End of Anonymity: Will you enter the white or the black market?

[Peter90]

Anonymity is widely considered one of the features characterising cryptocurrencies.
It had to be one of the reasons boosting cryptos' adoption, as a benefit compared to traditional bank-based transaction processes.
Some cryptos owe their success to the level of anonymity they offer.
On the other hand, Govs don't like anonymity, so that anonymity seems to have become an obstacle for wide, in particular institutional adoption of cryptocurrencies.

I just read the following article.
It seems that the future of cryptocurrencies will include two areas, a white and a black market.

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"The G-20 Summit in Japan brought 20 finance ministers and central bank governors to officially commit to implementing the guidelines of the Financial Action Task Force (FATF). The lack of regulation in the crypto markets can be fertile ground for money laundering, terrorist financing, tax evasion, etc. Therefore, it is not surprising why the FATF guidelines are calling for the end of anonymity in the crypto market.

In fact, after the G-20’s determination to comply with the FATF standards, we are soon going to see their implementation around the world, and crypto users will be required to put aside their privacy — and for some, even their ideology — in order to use services under the control of the regulator.

Pretty soon, what we are going to get is two separate groups of crypto addresses: clean crypto and black-market crypto.
To get into the clean group, you must declare your crypto addresses, account numbers, location information, beneficiary’s name, etc. If you choose not to disclose this information, you will be automatically assigned to the black-market group.   

The standards require crypto exchanges to perform extensive Know Your Client (KYC) and Anti-Money Laundering (AML) procedures. Each address will be identified and linked to a specific person, and there won't be any anonymous addresses coming in and out of the exchanges. This might be the end of the crypto world as we know it.

While many users will mourn the loss of their privacy, the bright side of these standards is the ability to integrate the crypto market into traditional financial markets, which can lead to a significant increase in usage and the ability to cash out crypto to fiat within the banking system. 

However, because of the anarchist nature of some hodlers, there will be some who choose to retain their privacy and to be a part of the black-market group.

As Jeff Horowitz, chief compliance officer at Coinbase, said: 
“I get why the FATF wants to do this. But applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement.”

Therefore, it is necessary to carefully consider which side to belong to — because once you go black, you can never go back. If you choose to have your addresses in the black market, it will be tough to "come clean" and use them without the risk of facing criminal charges."

https://www.zerohedge.com/news/2019-08-04/fatf-regulations-end-crypto-anonymity


I don't share the author's view that participating to the black market will be considered against the law: In my view, the black market will be allowed, there will be black market exchanges etc.
Those avoiding the white market simply won't be able to connect their ewallet to their bank account.

So, will you choose the white or the black market (or both)?

[aiviaa485]

Blackmarket like decentralized Exchange: IDEX, ForkDelta will continue to be sought by those who like Anonym.
If we can take the longing space in this case, we will find the name of the increase and decrease in the price of tokens which is very unreasonable.

Overnight we can become rich and then the next night we become poor.

[masterrex]

I think anonimity was already applied in crypto to crypto trade, and if you trading with "crypto to fiat" anonimity was not applicable due to the strict AMLC regulation in that case we should follow the government regulation to make it legal so for me im ok without anonymity just by exchanging my crypto-holding to fiat.

[Peter90]

@masterrex,
if I understand you right, you are saying:
Anonymity in exchanging cryptos for cryptos,
no-anonymity in exchanging cryptos and fiat.

I think that would run against AMLC too, as it allows criminals to use cryptos to move value anonymously: A (criminal) sends anonymously cryptos to B, B converts cryptos into fiat.
Authorities couldn't know where B's cryptos come from.
B could say, he doesn't know either.

Problems would also arise when cryptos get accepted from the vendor as means of payment, i.e. when fiat is left completely aside from the economic transaction: I go on holiday, I book a room in the hotel, I pay with Bitcoins.
No invoice from the hotel owner, no value added tax.

The hotel owner does the same: goes on holiday, pays with Bitcoins.
Let's suppose, at that time he got 10 Btc from me, and now he pays 10 Btc for holiday.
Ultimately his Btc account is zero, so he pays zero taxes, even if he had an income (from me).

[ZionRTZ]

It is funny now that what crypto is fighting in the early days has now become the "savior" of crypto for mass adoption.

This is quite complicated but I agree to this statement

“I get why the FATF wants to do this. But applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement.”

The increasing regulations may actually help cryptocurrencies become what it was intended to be (peer-to-peer). No fiat or centralized exchanges involved. Just two people using crypto as their medium of exchange.

[Rofiastuti]

Blackmarket like decentralized Exchange: IDEX, ForkDelta will continue to be sought by those who like Anonym.
If we can take the longing space in this case, we will find the name of the increase and decrease in the price of tokens which is very unreasonable.

Overnight we can become rich and then the next night we become poor.

That' s very long thread, and I have  same think  amout you guys, that white and black market  is mean desentralized exchange, we have to choose and do the best as we can and understand, becarefull in order not to do wrong step in trading.

[Peter90]

It is funny now that what crypto is fighting in the early days has now become the "savior" of crypto for mass adoption.

This is quite complicated but I agree to this statement

“I get why the FATF wants to do this. But applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement.”

The increasing regulations may actually help cryptocurrencies become what it was intended to be (peer-to-peer). No fiat or centralized exchanges involved. Just two people using crypto as their medium of exchange.

FATF = financial action task force on money laundering
Thanks Zion, a new thing learnt today 

Cryptocurrencies were intended to be just that, currencies.
Actually I think they were intended to be money altogether, which involves being not only medium of exchange but also store of value.
But this is another story, so let's leave it aside for the moment.

In order to be a currency, means of payment, a crypto must be adopted by both seller and buyer.
That's the problem.
Currently the case where both seller and buyer adopt cryptos as means of payment, is very rare.

Actually, in order to complete a transaction, seller and buyer need not only to both adopt cryptos, in general, but they need to adopt the same crypto.
If it has to be a peer-to-peer transaction (P2P), they cannot convert one crypto into another, as a P2P transaction is by definition a transaction without Exchanges involved.

The case of both a buyer and a seller accepting the same cryptocurrency as means of payment is extremely rare.
We can hope that it will change in future, but currently it is like that.
That's why currently fiat and Exchanges are needed.
That's why P2P transactions today involve only traders, not buyers and sellers of goods/services.

In other words, currently P2P means cryptocurrencies not being able to be currencies, except for very, very rare exceptions.
(I know about the internet lists of businesses accepting cryptos, but still, in my city, just to make an example, I guess 0,000...1% of buy/sell transactions could take place through P2P cryptocurrencies transactions, given the requirement mentioned above).

I like P2P.
I like anonymity.
But more than that, I dislike banks and fiat currencies, and I think blockchain currencies were born in the first place to do that: circumventing banks and offering an alternative to depreciating fiat currencies.
It's not a coincidence that cryptos are most popular in countries with high inflation.
It's not a coincidence that all major banks are creating their own Stablecoins.

So, I'm not sure about the idea that regulations run against the "cryptospirit", so to speak.
It is possible - I'm not sure - that the original cryptospirit was to eliminate banks and depreciating currencies, with P2P and Anonymity being means to that, and that later this idea got corrupted, elevating Anonymity to a goal per se even at cost of cryptos not being able to become a viable alternative to fiat.

I think that - as much as I don't like them - today regulations are necessary to allow cryptocurrencies to become what they were supposed to be, i.e. currencies.
I don't exclude the possibility that tomorrow a particular crypto becomes so widespread that it allows to avoid fiat altogether.
In that case, widespread P2P could become possible, and with that more anonymity than in case of traditional bank transactions.

[Peter90]

"Cryptocurrency is your own property.
As long as you know the password / passphrase of your digital wallet, the crypto coins are completely under your management and ownership and no one else can use it.
This is in contrast to the money you put on a bankaccount, which from a legal point of view is no longer yours. When you deposit money into your bank account, you become a creditor of the bank, that manages your money on your behalf.
In transactions that you carry out with ‘your money’, the bank acts as an intermediary between you and a third party. In regard to these transactions, you trust that the bank will perform the transfer as you intended.
It works differently with cryptocurrencies. You immediately do business with other people without the intervention of a bank or third party. Transactions with cryptocurrencies are peer-to-peer transactions or transactions from people to people."

https://www.mobisun.com/blog/10-benefits-of-paying-with-cryptocurrencies


"In a traditional banking or credit card system, you effectively turn stewardship of your funds over to a third party that can exercise the power of life or death over your assets. Accounts may be closed without notice for infringements of a financial institution’s Terms of Service – requiring you as the account holder to jump through hoops in order to get yourself back into the system.
Perhaps the greatest of all advantages of cryptocurrency is that unless you’ve delegated management of your wallet over to a third party service, you are the sole owner of the corresponding private and public encryption keys that make up your cryptocurrency network identity or address."

https://blog.finjan.com/advantages-of-cryptocurrency/


This is what make me love cryptos.
Bye-bye banks.
They create fake money out of nothing.
They lend you that fake money.
They enslave you and get rich doing it.

In my view, the difference between bank lending interest and usury is not a conceptual one, is just quantitative.
If in order to get rid of those institutional usurers I have to undergo KYC procedures and sacrify part of my anonymity, then be it.

[Peter90]

Why Regulation Is The Best Thing For Crypto

"It’s part of crypto’s DNA to be unregulated, some might say. It falls outside the scope of government and should remain so for all the reasons it was created in the first place.

But if crypto is the future and there are valid concerns, then surely these should be addressed. If we want crypto to be accepted and become part of our everyday lives, then we need to engage in the debate and embrace reasonable and responsible regulation. Even the most devout supporters, who wish nothing more than to see crypto succeed on a mass scale, could agree that the growth of this industry depends, in part, on the establishment of safe, fair and reliable market conditions.

Similarly, increased involvement in the industry from traditional market participants in finance, like Goldman Sachs, JPMorgan Chase and Fidelity Digital Assets Services, can only add further impetus to this debate — especially considering the recent findings of a Fidelity Investments survey, which revealed that unclear regulation is among the major obstacles deterring institutional investors from adding crypto to their portfolio."

https://www.zerohedge.com/news/2019-08-28/why-regulation-best-thing-crypto


The article's tone is slightly too regulation-friendly, but once put that aside, 2 comments:
a) institutional investors.
These are the entities whose investing behaviour ultimately decides if a market collapses or flourishes.
Institutionals have statutes which prevent them from investing, trading or using unregulated financial products.

b) The unregulated market - what the thread's title refers to as black market - won't disappear.
It won't be considered illegal.
Regulation doesn't mean that crypto users will be forced to give up anonymity and P2P.

[Contagem]

Many people want to remain anonymous using cryptocurrencies, I also like anonymity more. But we are all already passing KYC when we register on crypto exchanges, during the ICO and Bounty campaigns, so we do not have complete anonymity. I think that we don’t need to mix the wallets that we use for legal payments and those wallets that can be discredited by purchases or transfers on the Dark Net network.

[Alcor]

I think that anonymity in cryptocurrency will continue to exist, no matter what new rules the states come up with. We all know that offshore zones have long existed in which it is very easy to wash dirty money. Such zones are needed by everyone, including states, officials, business representatives and ordinary citizens. It should be expected that decentralized exchanges will flourish in such zones, in which financial transactions will be conducted anonymously.

[Peter90]

@Contagem, exactly.
One wallet for the white market, connected with your bank account, no anonymity.
One for the black market, more anonymity. It doesn't need to be Darknet, but it's an option.
Both legal.


@Alcor, yes people need a sphere where anonymity (privacy) is preserved.
That mean the black market...
Cash...
Anonymous precious metals acquisitions...
As long as the black market is legal and allowed, I have no problem with crypto-regulations.

[Peter90]

Talking about the main point of cryptocurrencies: Anonymity or circumventing the banks?

On the occasion of Bitcoin's 11th Birthday, I saw today - first time for me - Nakamoto's Paper.
Look at the Abstract

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.

While in the whole abstract there is no mention of privacy, the possibility of avoiding banks (financial institutions) is mentioned in the very first sentence.
For me it's clear that Bitcoin's main point wasn't privacy but offering us a way of freeing people from the banking system.

[Fenix]

I think that our entry into the white or black markets will depend on many factors. In the end, I think it will depend on the existing opportunities in the cryptocurrency market. If such opportunities exist, then people will always at least partially use the black market to avoid taxation. True, the degree of our visits to the black market will depend on the level of security in it.
Also, much will depend on the national legislation of the country of our residence, that is, whether the degree of such risk will be justified.

[Noverteno]

Of course, we will, whenever possible, avoid paying taxes to a reasonable extent, especially if this tax is significant. However, we still have to pay taxes. Therefore, we will use both white and black markets to use cryptocurrency, depending on the circumstances and opportunities.
The degree of our anonymity will inevitably fall over time, because states will establish new rules that will limit it.