Topic: What Do Centralized Exchanges Consider as Taint? - page 2. (Read 796 times)

One might also reasonably conclude that a multinational exchange with billions in the bank have a better legal team than someone who has had 0.1 bitcoin stolen from them.

There is also the argument that nothing you hold on an exchange is legally yours in the first place. As we saw in the recent Coinbase filings with the SEC, anything you deposit to Coinbase is legally theirs, and you are an "unsecured creditor".

When you withdraw from a casino account, or any other online account, you are exchanging an IOU for coin.

The judiciary will correct injustices against complaining parties and will do so in a neutral manner. Anyone can complain online, and tell a slanted version of their side of the story, but if courts are not granting judgements against exchanges for seizing coin, one might reasonably conclude that exchanges are not seizing property that lawfully belongs to their customers.

Coinbase never provided any information about what they consider to be taint when I asked them, but considering they are a US-based centralized exchange, I can only assume they have similar "rules" as does Gemini and Binance.US. If the source of the Bitcoin is a gambling platform, you will probably experience some problems depositing them into a Coinbase account. Off-shore and out-of-state gambling is illegal in certain States in the US, but that's just part of the problem.

Coins used in both legal and illegal ventures can end up in your wallet without you having done anything wrong. The same is true for fiat money. Imagine if someone were to check the history of your €50 bill you take out of your wallet when you are paying for gas and instead of getting into your car, you are called into the owner's office with police to ask questions who you are and where you got that paper bill from?

I can remember this also applied to Coinbase, it is one of the reasons to read the terms and conditions of any custodial wallet or exchange that you are using, you should know that the exchanges and wallet have the control and not you, they can because of your coins came from gambling site to freeze your coins, send it to noncustododial wallet and you are good or use a centralized exchange that accept coins from gambling sites. But that is not what tainted coins are if the gambling site are legal and follow government rules and regulations. Tainted coins are coins that are determined to have been used for illegal purpose before.

Imagine all those signature campaign participants who receive their payments directly in their casino accounts on a weekly basis. There are such campaigns. I remember when I was in the old FJ campaign. The weekly rates were always paid out to your casino account. According to Gemini or Binance.US, those coins are tainted, dirty, and worthless, and will probably by frozen or confiscated if I try to deposit them on those sites. Yet, I did nothing wrong. I provided a service and was paid for it.

And if I have sold you some good, service, altcoin, whatever, and you choose to pay me directly from your casino account, then legally speaking those coins you are sending me as payment are mine. And even if you send from your casino account to my own wallet, and then I send from my own wallet to an exchange, many exchanges will still take issue with that. As I said above, as soon as any transaction has taken place then you can no longer say that those coins have not changed hands, which makes taint analysis pointless.

Depends on your jurisdiction. If some government forces some hardline KYC requirements, then your account will absolutely be frozen unless you comply with them. And as I said in another thread:

The process for checking for deposits from prohibited sources is also largely automated.

Exchanges may seek additional information from the customer if it appears a deposit is from a prohibited source.

It is unlikely that exchanges have any legal basis to freeze coin indefinitely without some kind of court order.

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If I am not mistaken, most exchanges have TOS that direct people to only deposit their own coin onto their exchange account.
I think it is probably a good idea to assume you will need to provide KYC to any exchange you deposit coin onto.

I would also point out that it is very common for various crypto businesses to ask for KYC when they have what they believe to be stolen property. Multiple reputable casinos have done this in the past to those they have evidence of substantial cheating/hacking.

Regardless of what is in any TOS, there is no legal basis for an exchange to "freeze" an account indefinitely without a court order. If an exchange were to do this, the customer should take the exchange to court.

Of course it makes no sense. Even a direct transaction between a gambling platform and a centralized exchange can involve two different people and doesn't mean that the same person owns both addresses. It's quite possible that person A has sold Bitcoin to person B, and person A made that transaction from a casino they use. Person B received the coins in their exchange account on a CEX. Accusing person B of illegal activities or having tainted coins is out of order.

Those Terms and Conditions are written in such a way that gives them the right to freeze or block your accounts for whatever reasons they think are necessary. After that, they can request from you whatever proof they deem necessary, including KYC. You have a choice to play ball and do what they say, or give them your coins. A third choice is never depositing there in the first place.    

I don´t think that they will reject the deposit. At most exchanges cryptocurrency deposits are fully automated.
Therefore the funds will be credited to your exchange account even if they are tainted.

It is more likely that the account will get frozen after the deposit or they will at least ask you
to prove that you obtained the cryptocurrency from a legitimate source.

Exchanges are not going to necessarily to look at "taint" percentages (which are often wildly inaccurate). If the exchange has good reason to believe that you are depositing money from certain prohibited sources (as outlined in their agreement with you), they will reject the deposit and/or close your account.

The threshold for the above is likely proprietary information and is subject to change. Also, if they gain possession of certain information they would not normally use, they will likely use said information if it is reliable.

If there is a centralized exchange which serves your country/state/jurisdiction, then there must be enough of demand for it and so there must be a not insignificant number of other bitcoin users in your country/state/jurisdiction, some of whom would be happy to trade peer to peer. And given you can use payment processors such as Cash App, Zelle, Western Union, etc., you can trade peer to peer with people anywhere in the world.

Trading peer to peer is obviously different than using a centralized exchange, but I wouldn't argue it is any more complicated per se. And it obviously comes with significant advantages over centralized exchanges which makes it all worth it.

This is one of the reasons why I argue that taint is completely meaningless. As soon as coins are involved in a transaction - any transaction - then they could have changed hands in a perfectly legal transaction such as the purchase of some goods from a vendor or a peer to peer trade. At that point, claiming that the coins are still tainted is just plain wrong. If we applied this same nonsense to fiat, then every cent in your bank account could be seized on grounds that someone else somewhere once used it at some point for something shady, even if you earned it in a completely legal way, such as from your employer.

What if they are not your coins anymore? You withdraw your coins from a casino to your private wallet. That's step #1. In step #2, you exchange those coins (or one part of the withdrawn coins) for some other asset and send it to a wallet address provided by the buyer. The exchange wouldn't know that the coins have changed hands here. I assume blockchain analysis companies wouldn't either. Even better if there was a step #3 where the coins move from private wallet to private wallet of the other user before being deposited into an exchange.   

I partially agree with your opinion DEX had less volume/trade than CEX, but the rest I have to disagree.

DEX is easier and fast to set up rather than CEX, because in CEX you need to complete your KYC; take a selfie, driving license, your ID etc and you need to wait few hours or even few days until they approve. If they think your photo are blurred, you need to go back from the previous step and it's time consuming. While in DEX you don't need to wait the centralized party, all depends on you, if you followed correctly the step, few hours your account already done and you can start to buy Bitcoin.

If you ever did P2P trade on any P2P (custodial or non custodial), then you're completely much understand how it's work. I can vouch Bisq since it's the fully 100% DEX, the next is hodlhodl and localcryptos (not DEX but P2P no KYC). The cons of Bisq is they need small amount Bitcoin before trade for their security deposit, this would be a problem for pure newbie which doesn't have any Bitcoin yet. While the cons of both holdhold and localcryptos we need to create an account, this isn't good for anyone who really had privacy concern. Their services can save our data sent to them from our connections.

There are some guides of those P2P platforms.
1. https://docs.bisq.network/getting-started.html
2. https://bitcoiner.guide/hodlhodl/
3. https://localcryptos.com/#how-to-trade

I feel like this is not an option for everyone and to the majority. Many will choose having good time registration/trade to a centralized exchange while confidently giving their personal info than struggling to use and cope to a not user/beginner-friendly DEX.

To be completely safe, stop using exchanges which are anti-bitcoin, anti-privacy, and pro-censorship, by selectively enforcing nonsense metrics with no basis in reality which make bitcoin non-fungible.

I never understand why people's conclusion from the issue of centralized exchanges arbitrary confiscating coins is "Make sure you play by their rules!" rather than far more sensibly "Why in your right mind would you send your coins to an exchange which might steal them?".

So in conclusion, these exchanges that doesn't have any clear response is obviously that they will charge and restrict itss users once caught sending funds from gambling or mixed coins to their platform.

To be fairly safe, avoid sending "tainted" coins to any of these exchanges.

As an often gambling signature participants, what i usually do when the reward is sent to the casino account is

While most of these exchanges are playing trap cards. Even they dont have any specific policy regarding this kind of deposited coins, once they detect their users depositing their so called "tainted" coins, they will just provide you some policy that they have the rights to restrict the account because of etc. and etc.

Further, if they tell everyone "This is how we decide what is tainted", and then later change their minds about something and decide something else is tainted, then you can guarantee they would have angry users complaining that their non-tainted coins suddenly became tainted and their accounts were locked.

No exchange will every give you a straight answer on this, partly because it is so completely arbitrary and meaningless, partly because they want to be able to change things at any time, and partly because they don't care about you and only care about their own profits.

Waiting x amount of time between transactions does nothing to fool blockchain analysis, neither does simply hopping between addresses. They can still see exactly where your coins came from in both cases. Whether or not enough time or enough hops are enough for an exchange to decide certain tainted coins are no longer tainted is anybody's guess, but given the entire thing is so arbitrary then you can't guarantee it in any way.

Don't want to be subjected to taint? Don't use centralized exchanges. Simple.

Chainalysis is the most popular company, we don't know if it's best chain analysis when other company keep a low profile. But i agree 1 hop is unlikely to deceive them if they hire decent chain analysis service.


I'll keep that in mind, but the risk still exist.

I guess it's about how you do it and how much time has passed between those transactions. Let's assume you wanted to transfer $500 worth of Bitcoin from a casino to a CEX and you want to hide the origin of the coins by sending them to one of your wallets first, there are different ways to do it.

Withdraw more than you intend to deposit to your own private wallet days/weeks before sending to the CEX. If the two transactions (from the casino to your wallet and from your wallet to the CEX) confirm in a short period of time one after the other (one block between them for example) it might be obvious that it's the same person initiating them. So it's better to wait. It also doesn't look good if the CEX can see that $500 left a casino, landed in some 3rd-party wallet, and then the same amount minus the fees was immediately transferred to the CEX.   

I think in that particular case, you would have to prove to the support that you are not the one who gambled with those coins, you just purchased them from an alleged gambler. You might be required to show proof where and how you purchased them for them to unfreeze your account or allow you to withdraw the "problematic" funds.

Not really, based on my friends experience and some users in this forum as regular gambler, they're fine using that method until now. Moreover some people usually directly send their coins to CEX and no faced any problem, they're using big and popular centralized exchanges e.g. Binance and Kucoin. I think these CEX didn't froze gambler funds because the legal law didn't really strict about gambling sources, perhaps in the future we will see a change from those CEX just like how Binance propose mandatory KYC.

Anyway I think "conceal" origin is really complicated since any coins that we get isn't 100% free from high illicit sources. Let's say someone is trading via P2P in this forum and all went smooth, but when you send your coins to Gemini. Gemini froze your funds and accuse your funds come from gambling, the thing is you're not a gambler and realized the guy you traded is using gambling sources. I don't know how far Gemini will track your coins to see you're conceal the origin since I believe most of coins already linked with high illicit sources.