[Karrot_Kream]

> Stablecoins are a potentially huge vector for this kind of badness, so it would be unwise for Cloudflare to try to yolo this (but they probably will, because almost all tech companies try to work with finance this way).

Do you have any proof for this assertion or is it time to milk crypto cynicism for upvotes on this site again? The GENIUS Act (which regulates stablecoins) specifically calls out complying with AML and sanctions lists. So there's a clear regulatory regime.

[disgruntledphd2]

> Do you have any proof for this assertion or is it time to milk crypto cynicism for upvotes on this site again? The GENIUS Act (which regulates stablecoins) specifically calls out complying with AML and sanctions lists. So there's a clear regulatory regime.

Look, it's a fact that lots of criminals use cryptocurrency (see all of the ransomware attacks over the past decade). Secondly, crypto has 100% been used to get around capital controls (particularly in China some years back).

I assume that internal drug syndicates are using crypto (as it makes sense for their business).

Now, what do stablecoins offer here? Simply put, if you send your crypto to some stablecoin issuer, then you can redeem for fiat. There's clearly substantial ML risks here, and more particularly lots of unsophisticated (from an AML perspective) counter-parties here. More specifically, the models used for transaction monitoring and reporting are less likely to pick up on the signals associated with crypto ML/crime activity.

Like, this seems super clear to me, and I'm not making any value judgements here (personally I think that stablecoins/crypto are mostly turning into regulatory arbitrage, but that's not germane to my point here).

> The GENIUS Act (which regulates stablecoins) specifically calls out complying with AML and sanctions lists. So there's a clear regulatory regime.

You should look at the penalties for getting this wrong. Particularly in OFAC, they are no joke (personal responsibility for issues). And untested regulatory regimes tend to get altered based on what happens in the market, and this is gonna be a wild ride.

[Karrot_Kream]

I'm not sure what point you're trying to make. The best I can make out of it is: lots of criminals use cryptocurrency and cryptocurrency has been used to get around capital controls so any use of cryptocurrency is suspect. This seems deeply unserious to me and doesn't even begin to engage with stablecoins. Fiat is being used for all of those things. The trick, as always, is to observe that legitimate flows of money overwhelm illegitimate flows. Even then I'm not sure this is true of fiat but I hope it is for the big fiat regimes at least.

[disgruntledphd2]

> I'm not sure what point you're trying to make. The best I can make out of it is: lots of criminals use cryptocurrency and cryptocurrency has been used to get around capital controls so any use of cryptocurrency is suspect. This seems deeply unserious to me and doesn't even begin to engage with stablecoins.

The point I'm trying to make is that there's loads of dirty money in crypto (I think that's fair given all the ransomware). Banks/financial institutions who support crypto off-ramp are gonna be hard pressed to determine how much of the crypto assets they see are legitimate vs criminal.

So, the likely outcome of lots of crypto/stablecoin providers with fiat off-ramps is that it provides a way for this dirty money to get laundered into clean fiat/assets. This is gonna be a real headache for these providers, and I really can't see how they ever do due diligence/AML/KYC on all of this money.

That being said, dirty money has always and will always exist (barring some totalitarian global state) so this isn't a new problem, just one that I think will be concerning for financial institutions and regulators.