RT @monero: The long-awaited Perkins Coie whitepaper is now available!
"Anti-Money Laundering Regulation of Privacy-Enabling Cryptocurrencies"
This 40 page report is the most comprehensive to-date on compliance and Monero and will greatly assist adoption of XMR!
Don't lose the forest for the trees. Did anyone even read the paper?
Most of their suggestions, regarding Monero, if implemented by exchanges and payment service providers would mean a nightmare for everyone in this community except for those select few that are already well connected, have fancy lawyers and "optimal" legal structures.
We as a community shouldn't condone or incentivize this type of discourse, even if it means financial "gains" in the short term. Most of their suggestions if put in practice would be a direct attack on Monero users, and yet here we are, celebrating. As /u/geonic_correctly pointed out this paper feels like a missed opportunity more than anything else.
We as a community need to remain vigilant and not fall for the same traps that have plagued some other projects in this space, code can change, communities consensus can change, be mindful of playing the state apparatus game and hoping that somehow you'll "win" by playing by their rules. You'll lose, badly.
Even if some people would be financially better off in the short term. That was never Monero's goal, keep that in mind.
> playing the state apparatus game and hoping that somehow you'll "win" by playing by their rules. You'll lose, badly.
Get a moral gold medal. I'm happy to see there are still people in this community who refuse this kind of regulatory bullshit. I hate to see many acting like Monero will survive only if it will fit state regulations. Too many seem to see Monero as simply a product that needs to fit as many regulations as possible to become mainstream. I don't care of Monero becoming mainstream and worth 1 bajillion a coin.
People who actually need Monero will never go through KYC or other regulatory bullshit. They will use an half-broken smartphone found in the streets of a city in Rwanda to send money to the rebels who are trying to overthrow the dictatorship.
How did this whitepaper change the community from cypherpunk to regulatory bootlickers? The tech hasnt changed, the people neither: chill man!
EDIT: ErCiccione pointed out to me he didnt write anything like this, I must have read it elsewhere. Anyhow, my apologies to him
EDIT2: I see I mixed up two replies, but that doesnt change the fact I was wrong 😅
Also it's worth keeping in mind that loose community agreements shift, new people join the community, etc
BTC community was mostly cypherpunk at some point, it's far from it these days, sometimes those things change fast.
Monero can still be used outside of regulatory requirements, just like physical cash can. If Monero was made only to fit in such requirements (become neutered to the point it's basically Bitcoin), then I would have a problem with it.
> I'm happy to see there are still people in this community who refuse this kind of regulatory bullshit. I hate to see many acting like Monero will survive only if it will fit state regulations. Too many seem to see Monero as simply a product that needs to fit as many regulations as possible to become mainstream. I don't care of Monero becoming mainstream and worth 1 bajillion a coin.
I think we can close this thread now :)
> They will use an half-broken smartphone found in the streets of a city in Rwanda to send money to the rebels who are trying to overthrow the dictatorship.
Woah, you lean pretty far out of the window here :)
But yeah, has something.
I could have made a softer example about rural asian communities receiving fundings for their farm in XMR directly to their phone from a random guy in australia, but the rwanda rebels thing was a more powerful example :P
On another note, another high-level concern I have is that we as a community will change our culture and start focusing on these "compliance questions" too much, foregoing possible protocol improvements/research because that would potentially mean "delisting". Being not compliant with policies as draconian as the FAFT or AMLD5, would in other periods in this community, not that long ago, been seen as a badge of honor.
Or that we'll become gradually more like the Bitcoin community, more and more focused on "number go up", "institutional investors" and similar crap like that.
This is probably my biggest fear. Luckily that's not the case yet, but i cannot hide that seeing so many in the community being so focused about compliance (not talking about the average guy who only wants to see numbers going up, talking about actual contributors) worries me. Luckily i don't see key developers like moneromooo becoming regulatory bootlickers, so as long as things stay as they are, we are good. On a personal note, i wouldn't really want to be part of a project focused on pleasing institutions and regulations. That's not the reason i'm here.
"To target and lessen the anonymity-related risks of privacy coins, appropriate enhanced due diligence would likely include measures to prove a customer’s source of funds, place of residence, and profession. Other measures may include a requirement that customers describe in detail their purpose for transacting privacy coins (e.g., the holder is a cryptocurrency trader or operates a business in which cryptocurrency is accepted as payment), along with anticipated privacy coin transaction volumes and anticipated privacy coin transaction counterparties."
"Although it would be a blunter instrument for risk mitigation than per-customer analysis, a VASP could reasonably and effectively lessen the overall AML risk of a privacy coin offering by categorically prohibiting customers who are in higher risk categories or geographies from accessing the privacy coin offering"
" a VASP could require supplemental information from a customer before processing a privacy coin transaction (e.g., details regarding the purpose of a transaction, the name and address of the recipient, and contact information for the recipient)."
"Users can reveal an XMR transaction’s details that are specific to their account via key-based functionality that is built into the Monero protocol. Specific view keys can be shared with any third party to grant insight into the account associated with the view keys. This enables users and VASPs to disclose certain transaction details associated with a given account to a third party without publicly disclosing that user’s transactional information. In addition, VASPs can require up-front disclosures as part of their registration process and on an ongoing basis to meet their obligations."
Imagine if all (or a combination of the above) becomes the standard of the industry, is this (as a community) what we are really rooting/lobbying for?
Yes, those are concerns, and I'd rather not have those requirements. However it doesn't stop Monero from being a useful tool. This would prevent people from *not* 'being their own bank'. People can still use Monero to transact and secure their wealth and pay for things without going through a bank or other financial institution.
I don't like discrimination, and this could prevent someone like a cam performer from getting a crypto bank account (even though their services are legal, places like PayPal already refuse to have them as customers). This hypothetical cam performer may not be able to get a traditional mortgage, but they could still rent-to-own. I'm sure other products/services would pop up in the future that would allow for people to more safely 'be their own bank'.
> Imagine if all (or a combination of the above) becomes the standard of the industry, is this (as a community) what we are really rooting/lobbying for?
Eh, maybe. I mean, even if that becomes the industry standard... This community would develop alternatives, as some of them already exist.
The goal of the paper was to prove that Monero can be completely aligned with KYC/AML practices and there's no need to ban it, which would be a lot, really a lot worse than just forcing KYC in the standard exchanges.
Cool. So I don't get your point.
This whole whitepaper is literally just ammunition for when people or other entities come around spewing bullshit that they need to ban monero or something like that because it's impossible to apply the existing regulations to it.
I prefer to have this ammunition than to not have it.
I disagree. This is allready standard practice with normal banks/fiat, as it is with buying crypto from VASPS’s with a bit higher volumes. I’d rather have XMR then USD, being sure there’s no unlimited printing AND I can buy stuff without companies knowing what and where I buy my groceries
Great that normal banks/fiat is the standard we hold ourselves up to these days.
Regarding the rest, if your grocery store were to be using a payment processor they would potentially fall under some of this regulations, were they to follow some of this recommendations it's not necessarily true that "companies wouldn't know where you buy your groceries".
Also, this paper clearly incentivizes entities to discriminate against "privacy coin" (blergh!) users to a degree of scrutiny that "other coin" users are not subject. That in of itself is concerning, it could also be used by current market participants (that deal with monero with no issues) to change their compliance policies to incorporate some of these suggestions. All in all, it's nothing to write home about, let alone celebrate.
I did notice the following references to auditing Monero exist in the paper...
Specific view keys can be shared with any third party to grant insight into the account associated with the view keys.
The confidential transactions feature is a cryptographic tool that allows for verification that no additional XMR has been created or destroyed as part of a given transaction, without revealing the exact transaction amount. ^(42)
Unlike the Bitcoin protocol, Monero users have two sets of private keys and public keys (four keys total). The pair of public keys make up the wallet address of a Monero user, whereas the two private keys (the view key and spend key) allow an individual to determine whether an output is addressed to them (view key) and enables the individual to send XMR and determine whether it has been spent (spend key).^(43) To verify transfers of XMR, a third-party observer must know that the XMR is owned by the individual using it. To enable this verification, the individual using the XMR signs the previously received XMR with the one-time address used, thereby proving that the individual knows the private keys and therefore rightfully controls the XMR that the individual is using. The private view key may be given to others to grant transparency into certain details of particular transactions associated with the address or addresses. Monero also contains an optional text field called “tx_extra” that can store arbitrary data in encrypted format. While this text field can be used for a variety of compliance purposes, this use has not been widely recommended by researchers and developers.^(44)
… which are great!
But I personally would like to have seen a small section to show (via the Monero command-line system or a symbolic representation) some techniques, specific tools, and processes of exactly how legally liable entities or operators can, in PC's confidence, sufficiently comply, maybe with some basic examples for different entity types.
Yes, I remember working on an original high level technical description of how Monero works during the MRL workshop which MyMonero and Tari sponsored and Naveen and I put on. We called it a one-sheet and it was requested for this 'regulatory writeup' work. Its on the MRL workshop minutes from back then, sarang, surae and I wrote it in Nashville, but was years before we saw what we became of it so I'm glad to see the post..
Can I violate the money laundering law as a private person? Suppose I sell Monero on localmonero.co for cash. I cannot check whether the money comes from illegal transactions. I have to assume the innocence of the other person. The money laundering law turns this around. You have to prove your innocence.
With regard to the “ease of crossing borders” factor, privacy coins and other cryptocurrencies present a higher inherent AML risk than cash, which is physically bulky and therefore more difficult to transport across borders, because large amounts of cash would require sufficient physical transportation and passing government border security. But privacy coins and other cryptocurrencies arguably pose a lower risk, in this respect, than cash, card, or paper payment instruments, which can cross borders with no transfer record at all (i.e., not even a publicly broadcast blockchain transaction
Where on-chain surveillance tools cannot be used, a VASP would still have ample controls to address AML risks of privacy coin transactions.
Great work, and well done to all those involved in making it happen.
aminokPlatinum | BTC 1321, ETH 1101, CC 422 | TraderSubs5 days ago
It's very encouraging to see this kind of high-level support for privacy, but I think it needs to be forcefully argued that "anti-money-laundering" laws themselves are a grievance assault on privacy rights.
The term 'anti-money-laundering' is an Orwellian euphemism for warrantless mass-surveillance of private financial interactions, and the existence and steady accumulation of these warrantless mass-surveillance laws is a fundamental affront to a free society.
tempMonero123Platinum | QC: XMR 1070, CC 1014, CM 25 | TraderSu4 days ago
It's important to note that Monero can still be used outside of regulatory oversight just like physical cash can.
Regardless of your views on privacy, you are correct that this means nothing in practice. The only reason that the current regulations are enough in their eyes, is that XMR (or crypto users as a whole) have to convert to FIAT at some point or another to make their crypto holding valuable and at that point there's KYC all around.
So for their perspective there's no need for extra regulations because there's already KYC in one end of the spectrum that applies for (virtually) everyone.
as a huuuuge lover of monero, I strongly disagree. Money laundering is the mechanism that allows criminals to do crime. Its what makes crime profitiable in the first place.
Its why one of the first rules for investigating crime (and investigative reporting for that matter) is "follow the money". Anti-money-laundering laws allow law enforment to follow the money. If buisnesses did not have to follow anti money laundering laws, it would be practicly impossible for law enforment to meaningfully follow the money.
I agree they can go to far, especially when it comes to live government monitering of financial transactions, *especially* if such monitering is done without a warrent. But the current regulatory regime is not like that at all. the US only *requuires* buisness to know their custimer, and keep good records (which any good buisness should be doing *anyways*).
aminokPlatinum | BTC 1321, ETH 1101, CC 422 | TraderSubs4 days ago
> Anti-money-laundering laws allow law enforment to follow the money. If buisnesses did not have to follow anti money laundering laws, it would be practicly impossible for law enforment to meaningfully follow the money.
Warrantless wiretapping of all electronic communications would also allow investigators to "follow the conversation", and discover what people are saying and to who, to uncover and solve crimes, but it would give enormous powers to the state over the individuals, and allow for nearly unlimited abuse and concentration of power in the organs of the state.
Just as warrantless mass-surveillance of private communication is wrong, so is warrantless mass-surveillance of private financial interactions. Anti-money-laundering laws institute warrantless mass-surveillance.
The dangers of totalitarian surveillance far outweigh the dangers of law enforcement not being able to use it to uncover crime. At its worst, the former allows for institutionalized tyranny, as we see in the dystopia that the Chinese Communist Party is creating in Xinxiang. Even milder varieties of mass-surveillance lead to extreme concentrations of power as they create significant information asymmetries between the general public and those who are privy to the information collected by the surveillance agencies.
Yes, investigators wouldn't be able to "follow the money" without these totalitarian laws, but that is the price you pay to have a free society where people are secure in their most basic of rights.
Money has utility to the extent that it is fungible, and to the extent that it is fungible, then criminals will be able to make use of money they generate from illicit activity. You don't eliminate fungibility in the name of preventing crime, just as you don't ban encrypted communication in the name of preventing crime.
If the problem is organized crime generating hundreds of millions of dollars in illicit revenue, then you go after the source, in the activity that is generating the revenue. You don't try to "trace the money" after the fact, once they have already acquired it. The kinds of organizations that produce these huge revenue windfalls leave plenty of evidence trails, in the physical merchandise they move, the people they employ and the victims they create, that can allow any competent law enforcement agency to begin and prosecute an investigation against them.
The investigative toolkit available to law enforcement in a society that respects privacy/due-process-rights is still significant. It includes the ability to plant under-cover agents in criminal organizations, to pay and pressure insiders to turn confidential informants, to get a warrant to conduct targetted surveillance, etc etc.
And the state can use these tools to focus on the meaningful crime, instead of the "money laundering" that happens after the fact. For example, if it is targeting drug cartels, it can focus on the movement and trade of the drugs themselves, and not a second-order effect of the trade, which is the movement of the money that is generated from the drug sales.
It is much easier to detect, trade and prosecute people for the trade of highly restricted Schedule I substances like fentanyl, which is a physical substance, than to stop the flow of cash that is derived from such activity, which will never be highly restricted, and can be done digitally and through innumerable channels. The state should be focusing on the prior, not the latter. By the time the criminal organizations are doing the latter, it is already too late anyway.
In other words, if the state cannot stop a criminal organization from trading highly restricted Schedule I substances like fentanyl, to acquire hundreds of millions of dollars in revenue, with all of the legitimate tools at its disposal, it is not going to be able to stop these organizations from moving the money they receive from that trade, regardless of what surveillance powers it is given.
The argument that the state needs all this control, to monitor everyone's private financial interactions, is just a cop-out to avoid doing the real work of policing and prosecuting real crime, to exert more government control over the law-abiding majority, and to create more positions in the private banking sector and government bureaucracies, for highly paid "AML experts" and "consultants".
While I applaud the effort, it's disappointing that they decided to amplify the "privacy coin" meme. "Privacy-preserving" or "privacy-enabling cryptocurrencies" should've been used throughout. I would've also liked to see a section on "privacy-eroding cryptocurrencies", starting with Bitcoin, and how that affects the individual user.
This was an opportunity to change the narrative around this technology and to underline how Bitcoin's radical transparency is the niche, not Monero's privacy-preserving technology. To explain to regulators and others that Bitcoin is unlike *any product* currently available in the financial world. Does any bank offer a transparent account that anyone can peer into? Why not?
The paper also misses some of the more important benefits of fungible money. Guilt by association is a thing with Bitcoin. You need to not only be sure of the person you receive your Bitcoin from, but also be careful who you spend it with, since that person might commit a crime and you are the source of his funds. Bitcoin erodes freedoms on so many levels it is preposterous.
All the points you make are valid but it also seems you are ignoring what a good thing this is. Yes, it’s not perfect. But yesterday there wasn’t a specific legal axiom for exchanges in the USA to support Monero alongside KYC/AML and today there is. Let’s celebrate that Geonic.
Does it really matter? Cryptologists, mathematicians, scholars, security experts, all have testified before congress/senate stating the backdooring crypto just won't work. Yet the keep writing new bills and will until the anti encryption passes.
Tons of greats quotes in this one, including some where PC suggests privacy coins are lower risk in practice than Bitcoin, but the conclusion perhaps put it most simply:
"Allowing VASPs to support privacy tokens under current, tested AML regulations strikes the appropriate policy balance between preventing money laundering and allowing beneficial, privacy-preserving technology to develop"
1. It will help random new guy that heard of Monero and then heard FUD how not complaint Monero is with regulations and how will be delisted from all exchanges.
2. It will help small exchanges or small merchants or any service that plan to use or use Monero and was uncertain because of the FUD. Now will normally continue doing what they were doing or start doing it with Monero. And they will point to the paper when people will ask about it.
3. It will help you and me to explain to people, that FUD how Monero dont have future and how only surveillance coins will exist, is false.
Well, for a while it has been a view that exchanges are hesitant to list monero because of regulatory concerns. This paper seems to allay fears that privacy coins are inherently incompatible with current regulatory regimes.
We conclude that privacy coins protect legitimate individual and commercial privacy interests and that existing financial regulations sufficiently address the AML issues that privacy coins present.
Not only do privacy coins provide public benefits that substantially outweigh their risks, existing AML regulations properly and sufficiently cover those risks, providing a proven framework for combatting money laundering and related crimes.
Thank you; (and) yes this is a moment we all need to seriously appreciate and remember. We are here in a place of important historical remembrance where we prove our freedom is justifiably interwoven with truth and privacy as well as anti criminal pursuits.
Beautifully written and now “peer” reviewed.
Thank you to all who have made our wonderful and abstract journey possible.
Have a beautiful day.
Lawyers think whatever you pay them to think.
I wouldn't take what they've written as a personally held opinion. Otherwise they would've written it without being commissioned by Tari Labs & Co (and it would've taken them less time, but, you know... they charge by the hour).
Does anyone really think Perkins Coie would refuse to argue FOR the government (or any other institution) and AGAINST privacy-preserving cryptocurrencies, if they had approached them first? Because they believe in the technology? Please.
Not arguing that. I'm saying that I can't judge their moral character by their professional output.
>Does anyone really think Perkins Coie would refuse to argue FOR the government (or any other institution) and AGAINST privacy-preserving cryptocurrencies, if they had approached them first? Because they believe in the technology?
What do you think about this part?
I was replying to someone who had said that the lawyers "have their head on straight". That implies a moral judgment.
If they had refused to argue for the other side or had done the work pro bono, because they believe in the cause, I might be inclined to agree.