Topic: Trezor implements Address Ownership Proof Protocol, more regulation less privacy (Read 357 times)

However, the argument is did anything change when Trezor removed the implementation of AOPP? My argument is that nothing has changed. This public outcry is pointed to the wrong people. People who only wanted to automate wallet verification and make it easier for Swiss users. The public outcry should be pointed to the intrusiveness and the inconveniences caused by the travel rule. Also, if I am not mistaken AOPP is optional.

If AOPP can be done manually or not, maybe frustrating or not, noncustodial wallets should not support it at all, they should just stay in their line rendering only noncustodial means of holding coins, Swiss people should have a custodial wallet or use custodial wallet that support AOPP for convenience but they are not in control of their coins if they use custodial wallet. Noncustodial wallets should not support anything of such that is related to privacy invasion.

Trezor did not need develop AOPP. The users in Switzerland can still do the compliance requirements manually but this is annoying. I might be mistaken, however, AOPP did not change anything. It has only automated the compliance requirement and made it easier for users. This is why the public outcry might be pointed to the wrong people. It should be pointed to the government because the travel rule that they are enforcing is very intrusive and inconvenient for users.

There is nothing Trezor want to do aside from ways to market its product, if we see companies like that, it is normal that they want what people are requiring from them. Trezor will think for Swiss people to know more about their wallet, that they can support what Swiss government want, but it supposed not to be like that, trezor is a company that produce noncustodial type of wallet, they should work more on how the wallet can remain noncustodial, not to focus on any kyc or custodial means of usage.

It seems a tug of war is happening at the moment, with both sides gaining the advantage alternatively. First, there was the good time, and then came AOPP, and then followed the outcry which resulted to the wallets taking back the implementation.

It is interesting that the public's voice prevailed at the moment. But how long could such a force as public outrage stop these wallets from bowing down to the letters of the law? How long does the resistance last? Could these wallets continue to submit to the demands of their clients when what could be at stake eventually is their license to operate?

Trezor’s Address Ownership Proof Protocol was only trying to make address verification easier for Swiss users. I reckon the community on Twitter was only upset over nothing. It is head shaking because much of them are not living in Switzerland and none of their anger has made Switzerland change or remove the travel rule. This anger the community has over Trezor is pointed to the wrong people hehehe.

It wasn't even meant to prevent money laundering, just a stupid useless tool that basically does nothing.
After you go beyond their first page of PR when they quote money laundering and FACTA regulation you get to the point where:



You can't withdraw cash unless you do it to a bank account that has been also whitelisted, and after their regulations, all accounts enlisted are checked by the FIU.
So you can't basically withdraw either fiat or crypto to an account that is not already KYC and has your name on it.

As for the usage, I'm always skeptical about those 10-20% numbers, assuming we have 100 million users in India and zero protest about their laws or 20 million in Nigeria and zero protest when the banking ban was put in place makes me think the numbers are highly inflated. But in the case of South Korea probably the pill was far easier to swallow, their capital control rules are probably the toughest in the world, and poeple are used to, you simply can't get money out of SK, that's why coins always have a premium there as it's costly for them to acquire from foreigners since those can't get their money out of there and in their bank account.

There are still CEX that will only require username and email from you and 2fa but optional. Example is Kucoin. But just that CEX can request for verification at any time and customers accounts can be freeze at the time.

These wallets will make your coins to be safer, online wallets can still be used with small funds, control and privacy can still be if the person is careful enough. They are all different from custodial exchanges wallets.

trezor seeing sense
not only is the aopp a gimmick that does not stop hackers from withdrawing funds and just puts an extra headache into withdrawing simply so an exchange is not seen as servicing an illicit receiver(which can also be worked around, thus useless feature).

but also for trezor to implement it, means a cold/hardware wallet, is less secure as it needs to be plugged in to a pc and then API a website. which can then put trezor device owners more at risk by browser extension hijacking to replace keys with ones supplied by the trojan extension.

yep trezor should not be adding more internet connectivity links. it should stay 'local'

New update on Trezor: https://twitter.com/Trezor/status/1487091879883722755



Not sure what they were thinking initially to actually support AOPP in the first place, but at least they've changed their minds.

They appear to have reverted their decision (source: https://blog.trezor.io/a-decision-on-aopp-789540c2930b) I edited the first post to reflect this. I think its a welcome decision, you should not make surveillance easier.

This was somewhat inevitable since the dawn of cryptocurrency. Governments have had fairly good views of money flows into and out of their country via banks - they have the ability to see all transactions due to financial money laundering laws. Cryptocurrencies undermined that whole structure and effectively allowed large and unregulated movement of money, which is bound to be used by even just a small percentage of criminals. Like it or not, these cryptos have been abused by a small minority and it is often a small minority that ruin it for the majority, causing new laws like this to become required. The taxman is also keen to access this information to make sure everyone is paying their fair share, so that was going to pop up at some point too.

I find this regulation rather useless than dangerous. How can it stop people from buying Bitcoin and sending it to terrorists? So what if they need to prove that they own the address, after they made a withdrawal to it, they can send it to anyone they want. And exchange already has KYC information of a customer, so if investigators will be tracing some criminal transactions, they will find it either way.

It's hard to understand to me and hear the first time about AOPP. Seems cryptocurrency moving to more centralization and exposing users' privacy. I am not getting how this works all over Bitcoin Network. For specific exchange and wallets is fine. But this isn't the right way to prove the ownership. If it's security reasons then the address would be whitelisted. If it's to prevent money laundering then just a nonsense idea. If all the exchanges walk this way, then decentralized exchange volumes will be higher.

its more (meant to be) about ensuring that the person logging in (presumed registered user who gave KYC to do market trades). proves he is withdrawing to his local wallet.. instead of some illicit service. thus an exchange cant be treated as being the 'source of funds or using illicit services' because a exchange is (meant to be) unable to withdraw to a mixer or foreign terrorist group/darknet market direct from the exchange. and only allow withdraws to people with control of a private key

EG silkroad deposits dont let users have the private key of the silk road deposit address so a drug addict cant withdraw straight from an exchange straight to silk road, same with mixers. the laundering customer does not have private key access to the mixer so cant withdraw from a exchange straight to a mixer.(EG in theory)

the flaw though..
when a exchange logged in user sees a 'session token' that needs to be signed by an address.. a separate illicit service offering deposits could EASILY also have a system where a user gives them the token. and the illicit service signs a message which the customer can then pass back to the exchange. thus the exchange then withdraws straight to an illicit service.

so as i said before its more like posturing to appear to be meeting some regulation. but not actually doing anything technically restricting, thus more of a gimmick that just causes more headaches for users.
it wont stop hackers and if done as just explained wont stop people withdrawing direct to illicit services technically.

ofcourse smart addicts wont want their KYC exchange session linked to a deposit address of a illicit service. so technically is possible to still withdraw to a service if the service handles message signing on behalf of a depositor. but practically a user would emotionally not want to, to preserve privacy

Before reading the protecting financial institutions I was kinda sure a protocol like this would have had to be paid for by someone external to the exchange (or possibly someone from a bank placed on the exchange to convince them).

Most cases of stopping "money laundering" in this way will stop the people you likely could've traced anyway and who weren't doing much illegal themselves, you won't hurt anything big by telling them in one country they can't buy and withdraw cryptos.

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I think there was news of crypto.com being hacked though recently and this would link into that quite well "we don't trust ourselves to handle your funds securely". If everywhere you send funds to has to be kycd, it might make it easier to get the funds back (probably not easier to know who took them if the person who took them did it well enough and sprayed them about a bit).

That's crazy! The reason is the usual:
That makes it basically a stock broker, not Bitcoin.

How do you KYC an address with AOPP?
It's just verifying that the address you're withdrawing funds to is your own, nothing else as LoyceV mentioned.
I don't see anything about KYC in the links you've mentioned.

But, if you want to talk about things really going dark, then there is Coinone and pretty soon I guess all of South Korea
This is a case where you simply can't withdraw funds other than an exchange that does KYC, you can't even do to your own Ledger address like AOPP would allow you to.

It's very likely in the future that everything you do will require some degree of Know Your Customer (KYC). The companies implementing it aren't always to be blamed either, since to operate legally they're required by the government to implement these sort of changes. Bitcoin will likely be battling this for as long as Bitcoin or KYC is around.

Yeah basically. The only way forward is by not using third parties at all, including those that provide hardware wallets, since they'll still be required to know some information  from the customer to sell the product to them, and for their usage, which seems to be getting more privacy invasive as time goes on.

The only way you can guarantee that you don't need to give up your privacy these days is by using your own generated offline wallet.

Yeah, cash seems to get away with a lot. However, depending on what you're exchanging for cash, you could still be required to give up some personal data. That's just how the world is going unfortunately. Like I said the only way of storing money while keeping your privacy intact would be your own generated offline wallet, but even then when it comes to spending that Bitcoin or exchanging it in all likelihood you'll have to give up some sort of personal data then. The only way around it currently is via peer to peer trading, but not everyone is looking to exchange their Bitcoin into fiat.

I wrote this yesterday:

As far as I know, this hasn't chanced since. So unless there's a Dutch official source, I assume a "KYC address" is not required.
For what it's worth: I trust Bitonic (both with money as well as for knowing regulations). If they'd be active here, I would leave them positive feedback.

I gotta say, I didn't expect this move. Somehow, I thought the govs wouldn't go as far as to demand KYC on basically any kind of ownership of Bitcoin... Exchanges is one thing, but not being able to withdraw freely is another... Very disturbing news, and that's happening in well-developed countries, so others are likely to follow. I wonder why cash is still being ignored. People can exchange it from hands to hands freely, without any documentation and often even without limits of sums. Here's a report called "Why is cash still king" from the European Police Office (2015), and it says
It's unfair that cryptos face such strict regulations when cash is still the key to illegal activities and is barely regulated.

I don't like the direction where the wind is blowing to but looks like this soon will be a world wide spread. I don't think this will affect those who are more privacy concern, at least not for now. I don't know any CEX exchange not requiring KYC process of verification before you can withdraw anything (or maybe small amours below 50$) so privacy and CEX cannot go together.

Paper wallets and offline cold wallets are the way.

this is not about trezor asking for your real life ID. its not about putting anything identifiable into a bitcoin transaction/blockchain.
its about a wallet that signs using a keypair which they want the withdrawal to go to, signing a 'session token' that the exchange gives to the exchange logged in users so that the exchange can see the person (logged in) requesting the withdrawal owns the address the withdrawal is going to
..
the way it works is exchanges with this scheme implemented has a API call where a wallet talks to the exchange on a different protocol from the bitcoin network to send the exchange a message that include a bitcoin address and a signature(signing for a message that includes the session token of the exchange login).

for emphasis, this is not adding anything special into a blockchain transaction.. its all done at API level (secret messages between peered software connections)

(the pro)
that way an exchange knows that the person getting the withdrawal is the person that logged into the exchange to make the request.

(the con)
ofcourse associating exchange login session via a token with a withdrawal address via these api messages means the exchange knows a little more about you. because inside the exchange they do ask for your ID when doing market orders. and so they can associate a real life ID to the withdrawal address.
but then again they kinda already did assume this.

(the pro)
it does not reveal anything outside of the exchange-wallet secret peer connection. meaning its not showing any ID in the bitcoin transaction itself

(pro)
you are then free once you get your withdraw to your local wallet to spend it to anyone you please and to move it to any wallet you please that does not do these api calls
it seems more of a protection to ensure only logged in users gets the withdrawal, or where an exchange is doing arbitrage an exchange-exchange can identify each other and share data (at API call level) not at bitcoin transaction level.

(con)
it seems more like posturing to pretend its extra security and only the withdraw requester(logged in user) gets the withdraw. but we all know hackers can play silly games, especially if they had access to the log-in details.

(con)
exchanges that implement this means that users have more of a headache when trying to withdraw as they need to prove the withdrawal address is that of the user logged in that is requesting the withdrawal.

(con)
hackers getting access to someones log-in can still ask for a withdrawal and sign the 'session token' to say they own the address for the withdrawal and know the session token for that login. thus they still can steal funds

(con)
chain analysis services where exchanges share customer data can see that if a withdrawal address is customer 'alice' and the other exchange getting a deposit has an id for 'alice' then all the taint of bitcoin transactions from the withdrawal to the deposit (inbetween on the blockchain) must also belong to alice. even if she has 'sweeped' addresses into new addresses in her local wallet

(con and pro)
if 'alice' used a mixer to sever the taint, it just appears as 'alice' using 2 separate stashes of funds.
the withdrawal association ends at the withdrawal. and the deposit association begins at the deposit
this could be wrongly seen as alice laundering. or alice having 2x the amount of assets. becasue the exchanges cannot link the 2 stashes
..
overall..
because hackers can still log-in and request a withdrawal. and then just sign a session token. its not really stopping hackers taking peoples balance.
..
because its not extra data on the bitcoin transaction its not revealing anything at the blockchain level. but is simply just making users have a headache when asking for a withdrawal.
..
users cant just withdrawal to a lambo dealership to buy a car, they need to withdraw to a local wallet and then spend the funds in the local wallet with whomever they want.
.
i dont see it as privacy invasive. as its not adding anything new to the blockchain data. and its assumed that withdrawals are associated with the logged in user anyway. i think its just posturing to meet some regulation of ensuring the withdrawal is going to a logged in user(even if a hacker is said user)

Oh man and I thought putting the bitcoin into your wallet is itself the ownership for us.

So what will happen to the “not your keys not your bitcoins” pledge ? Is it not what we always learnt on this forum. I always knew government will some way another gonna let down the whole crypto ecosystem this way.

Don’t know after this I have started to think that government could just go and hire private companies to take down the whole privacy chain with them. You know like connecting with the wallet companies and paying them to option out for this KYC address stuff.

This is crazy rude.

 I wish it was only for Switzerland, but sadly it looks like there other countries such has the Netherlands, Singapore and many more are thinking implement it. You can be sure if it is "accepted" as the norm it will be done by many more countries.

From their own website: https://www.21analytics.ch/travel-rule-regulations/

Already set:

* Canada
* Germany
* Gibraltar
* Singapore
* Switzerland

Planned soon:
* Japan
* Lichtenstein
* New Zealand
* South Korea
* UK

I believe they do these to help regulators as well as user since this is a requirements on there country. Besides this feature is only implemented on Switzerland so that there own residents that using non Swiss exchange will automatically track for regulatory purposes. The country is implementing full regulation so I don't think this is a wrong move for them.

I believe the OP should clarify the content that this news is only for Swiss.

We keep coming back to the fact that centralization and decentralization do not mix well with each other. When you try to use centralized exchanges with decentralized bitcoin, that is what you get! A lot of invasive and restrictive measures. That goes with any other centralization, like using a centralized payment processor to send/receive bitcoin.

For example this news does not affect me at all since I'm not using any centralized exchanges and my wallet doesn't come from a centralized company!

However, such measures are not entirely new. It sounds to me that some exchanges are blacklisting bitcoins coming from mixers or crypto casinos, although I just looked it up and I can't find anything. If my memory is right, I guess more and more measures will be taken in the years to come, and the privacy space will depend a lot on people's reaction, which I don't have much confidence in, by the way.

I'm not a specialist but I see two things

Yes of course sadly it can be generalized. I could see in the future if you withdraw or used your coin to an address you do not own or that is not KYC that you get blacklisted and or your exchange account would be frozen.

Also it looks like the State (does not matter the country) want to micromanage and know it all even for trivial amount of money like 1000$ in this case or the 600$ mandatory reporting to IRS in the US. People do not realize but what they are doing now can be totally fine and legal and from one day to the other becoming illegal. This could put you on the wrong side of the fence even if you personally did not change.

Snowden in his book had a good point. Law are not supposed to make the state efficient. It should be as inefficient as possible. For instance requiring a warrant ensure you can't just go randomly inside someone's home, but you need reasonable proof of suspicion of wrong doing. We are moving to a society were you are no longer innocent until proven otherwise but you have to actively KYC, etc to prove you are not a criminal. This is backward and is seriously harming human freedom.

You can also imagine be prevented to get out of a country just because you have some money in bitcoin since you could escape and go potentially anywhere.

I would be interested to know the opinion of those who have been in this field for a longer period of time and have more technical knowledge.

It is clear that the authorities want to KYC everything. Before Bitcoin and cryptos appeared, they dreamed of the disappearance of cash and being able to control absolutely all economic transactions.

Now with cryptos they would also want to.

Do you think this measure can be generalized?

I think there will always be a space for privacy, but the problem is if it becomes smaller and smaller.

I am surprised that wallet want to involve in address ownership proof protocol, is it hard than individual to give their address to the exchange they are using? Noncustodial wallet should remain noncustodial wallet. What I see about this is a marketing strategy for trezor for people in the country to buy their hardware wallet, or may be trends or what is currently going on in the country but trezor should not have done anything.

BlueWallet and Sparrow Wallet was initially part of the list[1] as well; but they seem to have backpedalled after the (understandable) public outrage. Check their recent Tweets[2][3].

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EDIT: Trezor update[4]:

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[1] https://aopp.group/
[2] https://twitter.com/bluewalletio/status/1486805550608392194
[3] https://twitter.com/SparrowWallet/status/1486785866739728386
[4] https://twitter.com/Trezor/status/1487091879883722755

EDIT: They appear to have reverted it  (source: https://blog.trezor.io/a-decision-on-aopp-789540c2930b). I leave the original text bellow:


Apparently certain countries such as The Netherlands implemented a new rule/requirement. You cannot withdraw your coin from an exchange to an address they do not KYC.

If you want to self custody, you must prove you "own" an address before you can send anything. After the fucking OFAC compliant blocks we now have AML compliant transactions.

The protocol is called AOPP (short for Address Ownership Proof Protocol) and you can find all the details on their official website here: https://aopp.group/

If you look at the company behind this protocol 21analytics.ch they have some screenshots featuring their product. This combined with something like chainalysis can have devastating consequences for privacy. What is even more surprising is we have not only trezor implementing this bullshit but also sparrow and bluewallet....

Source: https://www.coindesk.com/tech/2022/01/27/trezor-adopts-swiss-travel-rule-protocol-for-private-crypto-wallets/

Some clarification / edit:
Yes for now its only for a few countries such as the Netherlands , Switzerland, Singapore, etc. But lets not be fooled, this will become normalized and more and more common.