Topic: Tainted coins - page 2. (Read 490 times)

Despite of very biggest cases, tainted coins will no longer be tainted after they have many layers of transactions from initial tainted addresses and wallets to other wallets.

Bitcoin Q&A: Blacklists, Taint, and Wallet Finger-printing.

This video is from Andreas Antonopoulos, the author of Mastering Bitcoin book, a most successful book about Bitcoin. He explained very detailed about tainted coins and how exchanges blacklist such coins. Usually exchanges don't use too complicated tools and check very deep in blockchain history to find tainted coins.

One source for one part: https://thedefiant.io/us-gov-moves-1b-seized-btc

Another source for the other part (german): https://www.btc-echo.de/schlagzeilen/mt-gox-insolvente-bitcoin-boerse-verschiebt-rueckzahlung-160739/

The timestamp was early March 2023.

The first source is about 40.000 BTC (seized through the US governement) transfered for selling to Coinbase.

The second source is about the payback of the frozen/seized Mt.Gox Bitcoins.

Please where are sources of those tainted transactions that are big with 50.000 and 100.000 BTC.

If I have tainted bitcoins from criminal activities, I am not stupid to do money laundering on a centralized platform like Coinbase. So the story seems to be untrue.

If I do this, I would be smarter to move smaller amount of BTC than move them all in two big transactions like you shared. I would prefer to gradually make money laundering than do it all at once and face with risk that all of my coins will be seized by a centralized exchange.

Nearly 50.000 BTC (former "tainted coins") were trasfered to Coinbase in the last days. 100.000 BTC (former "tainted coins") will follow in the next days. The "tainted coins" were confiscated coins by the US governement, and are going cheap in the market now!

wait, I'm confused by the meaning of tainted coins and have to be washed with mined?
how does this mean
if you mean coins obtained from the proceeds of crime and in the form of btc are tainted (dirty) money then what about fiat money obtained from selling illegal drugs?
basically the crypto market does not know what tainted money is because no one knows who we are transacting with because it is anonymous every trader let alone
The market has buy-sell support so that no matter what people sell, there are always people who respond

1.Bitcoin mixers are a thing. I'm not saying that all BTC mixers work properly and would do the job of hiding the origin of the coins.
2.Most criminals are moving away from Bitcoin and picking privacy coins like Monero.
3.The fact that you sold some item and you got "tainted coins" doesn't mean that you are a criminal and you are guilty for committing a crime. The authorities aren't that dumb. If you cooperate and help them find the criminal you will get your coins back and you won't be punished.
4.This isn't 2013 and the police selling a bunch of BTC under the market price won't crash the entire BTC market.

"tainted coins" and the whole debates of  "fungibility" is not a yes or no question
its a scale of risk percentage

even bank notes are like this
a grocery store owner accepting a one time $10 bank note from a known drug dealer, the grocery store owner doesnt care much and only checks that its not counterfeit. he just sees it as a drug addict wanting feeding his personal drug fueled hunger for a bag of potato chips and candy

however if same grocery store owner was handed $10k of funds and was asked to be a part of a deal where he hands $10k of candy to be sold by the dealers pals for fresh cash from innocent kids. then the grocery store owner would reject the bank notes deal, as that risks him being involved in laundering

same 2 scenario's but from the banks prospective
bank receives money from a grocery store owner
1 bank note of 1000 has a serial number that goes back to a known drug deal. the bank just puts a small flag that drug money has circled through a grocery store owner. but the grocery store owner is not to be implicated, by giving it a low 0.1% suspicion rating

bank receives 1000x$10 bank notes from a grocery store owner. the flag rating that month is 100% suspicion rated and becasue it involved $10k a suspicious activity report is sent to authorities about the grocery store. where authorities then start investigating the grocery store owner

......
the silly thing about those promoting 1BTC=1BTC "bitcoin is 100% fungible" are the same guys that actually use mixers and want to lull innocent people into using mixers too via pretending bitcoin is fungible. and non fungible at the same time

now if bitcoin was 100% fungible. why would these dodgy people be trying to convince innocent people into using a mixer if a mixer was not needed

its becasue the dodgy people that care soo much about mixers and fungibility. want to get rid of their dirty funds on some innocent person and they dont care about how it risks that innocent person

And there's no protection for you - the buyer - for the cases you didn't know you've bought stolen goods? That would be a bit odd, there must be something that can help you.

Plus, in case of Bitcoin, there's a very good chance that when you get coins from somewhere, maybe 1/100 of an input would be from "bad sources". Will you call that tainted? Most don't. Most businesses tend to work with a number of steps back and a certain percent of "bad". A skilled thief (ie one that's not doing an obvious theft that's known almost instantly by everybody) has very good chance to get the time to conceal his coins even under the legal (percent, steps) "radar" (PS: afaik the last heists were not made by thieves that skilled). You know, it's not all black and white. That's why I said that for the sake of sanity the miners should not censor for reasons like "taint coins".


Actually this last point is invalid. And that's because of the way bitcoin works. Technically the link between the miners' fee and the "tainted transactions" is lost.
It's like for all the mined transactions the fees are sent into oblivion (destroyed) and spoof, the same amount gets added to the block reward (as newly created money).
(So while there can be a debate whether miners should censor or not transaction - but you would not have enough good arguments in that - on the tx fee I think that you have an even weaker case.)

First of all no one can confiscate BTC unless its stored in centralized platforms.

Ironically buying Bitcoin from centralized exchange is safe compared to p2p because we receive funds from exchange's wallet so it won't be considered as tainted and exchange has the complete responsibility for all the outcomes.

Blacklisting an address is possible but it can't be possible to stop transactions whether its incoming or outgoing.

And finally are we sure that fiat money we are using everyday has any assurance that it never used for anything which goes against laws of a country?

Laws change, and if we look at the legislation that was 10 years ago and today, we will find it different because they did not understand this new economy. Over time, understanding will increase, and then the laws will change, so I do not consider it a big problem.

The definition of bitcoin as an asset or as a commodity or any other definition is temporary and soon a new regulatory framework may be put in place, but it is not supposed to distinguish between currencies as good currency and polluted currencies (Tainted coins,) and soon those currencies are returned to the economy again or burned and thus gain value for the rest of the currencies.
The worst thing is that people believe there is currency discrimination.

Thank you for all the responses!

I think a core problem is, that BTC is often defined as an asset and not as money. As an asset it is a "good". In my country (Germany) it is called "Hehlerei", when you receive stolen goods - and you have no chance of get back the good, if it was taken by the police. Because you cannot own a good that you received unlawful. (After 10 years you can.)

So yes, I see, that there are different laws in different countrys about that and about fractional ownership, f.E. when transactions and miner fees involved.

Another thing is, unlawful transactions are forbidden to happen - so if cought, they are reversed - but, if they happening, they are lawful taxed by the state. And yes, we had some cases here in Germany. One case was "shiney flakes", an online drug market.  

It is a different topic, but one more leak for a loss of value of Bitcoin is tax fraud with getting taxes back for losing coins. If you have a business and you trade with BTC, and you sent BTC to a wrong wallet, you can claim taxes back for the loss. I thing this is also a big deal for crypto as "store of value".


Negative, Sir.

You can explain. But it is against the law to buy stolen goods. With intent or without intent. You buy a stolen bike, you do not get it back. You buy a stolen bike on the street, and you do not know it was stolen, you do not get the bike back and you will be charged, because before the deal you have to make sure that you do not trade stolen goods.


Yes, I mean that. Not today, but it is coming - and it is right. You cannot make business with illegal assets. This is a problem.


Sir, this is a very good example.

Traces of cocain are not forbidden. But if you try to wash It is not just money. Also clothings (assets) having traces of cocaine on it. But the thing is, there is a difference between asset (clothing) and forbidden asset (cocaine). And we were talking of the forbidden asset (the tainted coin). So 1g of 10kg cocaine is forbidden. And 0.01 BTC trading fee out of 1000 traded tainted BTC are still tainted.

If ever the confiscated BTC is sold, there is really a temporary decrease in price of Bitcoin but I do not think that it will decrease the value of Bitcoin.  As the market flow is dependent on supply and demand, it is obvious that when a huge chunk of BTC is sold in one go, the demand side will be eaten but eventually, I know the demand will catch up recovering the price



If user Y had bought the coins legally, he can then show the proof of purchase, that is one way of protecting ourselves from losing 1 BTC due to the reason that is tainted when we actually bought it from the exchange. 


I do not think we have the capability to protect the community from overall loss of value.  I even doubt we have the capability to protect ourselves from it.

Protect before it happens, no, solving the problem afterward, yes, by taking the one that has sent you the money in the first place to court, just as you do know if you find you have bought stolen goods from somebody without knowing and the cops come and seize those.


There is no such market, if somebody knows he has got tainted coins he will not sell them to somebody directly so that a connection can be made to him, he will try to as you said,  wash the coins, at which point the coins are just like any other coins, so no discount.


If you're aware of a transaction being "illegal" for various reasons even the fact that you helped it is illegal, not just taking a fee.
If you have taken the fee unaware of this and in good faith at that moment,  it's nothing that can really happen to you.


No, it's not, by mining you just earn clean coins but you still have to pay for the mining hardware and electricity with your previous funds first before you earn a thing, so you're back to square one.

Frankly, I don't think tainted coins can be a problem. I'm in Bitcoin for 12+ years and I haven't met or heard/read of someone who was affected by this issue. Which makes me think these cases are incredibly rare. And here I want to ask you: did something like this happen to you? Your friends or relatives? Probably not. I guess, in most cases, coins get blocked/seized before they reach user marked Y in your scenario. This is true mostly to big amounts of Bitcoin. Yes, there are also some petty thefts/crimes which never get reported and therefore nobody marks them tainted. Just my 2c.

This question is very problematic, since the definition of legal transactions differs from one country to another, and while some countries view the transaction as illegal, the same transaction can be legal in another country.

If the miners will check every transaction whether it is legal or not, then this will be a huge burden and a big problem in the network, in addition to that it is very difficult to judge whether the transaction is legal or illegal, so I think that it is completely legal to charge a fee for every transaction that takes place Registered on the network (whether legal or not).

We've all touched tainted cash, the only difference is it's much easier to trace Bitcoin because of the public ledger that we rely. I'd like to think that criminals wouldn't want a permanent association of their Bitcoin to be tainted, and therefore they'd use cash instead. After all, cash is much easier to hide, and much easier to use. I know that isn't the case, but I don't think tainted Bitcoin will be a big problem. After all, they'll be able to somewhat detect when that money changed hands, and if you don't know that those coins are tainted then you aren't breaking the law. It's impossible for the average person to know if coins are tainted. You could potentially be investigated, if the authorities aren't sure if the coins have changed hands, but ultimately that's the very same as cash. If you use Dan Coopers cash, with the serials they'll likely flag that up if they notice it, and ask you in for questioning.

Most of the world is innocent, and it would be a shame to limit a currency based on the select few that use it to break the law.

This is an argument against seizing coins and not one that's for it really. If you had the same problem but mixed your coins or put them through a dex or held them as a privacy coin, this wouldn't be a problem you'd ever have to deal with.

Realistically:
1. Exchange marks and seizes coins
2. You explain how you got the coins and how you paid for them (showing proof where you can).
3a. Exchange unlocks the coins when they're satisfied you've provided all the evidence needed.
3b. You start mediation and then take the exchange to court for the money you've lost because what the exchange is doing isn't fully legal at this point.

Washing coins probably damages the ecosystem as much as holding coins damages market cap (two very precise groups of people just attacking each other over something that doesn't matter as much as you'd expect it might if you listened to either group).

Money should not be distinguished. Money earned from legal and illegal business is one and should not be distinguished between them, otherwise the US government would have burned those confiscated coins and not sold them.
Either selling them for less than their value is because they are offered in auctions or sold outside the market, and therefore the quantity will be large, but the price is different, and it is something that happens naturally in the market, and soon the prices are balanced.

Not really, if you rent for high amounts with Nicehash, they will quickly ask for a KYC from your side.
Nicehash is a CEX too, they have signed EU AML texts and respect them.

And if the launderers use MRR, they lose a big amount of money.

Serious people are using privacy coins as XMR for their shady things, I am not sure any real player is actually loosing his time with ASICs rental to wash his dirty BTCs...

But the best way to "wash" tainted coins is mining in the end. They rent machines and mine. I think the undertaking as a whole thing (mining pool) would be illegal in this case.

In the real world you have to know your business partners. And I hope it is the same in the virtual world.

Or did not we care?