[tsimionescu]

They could easily ban any BTC traded by a DEX that offers BTC/XMR exchanges, and any BTC that comes from a pool that also contains money that participated in this etc.

If the US government wants to ban an XMR, it can ban XMR.

[__MatrixMan__]

I don't think it would be so easy. How does the government figure out which addresses go with the DEX offering BTC/XMR?

I suppose if they could buy XMR with BTC and see which output addresses were involved with that transaction--those would be addresses controlled by users of the DEX. And then they could buy BTC with XMR, harvesting a few more addresses.

But if they run analysis like that continually they're going to end up paying a lot of money to the DEX in fees.

In fact, the exchange might not even need real users at all. They can just generate enough noise to attract the government's attention, and then soak up the government's money while letting the government spy on a bunch of robot activity.

It's gotta be one of these:

- ban crypto entirely

- give up on drug prohibition

- burden taxpayers with an endless game of whack-a-mole which slowly transfers value out of the US economy without achieving meaningful enforcement goals

I've got a guess about which one it will be.

[tsimionescu]

Doesn't the DEX have a specific wallet (or several) that you send/receive crypto to/from, on the ETH or BTC chains? If so, then it's easy to ban anyone from interacting with a DEX which advertises XMR. You don't just ban those who traded XMR with the DEX (which is costly), you ban anyone interacting with it at all (which should be easy to check on the classical block chains).

[__MatrixMan__]

A "wallet" is a client side concept, all the blockchain sees is "addresses" (we're talking BTC here, but it's common elsewhere too). Most wallet software will create many separate addresses for a user and the "wallet balance" will be their sum. Which addresses can be correlated with each other by an adversary will depend on usage patterns.

For instance if you receive $5 and then later send $5, your wallet can just send it from a single address, so none of the other addresses in your wallet can be correlated (via chain analysis) with that transaction. On the other hand, if you have addresses with $2 and $4 and you wand to send $5 then both will be involved in the transaction, plus you'll be getting a new address where you get the change ($1) back.

It would be the same for an exchange. A single address (or a hard-coded list of them) would be a centralizing feature, if it has that, it's not a DEX (because whoever controls the keys for those addresses controls the exchange). A DEX would have to make buy/sell orders happen based on some set of addresses that were not around for the founding of the exchange. Likely, those addresses would also not stay around for its lifetime. You'd generate them as needed and forget them when they no longer served you (I suppose "you" are a DEX node in this scenario).

What's uncertain is just how interconnected they'd have to be. On one hand, you want to keep the list of known associates small so that token taint doesn't spread to all users of the exchange (which is what you described in your previous post). On the other hand, maybe you want the list of participants to be large enough that it's not practical to send an agent to kick down each door in the list.

If anybody can find the maximally infuriating size here, I'd trust that it's the kind of person who would write a DEX.

[notch898a]

Lol so if I send BTC to a friend overseas and they use it on their ancapworld exchange or whatever that is legal in their 3rd world shithole, then suddenly that BTC is banned from ever entering the first world again?

The only way I see this kind of works is if they ban crypto in general, and then ban cash in the mail too. Oh yeah and ban foreign trade, because as long as it's legal somewhere else you can spend XMR in THAT country in the form of importing goods to the US and then sell those goods for cash. We're talking about bits in the ether, and unlike with bitcoin at least to our knowledge the public ledger is not traceable. Seems like a tall order.

[tsimionescu]

Yes, they could declare any exchange that offers XMR to customers as banned, and no financial institution that trades with that exchange would be allowed to trade with a US bank. That's how US sanctions typically work. Most likely, that exchange would quickly stop offering XMR trades itself.

And even if they didn't, that BTC could indeed no longer be allowed in the US controlled banking system (which is far larger than the West).

Of course, if your friend were able to redeem buy actual goods for XMR and send those back to you, great. But what goods vendor would want to own XMR in a world where no institution that does business with banks would want it?

Note that what I'm saying is not purely theoretical - this is the status of Tornado Cash - where they went so far as to arrest developers of that. And banned BTC also exist - there are BTC that are illegal to own, and wallet addresses that are illegal to trade with.

[notch898a]

Your points are taken, may rebuttal would be that monero is only worth at most about $3B and that much value is easily captured outside the banking system. It seems like one of those scenarios that will require a gargantuan effort in practice and at best you end up with drug-war style penalties without even choking out the lions share of the value, and even if you do something else just takes its place. It would really pain me to see my country going down that path again, but history does have a way of repeating itself.

[runnerup]

> then ban cash in the mail too

I mean, yeah this is already done. Over $10,000 requires you to file a FinCEN Form 105. The point isn't "you can't send money" its "The US government only wants to allow systems to exist in which it knows who/what/when/where about any non-trivial sized transaction."

If there's an auditable/subpoenable record, they're happy. If not, they're not. Right now they're "not happy" about XMR. Some day they'll ban it.

As for ETH/BTC<-> XMR they'll probably ban that too. Not from a technical perspective but more like "if we catch you sending ETH to that Russian XMR exchange we'll prosecute you."

[notch898a]

Honestly banning cash would be one of the easier things to do, but I don't think what you've said is necessarily true.

I cannot offer legal advice here, but my understanding is if Bob in NY has the fantastically idiotic idea to send $100k through the mail to cousin Suzy in CA, he wouldn't be violating in laws by not filling out the 105 or IRS 8300. He's not engaging in a trade/business and the money is not leaving the borders.

[runnerup]

I meant internationally, domestic cash transactions don't currently have reporting requirements per se. Most domestic cash mails would eventually reach a magnitude large enough to meet a reporting requirement for sales tax, 1099-MISC, gift tax, etc.