In the end, even if implementing privacy on protocol level would solve all our issues and exchanges & authorities would suddenly accept that they can't easily track Bitcoin anymore (highly unlikely in my opinion), I'd like to bring up one question. Do the people who currently use Bitcoin with 0 privacy (who would gain some by this procedure), deserve it? Do people who are ready to sell out their own PII without blinking twice, who are ready to run with all the 'criminal tainted UTXO' nonsense, deserve protocol-level protections of their privacy?
Yes. Privacy is a human right.
Universal Declaration of Human Rights
Article 12
No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.
If privacy is guaranteed on a protocol level, you don't need (to rely on) laws to protect you. Many people don't care about many things, but improving it makes it better for everyone. Including the people who couldn't care less.
Alright; that's a good point, however I still don't know why the entities pushing against this human right (politicians, lawmakers, ...) would treat 'Bitcoin with protocol level privacy' any different from 'Bitcoin with high-level privacy' (that comes from ChipMixer or other non-traceable origin). To them I don't think it matters
why they can't trace it, just
that they can't - and that's what they push back against. They couldn't care less in which layer we implement privacy, in my opinion.
I'm not sure they would help a lot to be completely honest. Any service committing to this whole 'taint' thing would for one, heavily resist such a change to Bitcoin and maybe even try to fork it or some shenanigans like that (of course, not before spreading enormous FUD about the proposal and telling everyone that it's initiated by criminals, to protect other criminals).
Let them try. You would either end up with a small number of centralized exchanges forking to some niche altcoin which would quickly die (and those exchanges along with it), or if you somehow reached consensus among a majority of large exchanges for a fork (which would be near impossible since they would all want to somehow exert majority control), then you would be left with essentially a CBDC.
Honestly, if the majority of people (think 'Bitcoin Twitter' with most of their big 'personalities' and conference speakers) use and support centralized exchanges, Wasabi and similar, I can see a scenario where miners see it as more profitable to mine on
that chain instead of the original one. Contrary to
the UASF, in this scenario it's possible that the majority of (especially loud) voices side with the taint nonsense.
As long as the exchanges and government bodies behind them don't control the hashpower, it's not really a CBDC, but on the other side exchanges already 'issue' (sell) nonexistent BTC, so it's really close to be honest.
I wrote
What Do Centralized Exchanges Consider as Taint last month.
I was told by Gemini support personnel that if they find out that you are depositing coins from a casino/sportsbook or you are trying to conceal the origin of your coins, your account will be permanently closed. Binance.US said something similar, although they didn't specifically mention the closing of accounts. "
Actions will be taken" is the wording they used.
Thanks a lot, this is what I'm looking for! Will add with links to your post.
Edit: Won't add Binance for now, since they didn't mention 'attempts to hide the origin', so I have to give them the benefit of the doubt that they just don't want funds that come directly from a gambling site.
I wrote
What Do Centralized Exchanges Consider as Taint last month.
I was told by Gemini support personnel that
if they find out that you are depositing coins from a casino/sportsbook or you are trying to conceal the origin of your coins, your account will be permanently closed. Binance.US said something similar, although they didn't specifically mention the closing of accounts. "
Actions will be taken" is the wording they used.
I think it is important to note that this is different than taint. I believe they are saying that if they conclude, based on the facts, that you are depositing the proceeds from gambling, they will close your account. I understand that they are not saying they will necessarily close your account based on a single metric on a single report.
It is 'taint', though:
you are trying to conceal the origin of your coins. What if Pmalek sends me his coins (that he got from a gambling site) for a
3D printed steel washer jig that I sold him; and then I want to deposit those BTC on Gemini? Gemini will easily be able to claim that I am the one who withdrew the coins from a gambling site and that I just shuffled them from one wallet to another in an attempt to hide their origin.