Topic: What Do Centralized Exchanges Consider as Taint? (Read 802 times)

Monthly bump

The USD is received directly by you via whatever payment method you choose. If you choose a bank transfer, then you will get it directly in your bank account. If you choose some payment processor like Zelle or CashApp, then you'll receive the USD in your account on those apps. There is no wallet on these DEXs which stores USD for you.

Some of the ones I have listed above support a few select altcoins such as Monero. If you want to trade bitcoin/altcoin pairs, then there are a variety of non-KYC instant exchangers you can use, but I'm not familiar with this area so I can't recommend any. Maybe try the altcoin boards.

Ok but you can only exchange btc - just took a look - and what can you do with the USD? Not sure exactly how it would work unless I test it out myself.

Support personnel know how to handle the most common types of issues that users run into. If you have a serious question, concern, or you ask them something uncommon (like taint algorithms or blockchain analysis), they will give you an answer that is somehow connected to topic but in reality has nothing to do with what you asked. Or they will simply tell you to read the TOS.

But the support staff doesn't have the needed information because things like "taint" is surely handled by a different department and they aren't going to connect you with those people. And even if by some miracle they do, you won't find out anything because any information they might give you could be used to try and trick their systems.

Use them for what?

All the DEXs I have listed above let you trade bitcoin for USD and vice versa peer to peer, using a huge variety of payment methods. You can pick and choose which payment methods you are interested in using. At no point do you need to trade for or hold any stablecoins, and given that most stablecoins are centralized and fractional reserve, better not to touch them at all if you can help it.

In my experience, most startup exchanges and relative new exchanges have no serious issues with "Coin tainting" ...because they are simply too focused on building a large user base. (The same goes for KYC requirements at casinos) .... once they reached their target, they suddenly start asking KYC verification and they they start to adhere to strict regulations.

Also, most of the support personal do not even know what you are talking about, they just give you some generic answer that was prepared for them. 

But how? i thought you have to use usdc or usdt - thanks will look at dex exchanges

Absolutely they are. Your standard fiat bank asks for far less KYC than most centralized crypto exchanges, freezes coins and accounts far less often, and has actual channels people can go down to have their accounts unfrozen if it does happen, rather then being left endlessly spamming Reddit and Twitter and getting nowhere. Not to mention that they don't perform "taint analysis" on all the cash you deposit or even track your withdrawals to see how you are spending your money, like centralized exchanges do. CEXs are antithetical to the whole concept of bitcoin.

As with many companies and entities in this space - started out with great intentions, but as soon as some nice profits came along, morals and ideals were discarded in favor of greed.

DEXs are the way forward. Using something like Bisq, LocalCryptos, or RoboSats to trade bitcoin to fiat and vice versa, all without having to complete KYC or even registering an account.

From my experience these exchanges are now worse than banks. They literally want a photo print of your backside before you can really use their services. More KYC and AML procedure than the strictest banks because hey - its crypto. They all started out singing the tune of crypto and btc decentralised and private. But now its just crazy. Whats needed is like a swiss style crypto account or even just a company who just collects the ID etc like a bank and dont act all crazy like Kraken or Coinbase over large value clients asking for backside pictures. How any institutions do business is beyond me. And they block all your funds anytime you do something they dont like the smell of. Basically anything high value. And accepting any crypto from a friend to any exchange account is an automatic ban usually and hold of all funds. Bitstamp did that to me once over 150$ worth of XRP. I had no wallet so sent it there and wham. Had enough. Thats why these web 3 wallets seem good if you can just convert to USDC - but again you taking a risk in the stable coin. If you want convert to USD now and again we unfortunately tied to exchanges.
I for one am going to test a Web 3 wallet, then send to exchanges for buys or sells.

I am sure that Coinbase has had its growing pains over its years in existence. It is difficult to reliably determine how frequently these types of problems occur. It is trivial for someone to create multiple reddit accounts (or buy/hack them) and post arbitrary information. I also remember not long after bitfinex was hacked in 2016, they were subjected to many attacks on social media that appeared to be baseless -- I suspect the person/people who were behind the bitfinex hack were also behind these attacks. I don't think that all of the reports you describe regarding coinbase is baseless or that those writing them have ulterior motives, but I do think the number is greater than 0.

When someone wins a civil case, they often are awarded actual damages, plus attorney's fees. You are correct in saying that most users do not have the resources to pursue small amounts in court, and will just eat the losses, but the costs to coinbase if only a small number of customers win cases involving funds being seized that shouldn't be can get expensive quickly.

+1

I don't think Coinbase are setting out to deliberately steal coins from their users, but there is absolutely no doubt that their poor procedures and controls to which you refer are having the outcome of users being deprived of their coins. You can go their subreddit or Twitter accounts and see post after post after post of people having accounts locked or restricted and coins frozen or seized and receiving absolutely no help from Coinbase Support or even an explanation, even after months of sending support tickets. I'm sure that as you mentioned above that a not-insignificant proportion of those users will be telling a slanted story or leaving out important details, but it certainly isn't all of them and Coinbase are certainly to blame in some situations.

I think for the most part users simply do not have the time, money, or resources to pursue a lengthy legal challenge against a multi-national multi-billion dollar corporation, the cost of which in most cases will be more than the value of the coins they have lost.

I will write this without reading the post in question because I think it is unnecessary to read it in order to make this point, although I will append my post if I am wrong....

I think we disagree on many issues, but I always find your arguments to be articulate and well reasoned. Further, I find your arguments to be made in good faith, which is not something I can say about everyone on the forum. I have found that you are capable of engaging in debate with those who disagree with you. As a result of the above, I often respond to your posts. I hope that neither you, nor anyone else views my responses as any kind of flame war, or anything like that.

I think a lot of what you describe are failures to implement procedures/policies properly, to have proper controls, etc. I think if Coinbase had a procedure to intentionally confiscate property in small amounts for reasons they knew were invalid, they would have difficulty retaining customers.

I know you disagree with my conclusion, but I believe the reason there are no court cases whose resolution is to provide their customer with access to their funds that were frozen is because coinbase is not denying access to funds by their customers for reasons that are not consistent with the law. I think if this was not the case, there would be at least a handful of cases in which a competent lawyer would take the case on a pro-bono basis.

I think simply we fundamentally disagree on this point, which we have discussed before: https://bitcointalksearch.org/topic/m.60068274

Coinbase have done plenty of suspect, shady, and downright illegal things in the past, and yet continue to have no problem attracting and retaining customers. Everything from selling user data to insider trading, hiring human rights abusers to seizing customers' coins, attacking bitcoin itself to creating their own blockchain analysis subsidiary. The loss of a court case would add very little to that rap sheet, especially not a court case for only $1000. Most users simply wouldn't care.

But even things that happen often, like losing money following a hacking incident of the exchange wouldn't require the service provider to refund their customers. They surely consider such events as events they can't influence and hence are not bound by the TOS agreement to compensate the damages to the clients.   

Sorry, I just saw this post due to Pmalek's bump.
Probably not very high, although if Coinbase were to do this on any kind of regular basis, I am sure that there will be a number of lawyers willing to accept their case Pro Bono, and lawyers may be willing to accept the case Pro Bono even if it is an isolated incident. I think the risk to Coinbase loosing a case when they took $1000 is more reputational than anything. If they were to lose this type of case, they would have trouble attracting and retaining customers.

The relationship between exchanges and their customers should be more clear. I suspect exchanges haven't done this in the past because of the hysteria surrounding Coinbase making this disclosure.

The "insurance" claims are often not much more than marketing gimmicks, and often after reading the fine print, the insurance coverage is often very narrow, and covers things that have not frequently ultimately resulted in exchange customers loosing their money.

It is, but I also don't think it's going to make much of a difference. Most people aren't really reading the Terms and Conditions anyways. Writing and talking about it on crypto news outlets, social media, and forums like this one will draw more attention to the problem. People aren't concerned with house fires until their kitchen appliances go up in flames. When that happens, it's already too late.

And not to pick on any person or country in particular, but how do you think a citizen of a third world African country (for example) with less than $1000 to their name is going to fare trying to sue Coinbase, even if they have a winning case?

Yes, but it is helpful to see it in writing, especially when exchanges keep pushing their "Funds are safu" and "You deposits are insured" and other such nonsense to fool people in to thinking they aren't putting everything at risk by deposit their coins to such exchanges.

A good lawyer/legal team will only help at the margins. If an exchange has a loosing case, a competent legal team will tell the exchange to return the money/coin.

I also don't think the fact that exchange customers being unsecured creditors of said exchange is anything new. This is exactly what happened when Gox failed years ago.

Exactly this:


Anything you deposit to Coinbase (or any centralized exchange, for that matter) are legally considered to be the property of that exchange. If Coinbase mess up, then your coins (or more accurately, Coinbase's coins which you think are yours) will be used to pay off their secured creditors, which will be the large financial institutions they partner with. Average users will get nothing.

Are you talking about the new SEC requirement where cryptocurrency exchanges are required to warn investors about the dangers of storing crypto in their accounts? There is a part that says that in case of bankruptcy, anything held with an exchange is considered to be the possession of that exchange. It seems like it was always like that, the only difference now is that SEC wants the platforms to make that absolutely clear to their users through their TOS.