[immibis]

Apparently "Liberty Reserve" was a (now defunct) digital cash service. As in you'd mail them cash and they'd add it to your account, and you could withdraw and they'd mail it back, minus a fee. And you could log in and transfer it.

Apparently it powered online drug marketplaces before Bitcoin existed.

[Ozarkian]

You're not wrong. But Liberty Reserve was able to be shut down because it was centralized. Banking regulators in various western countries leaned on the Costa Rican authorities to shut it down.

Try doing that with crypto. Who are you going to arrest?

[tpxl]

> Who are you going to arrest?

Every on- and off-ramp provider. EU legislation has basically created a database of real person to wallet mappings (for some subset of wallets). You can't take money from a wallet if you don't know who it belongs to (if you're an exchange anyways). The checks are a bit soft (ie. self attestation and stuff), but the public ledger part of crypto makes tracking far-far easier than with traditional banks.

The end game for this is that people in the West (and whoever they can pressure) won't be able to buy crypto to buy drugs or sell it when selling drugs, making it useless on a big scale.

[DaSHacka]

> Every on- and off-ramp provider.

This is essentially the purpose of localmonero and similar offerings. Trading cash for Monero in a p2p manner is going to be extraordinarily difficult to halt.

[bluGill]

The transaction is traced and and eventualy it goes to someone with a real bank accont and the tainted money is refused.

[immibis]

First, the chain only sees the monero side of the transaction, not the fiat side, of which it's likely that no records exist at all after a short while. It looks identical to a payment for a good or service and it also looks identical to a transfer between two of the same person's wallets.

Second, Monero is still thought to be untraceable. In fact regulated entities are banned from exchanging it in the EU precisely because they can't trace it. (Zcash is also banned under the same law, but is considered technically inferior because not all transactions are private.)

Third, what do you even mean? Do you mean they'll go back to the last time those coins passed through a regulated on-ramp, and prosecute that person? For what? Buying cryptocurrency, then buying a legal product with cryptocurrency, is not illegal, and even if the product was illegal, the government most likely couldn't prove that. Also, the on-ramp was probably in a different jurisdiction. Perhaps for something like "acting as an unlicensed money transmitter" which is a thing they have done against users of cryptocurrencies. If they prosecute that in large quantities, will it fly?

Or do you mean they'll wait until someone takes the crypto to a regulated off-ramp, and then prosecute that person? For what - undeclared income? As far as I know, trading one cryptocurrency for another is a non-taxable currency exchange, at least in some EU countries, so they can't get you for that. And what if they declared it? Again, they might try "acting as an unlicensed money transmitter" of course. What if it never gets to a regulated off-ramp and just circulates peer-to-peer forever? It's more likely tyou think, since remember, regulated off-ramps are strictly banned.

[DaSHacka]

Assuming you mean the cash itself, tracing dollars isn't common with other kinds of small-scale illegal transactions like drugs and firearm sales.

Why do you believe it would suddenly make peer2peer cash to cryptocurrency exchanges unviable?

And if you meant tracing the Monero itself, I suggest you read up on how Monero works—and how it differs from BTC—first.

[immibis]

Didn't they already shut down localmonero?

[eru]

> The end game for this is that people in the West (and whoever they can pressure) won't be able to buy crypto to buy drugs or sell it when selling drugs, making it useless on a big scale.

I agree with you on targeting the on- and off-ramps. But I think you got your use cases wrong.

Crypto has two major use cases these days:

- speculation (aka gambling)

- ransomware payments

Buying drugs is pretty far down the list. And so are pretty much all purchases of normal goods and services.

[jagged-chisel]

If law enforcement started arresting larger actors (traders, managers of exchanges, etc) and continued working their way down the list, it wouldn’t take long to have a chilling effect on crypto.

[lawn]

The difference is that with actual cash you give cash directly to someone. With "Liberty Reserve" you introduced a third-party that did this for you. These things aren't the same.

With crypto you don't hand over your coins to a third-party for safe keeping, you instead send coins directly to one another, just like with cash.