections of existing law give a heck of a lot of
authority to the Treasury Department. Treasury could cough up very specific
and narrow regulations that would lessen the impact. Or Treasury could follow
the statutory text (aka go big or go home).

The bill also expands the sweep of existing criminal law. Existing criminal
law (31 USC 5324) prohibits any attempt to "structure or assist in
structuring, or attempt to structure or assist in structuring, any transaction
with one or more domestic financial institutions." (Structuring is defined as
"evading the reporting requirements" in which banks tip off the Feds that
you're, say, moving high volumes of cash.)

Because an "issuer" or "redeemer" or "exchanger" of digital currency is now a
financial institution, if you or I tried to dodge reporting requirements, we'd
be looking at a federal felony punishable by up to 5 years in prison. Note
that many other sections of Title 31 grant the Treasury Department discretion
in rulemaking, so the blow could be lessened. At first glance this section
does not seem to be one of those.

The bill also means that no financial institution (remember this now includes
any "issuer" or "redeemer" or "exchanger" of digital currency) would be
allowed to "issue" any "monetary instrument" (which includes any code
"retrievable and transferable at some point in the future") unless "the
individual furnishes the financial institution with such forms of
identification as the Secretary of the Treasury may require." (31 USC 5326)

I'm getting a bit tired but did want to raise the question of whether or not
the 31 USC 5332 rules against moving cash across the U.S. border now extend to
digital currencies.

One section of the bill requires CBP to devise a "strategy to interdict and
detect _prepaid access devices, digital currencies, or other similar
instruments,_ at border crossings and other ports of entry for the United
States." (Emphasis added)

Existing law punishes anyone who: "Attempts to transport or transfer such
currency or monetary instruments from a place within the United States to a
place outside of the United States" \-- and remember, "monetary instrument" is
newly expanded. At least this seems at first glance to target only physical
border-crossing and not electronic, and to require intent to evade reporting
requirements. Would you have to declare a cold storage wallet if one happened
to live on your electronic device? (CBP's forensic searches and scans just got
a bit more worrisome...)

Anyway, that's my quick take. I may be wrong on some items--as I'd like to be!
That means this bill would not be as broad and potentially worrisome as it
seems to be at first glance.

~~~
NwmG
Thank you very much for this description. I did not understand the
implications or effect the change had. My question is - as a number of
exchanges operating in the US (polo, kraken, GDAX) require Id's or some form
of verification, what changes are really required? New AML/Compliance
departments?

Also will individuals P2P transmitting cryptocurrency have to perform these
same checks?

~~~
declan
I think there is a big difference between merely requiring IDs (which as you
say may well be the case today) and being subject to thousands of pages of
regulations, of which requiring IDs is only a subset. For example, a big part
of those thousands of pages of regulations has to do with submitting SARs--
suspicious activity reports about customer activity--to the Feds. They have a
handy web interface, complete with a FAQ, for you to use to submit those
reports:
[http://bsaefiling.fincen.treas.gov/main.html](http://bsaefiling.fincen.treas.gov/main.html)

As for individuals transmitting cryptocurrency, I haven't spent enough time
with the bill and the existing part of Title 31 to be able to answer that
question. I would point out, though, that other sections of the bill make
existing law even more onerous than it is today.

------
cowpig
I wish I understood this language

