Over the past month, we’ve seen the US Federal Reserve go after BitMEX for not identifying customers. Crypto intelligence company CipherTrace reports that most cryptocurrency exchanges do not collect enough information about users, and so-called “FinCEN files” show that even large banks that collect and report large volumes of suspicious transactions do not do enough to remove banks. Suffice it to say, this is a great time to survive in the face of tough compliance and rough tweaks for privacy managers, despite the massive price hike for Monero (XMR).

When we go back and look at the broader trend, many in the crypto community now envision a world with a “bitcoin chain” – or perhaps two different networks from two different chains. The first is the blessed white blockchain, or “block of light,” like a friendly neighborhood where everyone knows each other’s names; The other is a frightening dark chain full of drug dealers, pimps and terrorists (as far as we know).

Privacy advocates fear that because Know Your Customer (KY) rules apply to exchanges such as custodian cryptography, and that banks and corporate assets will bring crypto to the mainstream through similar proxy solutions, only those who track cryptocurrencies in these institutions, the fine light of the chain will be allowed. These chains will end up in the ivory columns high on Wall Street and into the corridors of wealth and power, while the huge unwashed masses who choose to hold and control their cryptocurrency will be forced into cryptocurrency via the dark chain.

Anti-money laundering
While this concern is well founded, it is important to remember that the original goal of AML compliance, which originated in America in the 1970s, was to assist police investigations. Maintaining a large reporting system to monitor and communicate user activity to the government, such as the revamped Transportation Security Administration at Panopticon Airport, is a post-21st century Bush America’s invention, not a prerequisite for a global financial network. …

In fact, this newly enacted standard has become an important driving force behind many privacy-enhancing cryptography innovations, including, no doubt, Bitcoin (BTC) itself. In other words, “light chains” are likely to justify removing privacy from blockchains in line with the same Patriot Act “war on terrorism” justification, only with the ability to constantly move your contaminated clothing into a shared ledger rather than store it between banks. and governments. (and sometimes seeped into Buzzfeed).

It is important to note that it has long been clear that even in the crypto domain, the introduction of mandatory wallet identification and tracking is placing a burden on this initial rationale for “enforcement” AML rules. Historically, the ellipses and effects of CypherTraces and Chainalysis around the world have spent most of their energy working with the police to identify real criminals and their transactions as a result of real criminal activity, rather than creating large networks for everyone’s wallet addresses.

Be it a mountain. Gox or other exchange hackers, BitLocker scammers or all sorts of international criminals, Bitcoin has a feature that allows blockchain research companies to spot known bad guys and create a true “dark chain” that should not be merged with the polite remaining blockchain company (s) …

This system worked. Most virtual service providers or VASPs (i.e. exchanges) use blockchain conductor matching tools to block and track transactions in the dark chain and help police investigate them. These efforts have also made it difficult for real criminals to launder their cryptocurrencies on compatible exchanges.

Lightchain vs. Darkchain
So let’s reject the premise that we are moving towards a light versus dark streak duality. Instead, let’s be aware that we already have a proven little dark chain of laundries that VASP does not partner with, should not partner with, and must freeze and cooperate to deal with it. We then have the light chain points found in VASPs (i.e. exchanges) as they are and should be legally required to maintain confidentiality and only participate to the extent that they detect dark streak or verifiable criminal activity, rather than share user’s private information. from non-criminals. This leaves us with a third chain – the big, beautiful and beautifully coated gray blockchains that have served us well over the years.

Source: CoinTelegraph