Exchanges not accepting mixed BTC, so is BTC no longer fungible?

suzanne5223

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Quote from: OROBTC on June 09, 2020, 02:59:15 PM

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I have been reading that many exchanges are using Chainalysis (etc.) to look at transactions, and refusing to exchange BTC (or even accept them). I also know that BitPay is using such blockchain analysis to NOT accept BTC that looked like they were mixed or otherwise have a "dubious" history.

This looks like it is going to be an issue, probably getting to be a bigger issue into the future.

If we define "fungible" as satoshis = satoshis, then it looks like that some satoshis are more equal than others. Does this mean that Bitcoin is no longer fungible?

This looks like a problem for BTC and possibly all of crypto, in that crypto NOW has / will have to be "proven" clean, else hard to exchange for fiat, other crypto, or even for large purchases?

Please discuss.

Bitpay was not the only crypto exchange site that used blockchain analysis to verified the healthy level of a transaction because Bitstamp, Korbit etc are also among the exchange that use the service. However, i think this will make government to trust that terrorists, dubious people etc are not using crypto and don't see that as something that will by any chance cause some serious problem for bitcoin and others cryptocurrencies if community still support crypto and the miners continue to mine.

posi

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Quote from: amishmanish on June 12, 2020, 12:13:04 AM

Blacklisting mixers has another benefit for bigger exchanges. They will have a business opportunity to provide the typical "Swiss bank" equivalent service to its rich customers. You only talk to the banker and the banker talks to nobody. CZ is a clever businessman. He was the first one to see the huge opportunity in giving a platform of legitimacy to Alt-coins.

This was not about blacklisting tumbler site but the mentioned exchange site actually want to build trust between them and the governments/institution and also make it easy to spot a crypto scammer. However, i believe some crypto to crypto exchange site won't use the blockchain analysis and aside there are various ways of making transaction not to look suspicious.

Quote from: amishmanish on June 12, 2020, 12:13:04 AM

Alt-trading wouldn't be where it is today if not for the marketing and support given by binance.

Youre Binance those make a huge impact in crypto exchange scheme but according to CZ every team of his exchange work independently thats every idea the core team did it was from the core team thinking not is. With that been said, if Binance dont make the change happen sooner or later another exchange site will come up with something.

hongchao123

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Mixers was important part of btc history and now exchanges want to stop that. Not so good for network privacy. Thats why im a big fan of monero

Jet Cash

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As long as the miners continue to accept such transactions, Bitcoin will remain fungible in my opinion.

thesmallgod

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Majority of people that used mixed services for their bitcoin have potential of acquiring the BTC through shady means. You do not expect exchange platform to be queried or payed badly from something they do not know anything about. Many of this exchanges are operating and obey the government policy in country in which their business is. If they mistakenly taking mixed BTC from trader that stole public funds, What do you think will happen to them ?. The fall of e-currency such as Liberty reserve should remind you what government is capable of doing.

amishmanish

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Quote from: figmentofmyass on June 11, 2020, 05:36:06 PM

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Binance SG operates under the requirements as set forth by MAS and our MAS regulated partner, Xfers. Hence there are AML CFT controls set in place for the Binance SG.

i haven't heard of any similar cases at huobi or kucoin. i've also never seen any specific MAS rules that refer to mixing, coinjoins, or anything like that. none of those things were mentioned in singapore's new AML law passed last year.

So Binance is being the tip of the spear for crypto's eventual disconnect from any sort of mixing services. At least the publicly regulated part of it. This won't change the fact that mixing/ obscuring is a major requirement for people with a lot of bitcoin. From an outsiders' perspective, I would say that volume and liquidity needs make these bigger exchanges the only source of fiat for those holders. (Are there any others?? Like some secret OTC services on darknet, no questions asked??)

Blacklisting mixers has another benefit for bigger exchanges. They will have a business opportunity to provide the typical "Swiss bank" equivalent service to its rich customers. You only talk to the banker and the banker talks to nobody. CZ is a clever businessman. He was the first one to see the huge opportunity in giving a platform of legitimacy to Alt-coins. Alt-trading wouldn't be where it is today if not for the marketing and support given by binance.

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Quote from: electronicash on June 11, 2020, 07:31:50 PM

do you think we'd be seeing dex going to follow all these regulations that they are also going to be asking KYC?

i remember some dex in the past was already asking kyc too. once this happen the users who wants privacy will have nowhere else to go but just dealing with someone in the forum. bad situation for crypto, the price of BTC didn't even rockets up to beat the ATH and no real adoption still.

Then that's not a dex, that's a non custodial exchange.

Aside from Bisq, which has its issues too, I can't think of anything I'd call a dex but it's not an area I study.

The problem with them is that they'll become the guaranteed first port of call for anyone with questionable coins. If they're robust enough and liquid enough people may not bother attempting to mix or obfuscate questionable coins. They'll go straight there and hand the can straight to you. I can't imagine any dex bothering to question the origin of coins. It's your problem. And exchanges getting twitchier will drive that harder.

I seem to remember that happening to someone who exchanged Monero for some stolen BTC via a system like that.

20kevin20

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Quote from: Russlenat on June 11, 2020, 06:03:30 PM

With this going to happen, what would happen to the mixer business?

They will probably go underground once they get banned almost everywhere. Users will not use them anymore unless they want to hide from something off the grid.. which is usually underground activity.

Quote from: Russlenat on June 11, 2020, 06:03:30 PM

But anyway, I don't really think too much of this as I don't see any complaints yet regarding this kind of transaction from a user, so there's also a possibility that it could not be implemented in the future.

I have seen a few topics here and there on the forum and it'll become a widespread problem once more exchanges start applying the same thing (or the govs force them to). I am against the ban of them but we all should be aware that our governments never really cared about our privacy so they aren't going to start caring now.

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Quote from: eaLiTy on June 11, 2020, 06:52:13 PM

Quote from: OROBTC on June 09, 2020, 02:59:15 PM

I have been reading that many exchanges are using Chainalysis (etc.) to look at transactions, and refusing to exchange BTC (or even accept them). I also know that BitPay is using such blockchain analysis to NOT accept BTC that looked like they were mixed or otherwise have a "dubious" history.

This looks like it is going to be an issue, probably getting to be a bigger issue into the future.

I am not surprised we are seeing this happening, we will see exchanges rejecting coins which are deemed dubious and coins that are coming through mixers and there will be a time when we are not able to use those coins. We might even see the coins that are dubious might be confiscated by the authorities and then auctioned off at a later time, in simple terms washing through the legal system.

It is impossible to overcome the legal obstacles and we will be forced to follow what the regulators set out.

do you think we'd be seeing dex going to follow all these regulations that they are also going to be asking KYC?

i remember some dex in the past was already asking kyc too. once this happen the users who wants privacy will have nowhere else to go but just dealing with someone in the forum. bad situation for crypto, the price of BTC didn't even rockets up to beat the ATH and no real adoption still.

eaLiTy

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Quote from: OROBTC on June 09, 2020, 02:59:15 PM

I have been reading that many exchanges are using Chainalysis (etc.) to look at transactions, and refusing to exchange BTC (or even accept them). I also know that BitPay is using such blockchain analysis to NOT accept BTC that looked like they were mixed or otherwise have a "dubious" history.

This looks like it is going to be an issue, probably getting to be a bigger issue into the future.

I am not surprised we are seeing this happening, we will see exchanges rejecting coins which are deemed dubious and coins that are coming through mixers and there will be a time when we are not able to use those coins. We might even see the coins that are dubious might be confiscated by the authorities and then auctioned off at a later time, in simple terms washing through the legal system.

It is impossible to overcome the legal obstacles and we will be forced to follow what the regulators set out.

Russlenat

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They just follow the regulation since they are regulated, that is going to happen even in all exchanges as the regulators look at transactions that are possibly violating the anti money laundering law, mixers will not make transaction origin untraceable but it's hard for the regulators to trace such transaction, so they give the task to the exchange so regulators can carry their job effectively.

With this going to happen, what would happen to the mixer business?

But anyway, I don't really think too much of this as I don't see any complaints yet regarding this kind of transaction from a user, so there's also a possibility that it could not be implemented in the future.

figmentofmyass

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Quote from: gentlemand on June 11, 2020, 04:40:04 AM

Binance made it clear this was imposed on them by the authorities in Singapore.

this is what CZ said:

Quote from: gentlemand on June 11, 2020, 04:40:04 AM

There comes an inflection point where it starts to hurt their business in a significant way.

+1. people underestimate how much lack of fungibility can hurt exchanges. they know it too.

Atrax

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Companies like Chainalysis are doing different things:
- They have a good marketing towards the exchanges. However, they do not disclose in any way how they do their analysis and what the background for the level of taintednes is. They can claim anything - exchanges believe them.
- It is not clear yet how many information are being forwarded or made accessible to the government.
- They are using open source information. Some of the information may be wrong, some not.

And again and again, they claim that "regulation" requires this analysis. This is bullshit for most countries. If Bitcoin is going through a Wasabi-wallet. Chainanylis most probably flags the transaction. There is NO regulation to my knowledge asking for this.

The best way to counter this behavior, imho, would be to set up a community driven analysis tool which is doing exactly what the regulators ask for. Not more. Not less:

A database with addresses of hacks.

A tool which follows these coins.

If a part of this coin is in a transaction, the transaction is not tainted per se. It may be some Satoshis.

If the community runs this tool and offers it for free, firms like Chainalysis would soon be thrown out of the market.

The Cryptovator

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This is the disadvantage of centralization. If all centralized exchange do same thing then likely use fiat will be more easier. Sometimes Bitpay act like they are preventing bitcoin adoption. Bitcoin should consider as bitcoin it isn't came from hackers. But unfortunately only hackers aren't using mixer, everyone who want to keep private their identity and secure their privacy they are using mixer. I really don't want to see such as action from reputed exchange. If they don't accept bitcoin from mixer and gambling then only way will remain use decentralized exchange even it's quite slower.

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Quote from: amishmanish on June 11, 2020, 04:30:41 AM

The exchanges maybe choosing to do this not merely to comply to KYC. They have bigger interests. Imagine a future where you will have to provide proof of your BTC source as being non-mixed or non-tainted. In that case, exchanges can easily claim to be the only "legitimate" source of "untainted" bitcoin, much like a federal reserve on their own.

So coinbase, binance etc must be opposed in some way before this solidifies as an acceptable norm.

Binance made it clear this was imposed on them by the authorities in Singapore. I expect Coinbase is rather keener on the idea since they're actively pursuing surveillance. Whoever they are they'll have to make a decision on how far to take it. There comes an inflection point where it starts to hurt their business in a significant way.

amishmanish

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For those who have a lot of bitcoin from early days, what other option do they have than to obscure the source before spending? Even if they want to do a small peer to peer transaction, nobody would like it be known that the addresses that can be traced to them contain 100s of BTC. It would be dangerous for their personal safety in light of the "five dollar wrench" attack.

The exchanges maybe choosing to do this not merely to comply to KYC. They have bigger interests. Imagine a future where you will have to provide proof of your BTC source as being non-mixed or non-tainted. In that case, exchanges can easily claim to be the only "legitimate" source of "untainted" bitcoin, much like a federal reserve on their own.

So coinbase, binance etc must be opposed in some way before this solidifies as an acceptable norm.

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Quote from: Sanugarid on June 09, 2020, 04:46:07 PM

So I guess the mixers would be useless now? or Exchanges who has this policy would be a lesser option for anyone who is using mixers to wash their bitcoins?

Same concern here,what will be the advantage of using Mixing service since this has been happening in some exchange?do we have to find another exchange to make our privacy still indeed?

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The move was quite good, since there are lots of stolen bitcoin that is being mixed/wash so it won't be tracked from the blockchain and they can continue using the same old address of them.

Actually i support also this because we already know that bad elements are using Mixer to hide their activities but what about those legit that only wanted to keep private?

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But I got to ask one thing, why would the exchanges do this? I know they are not all has this kind of policy.

Exchange are now getting target of the government thats why they need to keep their company clean so maybe about regulation so this has been implemented?

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I think exchanges are under the pressure of governments, governments want to control everything and want to have a centralization in everything and of course Bitcoin is the primary enemy of government centralization, what will make the exchanges care if the bitcoin is mixed or not? I think the governments are the reason as well as the reason to request verification by KYC.
But I have a question, are there no Bitcoin mixers capable of preventing exchanges from knowing whether Bitcoin is mixed or not?

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Quote from: adzino on June 11, 2020, 02:19:44 AM

Quote from: hatshepsut93 on June 10, 2020, 12:41:18 PM

This was the case for a long time, for example exchanges refused were closing accounts of customers who made deposits from their crypto gambling accounts. This can be explained by the fact that crypto casinos are unregulated and can be used for money laundering, so coins that come from them might be dirty.

From a practical point of view, there should be ways to "clean" your coins. Maybe it's enough to just move them between your addresses to build up a bit of history after the mixing. Or maybe you can deposit it to some exchange or other service that doesn't care about mixing and then withdraw from them. It all will not work if you will be personally approached and requested to explain the origin of your coins, but it might be enough to avoid triggering the automated chain analysis tools.

Isn't this the exact reason why exchanges implement KYC? I mean, more and more exchanges are asking for user identification. They are doing this in order to keep the user database clean. They are doing so that users don't launder money using their exchange. The KYC process helps them identify those who might be laundering money using their exchange and hand over the information to the law enforcement officers.

In any case, if we assume that Bitcoin will be used by someone for criminal purposes, then such coins will always be under scrutiny and will be called "dirty." Indeed, the above actions of cryptocurrency exchanges that refuse to exchange or sell the so-called “dirty Bitcoins” are primarily due to the relevant rules of controlling structures that fight money laundering. Each exchange wants to work legally and without any problems, so they try to protect themselves in various ways. But the provision of KYC by users on the cryptocurrency exchange is the final character of recognizing the owner of the so-called “dirty Bitcoin”. in fact, there is no difference between these Bitcoins, but the situation is very similar to that when the dollars received for the sale of drugs or weapons are also considered dirty, but after confiscation and return to the State Treasury, they become clean again.

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Quote from: hatshepsut93 on June 10, 2020, 12:41:18 PM

This was the case for a long time, for example exchanges refused were closing accounts of customers who made deposits from their crypto gambling accounts. This can be explained by the fact that crypto casinos are unregulated and can be used for money laundering, so coins that come from them might be dirty.

From a practical point of view, there should be ways to "clean" your coins. Maybe it's enough to just move them between your addresses to build up a bit of history after the mixing. Or maybe you can deposit it to some exchange or other service that doesn't care about mixing and then withdraw from them. It all will not work if you will be personally approached and requested to explain the origin of your coins, but it might be enough to avoid triggering the automated chain analysis tools.

Isn't this the exact reason why exchanges implement KYC? I mean, more and more exchanges are asking for user identification. They are doing this in order to keep the user database clean. They are doing so that users don't launder money using their exchange. The KYC process helps them identify those who might be laundering money using their exchange and hand over the information to the law enforcement officers.

Topic: Exchanges not accepting mixed BTC, so is BTC no longer fungible? (Read 933 times)