[matthewdgreen]

>And we have to admit that Bitcoin, ZCash, Ethereum (Tornado Cash) and other cryptocurrencies are facilitating that. ... After all, transactions are all public and once you can label one wallet address, you can perform all sorts of graph analysis and learn a lot. Contrast that with trying to subpoena banks to follow money trails.

The mainstream banking system has built up an infrastructure of laws and procedures designed to guarantee transaction and identity confidentiality (e.g., laws alone: RFPA, GLBA, FCRA, GDPR and many more.) These privacy protections aren't some quaint byproduct of another era, they're requirements for any working financial system. You can't have your private banking data oozing out all over the world: this is terrible for business and fundamentally unsafe for users. It's unsustainable in the cryptocurrency sphere as well, but crypto is mostly a toy that nobody uses for real applications so these weaknesses aren't a killer -- yet.

The traditional banking system squares the need for privacy and desire for AML by placing confidential banking data into closed systems which share it with law enforcement upon presentation of a subpeona. Most cryptocurrencies deal with it by, basically, YOLO. But none of that is sustainable.

Worse, it hurts the good guys and hides the bad ones. Traceable blockchains put you into a regime where the clever launderers will find ways to obfuscate their transactions, and everyone else ends up with an unusable system that dumps their business secrets into the hands of any competitor who can write a check to a tracing company.

(Full disclosure: Zcash scientist here. But we created the tech for a reason, and fear of a broken 'panopticon' banking system was a big part of that.)