soul'ed
Must start with acknowledging the sad fact of us living through yet another war while many in the 2nd & 3rd world have not yet ended. I hope & pray this one ends soon.
Over past two weeks there have been many mentions of sanctions evading capability that crypto provides; even Senator Elizabeth Warren brought this up this week at House Financial Services Committee. There are few facts media, pundits & politicians are stepping around.
- all major crypto exchanges with deep enough book to move multiples of tens of millions (if not billions) are bound by AML & KYC. Moreover, they keep bothering their clients with proof of wealth/funds to the extant that I sometimes wonder if their job is to annoy clients so they go away! e.g. I am KYC'ed on at-least 4 exchanges; yet I have had to provide more documents for proof than I heard my sibling get requested for Interactive Brokers.
- another example from personal experience - I have had to on number of times find proof of my original purchase of 2011/2012 which involves hunting down bank transaction going back a decade now. Compare that with how I got a mortgage from a globally top 10 bank couple of years ago and all they cared about was latest salary slips and a tax statement.
- recent arrests of Bitfinex related hack is a concrete proof of how advanced blockchain analysis software has become that even tech-savvy tools available to obfuscate origins of coins (e.g Tornado Cash for ETH, Samourai for BTC) are largely breakable.
- same arrest proves billions are impossible to launder - I doubt an oligarch used to private jets & super yachts will be able to have same lifestyle with gift card scams.
- finally, the whole blockchain ledger is auditable - anyone using it to move any ill-gotten or sanctioned money is hunt-able to the extent that even US treasury themselves admit albeit in a very subdued manner (showing its more of a political ploy than a technical limitation)
Sam Sutton
Now coming full circle to questioning the use case of crypto if all is traceable - why even bother? Answer to this is hopefully becoming obvious to the 1st world populations:
- Canadian donators to Canadian trucker protest
- population of sanctioned countries (e.g. Russia)
- population of a country defending an invasion (e.g. Ukraine)
All 3 above categories have largely lost/degraded access to banking services due to their government's decisions / events outside of their control. However, populations still need to feed themselves, negotiate transport to exit war zones, attempt to settle their dependents; aka populations need to have an asset they can utilise when Bank stop services or run out of money. This is the very reason within hours of war starting, one of biggest Ukrainian crypto exchange, Kuna, was trading Tether at $1.10. Flight to pseudo-dollar had begun. Same sort of demand for Tether was seen on nearly all International crypto exchanges - even fiat pairs against Tether were impacted (e.g. USD/EUR on Coinbase was up nearly 1%).
Furthermore, as populations forcibly migrate, there is only so much they can physically carry so one avenue to transfer assets is to move them off exchanges into personal custody wallet. Why? Personal custody wallets, e.g. of BTC allow you to create a wallet with a seed phrase. All you need to do is remember that seed phrase (yes hard thing to do when you are under huge stress). Nevertheless, if you can remember the 24 word seed phrase (or somehow store it across safe places - e.g. X different email addresses or data stores) then you can recover access to your assets anywhere in the world without a need to carry any gadget.
Of course, the nail in the coffin of above x-border asset transfer is how to KYC + AML if you are a refugee running away from a war zone; e.g. if I had to urgently exit say CountryA, I am not carrying my CountryA tax returns with me across hostile borders - conclusion: its not so easy to launder crypto nor easy to use your own assets if you are unable to prove origin of funds. There is still lots of work to do if crypto truly wishes to on-board the masses.
That leads me to couple of shenanigans that only happen in bear markets:
- folks complaining about companies that are changing the interest levels for crypto assets - e.g. crypto.com from 14.5% to lower range between 7% and 12%, with a max ceiling for clients with assets in excess of $30k! entitled much?
- many high conviction crypto platform developers are slowly leaving (e.g. just today more info has come that Andre Cronie & Anton Nell have quit the space). This is what happens when eyeballs start to drift away, boredom after making too much money creeps in, burnout after thinking crypto is a race to be won within a year or two instead of a marathon over decades. It'll be interesting to watch how some projects that Andre worked on progress (e.g. Fantom -
FTM, Solidly of Jump Crypto)
Lastly, it's been interesting to see $50.0m+ donated directly to the crypto wallets of Ukraine and then for details to emerge that 40% of the suppliers are willing to accept crypto as payment. Of course, not every donor thought that the money will be used to buy weapons, nevertheless, this proves there is abundance of crypto capital willing to fund countries & exit liquidity exists for such quick turnarounds.
Olga Kharif / Bloomberg
How does a country KYC/AML itself?
