Topic: Exchanges not accepting mixed BTC, so is BTC no longer fungible? - page 2. (Read 933 times)

Bitcoin is phenomenon we have never witnessed before. It's something that has unique qualities in terms of trust, neutrality, level of globalization. At the same time it shares similarities with precious metals and cash. Those are money that perfectly fungible, no one trying to taint gold bars or banknotes. No matter where transactions happen, in legal or illegal environment, everything remains the same. We still use dollars that were stolen from bank. There are some reasons why regulation is being applied in case of bitcoin. It is relatively easy to track transactions in bitcoin network. They are transparent and thus give an ability to monitor every purchase. Just possible to track, but not to control, however that is enough to start applying some regulations. That is part of the reason why we are switching to a cashless society, everything needs to be controled and censored. Governments might think so. The second reason, why they are trying to regulate and tainting bitcoins is inability of governments to control the network in other way. There is no point of failure, no one in charge, let's discredit the network by calling it taint, used by criminals, etc. As long as participants of the bitcoin network rely on third-parties when trying to exchange bitcoins for trackable cashless world currency, we will keep facing such attacks. There should be no tainted bitcoins in a pure bitcoin economy, an economy in which no one controls every transaction.

you forgot to read my full comment. the problem with Coinbase, and many other exchanges, is not just the mixed coins issue outlined in OP.  there are a ton of other issues.
- lack of security and insurance for when they get hacked (not if, but when)
- selling user data to anyone that asks including government (basically betraying users' trust and privacy)
- in many cases specially among altcoin exchanges: manipulation of the market
- weak servers that go down when there is a traffic rise specifically during price rises that leads to a lot of loss for traders that rely on responsive servers.
- ...
does anybody care? no. they keep bitching about all these issues and more but they keep going back instead of seeking and improving the alternative and better solutions such as decentralized exchanges that could actually solve a lot of these issues.

It would be hardly practicable on the long term because someone can pay a legit person using mixed BTC.

One day most Bitcoins will be mixed and what then? Exchanges who won't accept them will lose revenue and all traders will move to exchanges that do.

It's stuypid to taint bitcoins. Normal users who will buy some coins from someone or sell a physical item will inevitably get some of those mixed coins and add them to their clean coins. What then? Will all their coins become tainted?

+1. i've primarily only read about coinjoin users being flagged and having accounts frozen/closed, and those reports are few and far between. however, sometimes exchanges (especially gemini and coinbase) don't tell customers why their accounts are being closed, and proximity to mixing services could be involved.

the OP didn't bring anything new to the table. exchanges have been hiring chainalysis type companies for years. anecdotally i haven't noticed much of a change in recent times. things have been pretty quiet outside of that one binance singapore incident where they froze someone's account for using wasabi wallet coinjoins.

Do you have any information or links on which may get knowing on what are criteria they are following to label some bitcoins as mixed or having bad history? If many all other services/business start copying such a practice that may lead to many unexpected consequences and one of them is end of mixing business.

I am not going to blame them for doing that if it’s all being done for the reason of not supporting hackers/scammer and for security purpose. There are lots of things going on in the cryptocurrency space, from hackers stealing from exchanges and scammers creating fake projects and stealing from investors. And these scammers would usually send the stolen coins to coin mixers so that they can’t be traced. That’s why these exchanges are rejecting coins that are traced to such, because they certainly have a bad record.

I’ve read about some particular cases, although I still don’t have the impression that it is anywhere close to it being a general trend, neither in terms of practicing Exchanges, nor in terms of the total number of impacted users.

It is an uncertainty though which people could do without, and there are some more adamant voices that pop-up every now and then, asking for this type of activity to be acted upon, and are at least drafting studies to elaborate future standards. Take for example the following EU study:
https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf

Now the aim of the above EU study is on money laundering and such, but the key is in seeing how far they can/will go, both technically and legaly, without treading on people’s toes. A person is conceptually entitled to obscure his BTCs (et al) for legitimate reasons (i.e. keeping nosy parkers at bay), and it’s not as if FIAT doesn’t have a trace of illegal activities on many of the paper bills. Reeling-in or acting upon pre-emptively on mixer users through chain-analysis, should have clear boundaries on just how many steps back can implicate you in some way, and how, alongside the layout ethics and presumption of fairplay (as opposed to foul play).

While I recognise and share the concern raised in this topic and also addressed in the above comment, I would like to point out that perhaps this extra level of policy on some of these exchanges is one which will not be incorporated into all the exchange platforms.

I fail to see how this type of response will be encouraged by the crypto holders, and while it is evident that some measures like this have been put in place to deal with crypto based money laundering, I don't think this is the way forward.

The reason for this is that BTC isn't the only crypto currency and if bad people take advantage of this technology they won't be limiting themselves to BTC, other coins will be at risk too.

Because of this I don't think that banning of BTC exclusively from some exchanges will be sustainable or solve the issue, and so failure to see this on the part of these exchanges will be detrimental to their business.

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.

It was completely predictable. Since all the exchanges usually ask users for KYC/proof of address and some other personal information such as SSN in US. They will need to answer the governments they asked them about identify of any user or source of the transactions.
If they allow users to use the mixed bitcoins none can track them easily for some security purpose in future in order to track drug/gun dealers and avoid money laundry. However, there are still some exchanges where you can easily use your mixed bitcoins without of any problem.

But the people can avoid using such exchanges as of now. There are many alternatives to these exchanges. Or the other alternative is to stop using mixing services which is a pretty good option if you ask me, or use privacy centered coins like Monero for moving funds and storing them later in bitcoins.

This is because majority of users don't use mixing services for their bitcoins and those do they already have other plans if they face these kind of problems. So you always have to be responsible for your funds or else there are many people in the market to who want to con you.

They want only "clean" coins haha! In other words, all that centralized exchange withdrawal limit and KYC stuff are inutile. It's not enough even though they really don't need all the personal information of their users.

"Merchants must be wary of their customers, hassling them for more information than they would otherwise need." - bitcoin whitepaper

I recently took part in a similar discussion, and we can think whatever we want, but if someone says that your BTC is not what he wants based on any criteria, then in that particular case that BTC is actually worth nothing. We all know that every banknote has a unique serial number, but when we pay something, the cashiers do not check every banknote to determine where it came from. Of course, it’s about the fiat being part of the system, while the BTC is just the opposite.

I share the concern of those who see this as a problem, because it can really happen that someone one day wants to use their BTC to pay for something or wants to sell them for a fiat, and everyone rejects it because coins are from some suspicious sources.

Here is something interesting about how BTC could be categorized in the future - > Classify coins (UTXOs) in several categories

centralized services will always do things like this and it will never have anything to do with fungibility of bitcoin. for example i can say that i won't accept payment from any address that starts with "123". that is my personal decision and won't change anything about bitcoin.

the reason that allows exchanges to do things like this and get away with it, is that people don't seem to give a shit! if whenever an exchange pulls some crap like this (or sells users information) they simply boycott that malicious exchange, the next time they are thinking about doing something like this they would hesitate.
look at Coinbase, have they lost any volume? no. so they will continue doing whatever they like.

I'd like to note that this is only really an issue because of exchanges. Bitcoin was meant to be peer-to-peer after all, and was actually designed in such a way that lets you avoid middlemen. It's fungible in essence, but using it in an unnatural way (i.e. exchanges) compromises that.


Yeah, this is why the policy is flawed. They're going to be asking you proof of financial capacity (like in this case with Binance), which is a problem because you're placed at the mercy of another person.

One important question to ask though, is do they automatically flag coins suspected of being mixed, or are they only flagging suspicious patterns? The case I shared above apparently mixed some of their coins directly post-withdrawal -- if they had sent it to a different address before mixing, would it have been flagged then? It's too early to sound the alarm, and blacklisting all mixed coins sounds a bit too draconian considering how easy it is for them to change hands.

We have to accept the fact that centralized exchanges can easily imposed regulations, restrictions and requirements for their users and there is nothing we can do but to follow them, otherwise the best thing to do is to find alternative platforms that can cater to our needs. I don't see this development affecting the fungibility of Bitcoin, at any rate. I am sure we still have (and more in the future) of platforms that do not care if you are availing of mixing services or not.
Centralized and government-approved exchanges have to be careful in all facets of their business because they don't want any agency of the agency taking notice which can surely affect their business and ability to be making big bucks.

I guess that's the way - seize mixed coins until the owner gives you the required information, if it's considered reasonable at all. Kinda sucks that you'd be using a mixer to earn some anonymity and they seize it and ask you for personal information and put you into some kind of interrogation, doesn't it? It's almost like these exchanges are becoming semi-authorities with some power you really underestimate when registering on their platforms


Mixing it once with a higher number of recipients is usually enough to anonymize your coins. But sending it to other platforms and then receiving them back to your wallet means trusting every platform you send to (especially as your coins'd come from multiple mixing and if the platform finds out you'd be even more suspicious than before) and then finally trusting the platform you initially meant to deposit on.

Now there's also a chance you might get screwed if the platforms you've used previously are going to notice the last one about the coin mixing you've done. Then you have fees. It's too much of a hassle. I'd just say don't use mixed coins on any third party platform.

They themselves may well be fine about it, what they have to worry about is whether the next place they pass it on to freaks out.

Exchanges must know that they're playing a questionable game. If it's continued to the stage where the only thing they'll accept is a coin that's either straight from a miner or has an unbroken trail of purity back to 2009 they're not going to have a business sooner rather than later. The entire thing will seize up.

At some point they'll have to nominate firm policies about this for their sake as much as ours and they'd better be pragmatic ones.

People are able to not rely on exchanges if they use bitcoin directly to pay for almost everything. There are many services or merchants out there who already accepted Bitcoin as a payment option.

For example, you can see the list on this site : 20 Major Websites That Accept Bitcoins [Pay In Bitcoins]
But it's just for example and I can't say that all of those sites are trusted since I haven't checked all of them yet.

Unfortunately, we still can't pay for primary needs globally in every country so we still need fiat for that. But we are also supposed to save some fiat so this is not really a problem.
Keep your BTC and fiat in good proportion and you don't need to trade it too much on an exchange.

But I still don't know if in the future merchants and service providers will not accept mixed BTC too  

I have open a thread about this issue before, Exchanges are now potentially banning btc sent to a mixing/conjoin services.

And far as I can remember, bitcoin's fungibility has been in question in 2015 when BlockTrail started to sell virgin bitcoin: BlockTrail Mint: Fresh Bitcoin Delivered From The Mines. But it seems that this offer have been discounted already.