Episode 116:

 

Rafael Yakobi

Discussing The Legal Issues Around Bitcoin Mixers

Transcript:

 

Sasha:

Okay! Hello everyone and welcome to the HODLCast! Today is Sunday, May 17th. And we have a very special guest, Attorney Raphael Yakobi. Raphael and I recently wrote an article for Bitcoin Magazine together. And we’ve been in the Telegram group for a little while. It was how we got to know each other. Raphael, thank you so much for taking the time today. Can you introduce yourself? And maybe explain how you got involved in this niche area of Bitcoin law?

 

Rafael:

Sure! Thank you for having me. Yes, and I recommend that anyone who’s listening, read our article. We put a lot of work into it, and I think it’s a good written background on some of the topics that I think we’ll cover today. So in terms of how I got into crypto or Bitcoin law, I’d been interested in Bitcoin for quite a while, on and off, a little bit here and there since 2013. I was in law school at the time, didn’t really have any money, but I got in because it was exciting, and heard about it from the Silk Road and just being a libertarian on the internet. It’s something that you’ll probably come across. Now everyone knows about it. But even back then, it was something that was pretty frequent, and it was like an interesting internet tool. The sound money, a value proposition, or investment proposition, at least not at all clear to me back then. It was more like a useful tool for having some freedom on the internet. And so I got interested in it back then. And then a couple of years later, in law school, I had kind of introduced Bitcoin to another classmate of mine. We graduated together and he ended up building a website, which is now the Crypto Lawyers, my law firms’ website. And he built a website kind of as an experiment because we were both interested in the area and people just started emailing. And then he asked me to do it with him and I was apprehensive. We both like crypto and Bitcoin, but who knows what the law is. My initial reaction was, “What exactly am I supposed to do for these people?” And then after we got into it a little bit further, we realized that people just want lawyers to do regular lawyer things for the most part. But it helps if they can understand the subject matter from a user’s perspective or things like that. So we just tried it out. And there was a need for securities lawyers and I was doing securities litigation, and then it evolved from there. So we adjusted with the market and it’s worked out really well. I haven’t done a billable minute of non-crypto work since we started the firm in early 2018.

 

Sasha:

Awesome! That is similar to how I got into it as well. There’s definitely a need in the space for attorneys. And it’s a fun area to practice in, that’s for sure. When I say fun, I guess it’s an innovative area and the need is ever changing.

 

Rafael:

Agreed.

 

Sasha:

And you become quite a Bitcoin privacy proponent. Can you explain a little bit why Bitcoin privacy matters?

 

Rafael:

Sure! I think Bitcoin privacy is important, primarily as just for safety purposes. I think that’s the most important reason. Given that Bitcoin has a public ledger where you can see the transactions, you need to be able to control what information you share with your counter parties when you transact with them. And if you always use the same address or something like that, and you also store all your Bitcoin in the same address all the time, you’re effectively sharing your balance and all your transaction history and your future transactions with everyone that you interact with. And if Bitcoin is to be money, that’s not an ideal way to do things. And you can see that from the real world as well. You don’t want to stop in a convenience store, and let’s say you’re in a bad area, and you stop in a store and you want to buy some water or snack or something, and then you swipe your card and they see, “Oh! This guy’s got a $7.5M.” That would be an awkward situation to be in, and put even put you in danger. It’s not as much of an issue in the United States, fortunately. But there have been people who have been kidnapped and put under pressure, tortured, things like that in other countries to get their Bitcoin. And because Bitcoin is a self-custodial asset, you have to take the responsibility of this. And I think safety is the main issue. But just as a matter of basic civil rights and having the ability to do what you want to do with your money, or do what you want to do with your computer without having complete surveillance over it. If you’re going to have freedom, you need to have some level of privacy. For me at least, those are the reasons why it’s important. I think safety is really at the core. And that can be from criminals, it could be from governments. But that’s my personal reason why I think it’s important.

 

Sasha:

Agreed! Great answer there. When you and I were writing our article, we were focused on this case, which I’ll just give a brief overview. I know you know the details inside and out. But for those listening, it was a case where there was a three count indictment. It happened on February 11th, and it was in the District of Columbia. The defendant is Larry Harmon, a 36 year old from Ohio. He was charged with money laundering, conspiracy, operating an unlicensed money transmitting business, and conducting money transmission without a DC license. Always, the money laundering and unlicensed money transmission charges seem to go hand in hand. So let’s maybe break down what is a FinCEN Exchanger? And if you are a FinCEN Exchanger, what do you need to do?

 

Rafael:

Sure! So just to give context, FinCEN is the financial crimes enforcement network which is a federal government agency that is tasked with preventing money laundering. That’s their primary focus. Whereas the states, they are generally more interested in consumer protection when they deal with money transmission. So FinCEN has certain kinds of classifications that if your activities or your business falls in to those classifications, then you’re required to register with FinCEN, and then you have to comply with the bank secrecy act. I’m just going to paraphrase here, but essentially if you’re accepting and transmitting money on behalf of others, or exchanging currencies, then you’re probably going to fall within one of FinCEN’s definitions as an exchanger. And this makes you effectively a financial institution by the broader definition under federal law. And so once you’re a financial institution, you’ve got certain obligations that you’re expected to fulfil commonly referred to as KYC and AML.

 

Sasha:

And in the case that we were looking at with Helix, so they were running a custodial mixing service, which meant they were taking. And most of their transaction with 350,000 Bitcoin valued at 300 million that was transacted between 2014 and 2017. Most of it came from Alpha Bay, which is a dark net. I think it’s like a Silk Road. I guess there have been so many different Silk Road variations since then. But it was a dark web marketplace for the purchase and sale of drugs. So they weren’t taking KYC information. They certainly weren’t registered with any Financial Crimes Enforcement Network and so they were just allowing people on the dark net to send money back and forth from this Alpha Bay to Helix. And then they would take custody of the coins, mix them to obscure or obfuscate the fact that they came from the dark web, and then send it back to the individuals. So I guess from a KYC perspective, they certainly weren’t collecting the information necessary for that. And another thing that you and I talked about was whether someone who is a FinCEN Exchanger, so once they’re already registered with FinCEN and complying, and collecting the necessary KYC information about each person who’s conducting the transaction, do they have to use blockchain analysis software? And are those blockchain analysis softwares reliable?

 

Rafael:

Sure! So this is definitely a controversial subject, at least to me. And I know too many other people as well. The law doesn’t say that you need to use blockchain analysis software. The law really doesn’t even mention blockchain. It’s only FinCEN’s guidance that puts virtual currency transactions within the realm of financial institutions at all. So they’ve interpreted the laws that Congress has written in past to include virtual currency. And then the general rule is that you need to take reasonable steps to prevent money laundering and some kind of a risk based approach. That’s it. There’s been a little more guidance here and there about which kind of businesses are regulated and which aren’t. But at least from my perspective, FinCEN doesn’t really get involved in prescribing exactly what kind of methods are to be used in every situation. So the burden is on the business to do a good job at what the law says they’re required to do. And whether or not that requires blockchain analysis is an issue that’s going to be answered probably not by the law, at least not in America. Although in Europe, that may happen. They just may make it mandatory. But it’s going to be up to the industry to develop standards that they’re willing to accept to the point where it would be considered that it’s required. But I think certainly for smaller businesses, let’s say Bitcoin ATMs. I don’t think it’s necessary. Mainly because it would be too expensive. These kinds of software applications, you get a license forward and they’re quite expensive. And let’s say you’re a trader on packs full or a Bitcoin ATMs, or local Bitcoins and you’re dealing with a few hundred dollars at a time, I don’t think it’s justified in terms of what level of surveillance you’re required to do on your customers, because if your transactions are all under $250, how much money laundering can people really do? It would take so much effort for a serious criminal to launder millions of dollars, $200 at a time, that they probably just not going to do it. And on the other hand, let’s say a very large exchange where people are sending many millions of dollars, then supposedly, I guess you could say fairly, the risks of money laundering are higher there. But that still doesn’t answer the question as to whether blockchain analysis is necessary. And I think it can be useful as a targeted tool if there’s already evidence that something suspicious is going on, or some crime has been committed. You can use these kinds of tools to track down where it went. Maybe somebody’s account got hacked and the coins were withdrawn from Bittrex and they were sent to Coinbase. Blockchain analysis tools would help you figure that out. Then you could call Coinbase, ask them to freeze the coins and maybe recover them back to the person that owns them. But as they’re commonly used now, it’s kind of used as like a Dragnet surveillance program where everyone’s transactions are being recorded and monitored all of the time and they’re building kind of a big  neural net map showing everybody’s coins and whatever when it’s doing all the time. I don’t know how many crimes it prevents, but it certainly shares a lot of information about individual activities that are normal and not criminal as I think almost everyone that uses Bitcoin is not using it for crimes. Maybe there’s some small percentage just like with dollars or any other currency. But in terms of their reliability, it’s hard to say because it’s in the blockchain analysis companies, financial interests to oversell the reliability of their work. The more reliable it is, people are more likely to pay for the software, and how much they’re willing to pay for it if it’s more reliable. They’re monitoring and mining your transactions, but we don’t have an opportunity to clarify on the record to show that they are accurate or not. They probably think that you and I are doing whatever they think we’re doing. And there’s no opportunity to confirm whether or not it’s actually true. So they just have heuristics, like they see coins go from one place to another. And based on the spending pattern, they make an assumption that this was a self-transfer from one person to themselves, or it was to another person, or it was for some kind of suspicious reason. Besides a couple of groups of people that are outside of these companies, but also have the ability to do chain analysis like OXT research, there’s almost nobody to really challenge them. I don’t think that their heuristics have been objectively demonstrated as being highly reliable. Not yet at least, because just looking at the blockchain is complicated enough beyond looking at your own transactions. So it takes a lot of effort, training and tools to verify the reliability. And we’re just not there yet.

 

Sasha:

Absolutely! And I think I saw Larry Sur Mac posted something on Twitter, probably a year and a half ago now, but it was really shocking to me at the time showing the amount of spending the IRS had made on blockchain analysis tools. So it seems like the IRS might be the number one customer of this, but then we’ve also seen banks requiring it in order to give someone an account. They’ll say, “Oh, well, where’s your blockchain analysis as though it’s a mandatory thing from FinCEN?” When it’s absolutely not mandatory that you have that on there by any chance and rules, as you pointed out. But I think the government and then the banks are some of the driving forces that are pushing these tools. And as we’re gonna get into, it creates this thing called taints. You’re probably better at describing what taint is, maybe you could give that a go?

 

Rafael:

Sure! So I guess it depends who’s using it, but taint is not a reference to anything that happens on the blockchain. The transactions are what they are, but it’s basically the practice of treating some Bitcoin, for example, different than other Bitcoin. And so an exchange that uses tools and a chain analysis tools and sees that Bitcoin are coming from somewhere that they believe are suspicious might give some kind of different risk rating to those coins, or treat them differently than other coins, which they consider safer. And so it’s something that is prescribed to certain Bitcoin versus others. Not something that actually exists on the blockchain.

 

Sasha:

And then what are the fungibility implications if a blockchain analysis tools start saying that certain Bitcoin has this taint on them?

 

Rafael:

Right! So fungibility, at least as far as money goes, is meant to describe that each unit is the same as every other unit. Meaning, a $1 bill is just as good as any other $1 bill. They’re both the same. They’re both worth $1, and it doesn’t really matter which one you have. So if you owe somebody $10, you can just give them any $10 bill. You don’t have to give them the same one back. And that’s because they’re all the same. They’re all fungible. And if exchanges treat different sets of Bitcoin is different, then Bitcoin is not as fungible. And therefore, if you start to get into a situation where somebody says that, “Oh, the price of this car is one Bitcoin, but if you send the Bitcoin from Coinbase, now it’s 1.2, or if you send it from Bittrex it’s 0.8, or if you send it from a minor, it’s 0.5.” It makes Bitcoin less money than it otherwise would be, considering if you believe that fungibility is a necessary quality for money. And I think most people do.

 

Sasha:

Absolutely! And is there any way to remove the taint on a Bitcoin?

 

Rafael:

Well, you could just not believe in it and then it’s not there. That’s one strategy. But other people may or may believe it and so it’ll still be there for them. But if the industry just doesn’t use that kind of terminology or that strategy, then the issue is solved. But we’re operating under the assumption that some people in the industry are going to use this characterization and so we have to figure out how to deal with that. I mean every time you use an exchange, and you deposit your coins into the exchange, and then you later withdraw, you’re getting new coins. I don’t think, for the most part, don’t just hold your coins and want to dress and then you just take them right back out of that address. When you deposit to an exchange, it gets mixed in with all of theirs, and then you can withdraw it again later. So every time you use an exchange, you’re basically starting over, as far as I can tell, assuming that they haven’t flagged your deposit and froze it on the way in. So just using it in that way is a potential way. And another way is just using the Bitcoin for goods and services the way you normally would, because it will travel from you to another business through like BTC pay server or BitPay or something. And then that person will have it, and they’ll sell it, or they’ll store it in cold storage, and it keeps flowing through the system. And eventually, even if it was previously tied to some kind of illicit transaction, let’s say it was in the Silk Road, but now it’s been like 50 hops since then, what does anyone’s supposed to do with that information? Maybe 50 people have had it since then. And then it’s not that useful. So first category, don’t pay attention to it. Second category, just use it. Another way is to use a mixer or a tumbler. And we alluded to that already. There are custodial tumblers where you send them your Bitcoin. Then, they send you back other Bitcoin, which is basically what a normal exchange does, except that with normal exchange, like cracking or something, you’re not sending the coins there so that you can get different ones back. You’re sending it there so you could sell them, or exchange them, or something like that. But it’s functionally the same thing. And besides the custodial tumblers, then there’s coinjoin, which is non-custodial mixing, which effectively puts your coins together with a bunch of other people who want to make a transaction. And then by the time it gets to the destination, it’s not clear where it started. And this effectively on links, your outputs, the destination of your Bitcoin from the inputs, which is where the Bitcoin started.

 

Sasha:

Yeah! And I guess the fear is, I’ve heard people say that places like Coinbase or very popular exchanges, maybe Gemini, I don’t know the exact exchange policies on these, but some people have said that the exchanges will not accept coins that have come from mixing, tumbling or coinjoin services, because they can’t determine the path that they don’t know if they’re then accepting coins that might’ve been used on the dark web at some point. And then opening themselves up to liability. So all the Bitcoin core or the privacy experts in Bitcoin suggests that everyone should be using a coinjoin with almost every transaction. But then, the reality of it is that the exchanges might not count those Bitcoins and then if it’s gone through coinjoin, it might have a higher level of taint and lower level of fungibility. So I guess the best way is just you stay off the exchanges and there’s no problem.

 

Rafael:

Yeah! Well if you don’t have to use an exchange, then certainly, don’t use it. But people do use them because they need to primarily just to buy Bitcoin and occasionally to sell Bitcoin, but who does that? So most of the time, people need to use exchanges just to buy Bitcoin because some people can earn it. Iron it here and there. You probably do too. That’s a privilege that we have and it’s not an option for everyone to get paid in Bitcoin. So the exchanges are necessary as far as I’m concerned, because there’s big demand for people who want to buy Bitcoin. But to the to the point about exchanges flagging coinjoint or tumblers, I think they definitely flag custodial tumblers because those are much more heavily associated with the dark web and illicit transactions because that’s really how they were used and advertised. That was their purpose. As far as non-custodial coinjoins being flagged, we’d have heard reports of that from a couple of exchanges. Besides maybe a BlockFi, which their CEO tweeted explicitly that they’re prohibited from accepting post coinjoin coins, I don’t know that almost any other exchange has really said what exactly how they feel about this.

We don’t know what they’re doing internally. Most of them are not very transparent. And so we know that the chain analysis companies can see these transactions as coinjoins, and flag them and maybe assign some risk to them. But the exchanges definitely don’t have a unified policy on this. And we don’t know why exactly yet. It might be because they don’t want to upset people. They don’t want to upset their customers, or they haven’t figured it out, they don’t trust the metrics, or maybe the chain analysis companies are doing even better than we think they’re doing, and they know everything anyway. Maybe they’ve got other methods to unwind lots of the coinjoins, and it’s like people are coinjoining and then deposited to the exchange thinking they’re getting away with something. And the reality is that the exchange knows everything already anyway. That seems unlikely, but it’s just a possibility. It seems like this is going to be an important issue that comes up, and it’s important to a lot of Bitcoiners, because a lot of them care about their privacy as well as they should. If enough people coinjoin, then the exchanges are pretty much not going to have a choice. If 50% of transactions are coinjoin transactions, the exchange can’t reasonably turn down half of their transactions because it’s too significant. So that’s a possible outcome that could happen in the future. But getting half of Bitcoiners to do anything is certainly not an easy task.

 

Sasha:

Yes, agree! And from a regulatory perspective, so you mentioned custodial and non-custodial mixers or coinjoins. Can you explain the difference, from a legal perspective, what taking custody actually means for a coinjoin?

 

Rafael:

Sure! Well, the short answer is that, custodial exchangers are regulated by FinCEN as money services businesses, almost always if they’re in the business of accepting and transmitting money, which is what custodial exchanges are doing, then they’re regulated by FinCEN. Those are financial institutions or MSBs. But if it’s not custodial, then they’re not MSBs. That’s the short answer. So if you’re using a coinjoin company, they are not a financial institution and they are not required to collect information about you because they don’t actually have access to your money. When you’re doing a coinjoin, essentially you’re paying for a coordinator to prepare transactions, unsigned transactions and advance, and distribute those transactions among the group of people. And everyone that’s going to sign them knows where they’re going. And a few steps later, a coinjoin is completed. I’m skimming over the technical explanation, but do you get the idea.

 

Sasha:

And I know you’re a big part of the wasabi community. Would you say that’s one of the better ways to do a coinjoin? Or where should people who haven’t done it before go to experiment with it if they wanted to? It’s one of these things we’re not recommending, well I’m not recommending or not recommending to do anything, but I think there’s some safer ways to do it than others and certainly a non-custodial mixing service is probably the way to go on this. And I believe wasabi probably has one of the best ones out there, but I’m not that familiar with it.

Rafael:

Sure! Using a non-custodial piece of software is definitely preferable to custodial. Not your keys, not your coins, everyone knows that or should know that. So if you’re using something that’s non-custodial and it’s relatively popular and people have looked at the code, then you can feel some reasonable level of assurance that they’re not going to secretly steal your money. That’s just basic Bitcoiners stuff. Before you download a wallet, make sure that somebody that can read the code has looked at it. And I can’t read the code so I have to rely on some level of trust. Trust minimized, not trustless. As far as particular implementations, I’m not in a position to endorse or not endorse any one of them. Not because I don’t have opinions on it, I do. But the reality is that you have to be very technologically sophisticated to be able to analyze the Bitcoin transactions in the context of coinjoin and then see which one is more effective than others. And people may not know, but there’s quite a rivalry between a samurai wallet and wasabi wallet in terms of coinjoin.

 

Sasha:

So when I first tweeted about the Bitcoin article, and then you linked to me several resources, was it samurai that you were linking to? ..maybe? and not wasabi? So I think I just got them confused. I’m sorry.

 

Rafael:

That’s okay. I think it was samurai wallet, but the short answer is, I’m not getting in the middle of anybody’s rivalry. Just to put a cap on that, wasabi is a desktop wallet and samurai is a mobile wallet. So they are different, and it depends what you’re looking for. And there’s plenty of information out there. Let’s say weighing the pros and cons of each. There’s plenty of information that you could dig into to try to make an informed decision yourself. Not just because of any rivalry, but I don’t want to give anyone advice about software when I’m not a software developer. I would just be repeating what other people told me that I thought sounded right, or what I read that I thought sounded right. People ask me about the law, I can talk about that. Because I can read the law and I can understand it, or at least I try, and give somebody an informed decision based on I don’t know how many thousands of hours I’ve spent practicing law and going to law school and studying. So if I talk about the law, I’m capable of giving legal advice when people hire me. But I don’t want people to confuse any expertise so I have in law with software or technological expertise. And so it’s just something that I would want to be careful about because I’m not an expert on those things.

 

Sasha:

Sure, that’s fair.

 

Rafael:

When I get to a point where I can review the code and understand exactly how they work and say with complete confidence that something is safe or functions as described, I’ll start giving recommendations at that point, but not before then.

 

Sasha:

And we’ve kind of talked about FinCEN and the requirements there for a company. What about OFAC? What are the requirements or where does that fit into the mix?

 

Rafael:

Sure! So OFAC deals with sanctions that are imposed by the US government and probably other governments, or between various national governments. They say that you’re not allowed to do business with certain people, terrorists or criminals, or whoever they put on their list and certain countries. And so they maintain lists of people that you are not permitted to do transactions with. And if you’re a financial institution, you’re required to search these lists before you do a transaction with someone, which is part of the reason why you’re required to know who your customer is so they can make sure that they’re not on the list. And something that I’ve been thinking about and have been starting to research, just a little bit is how these kinds of requirements apply to individuals? Because they apply to everyone. You and I don’t have an affirmative obligation to do this kind of research before we take a client, and neither do most people who just run businesses. But even though we’re not required to investigate this issue, we’re still not allowed to do business with these countries and people. And who has time to search the OFAC list before they pay their carpenter or something like that? But anyway, OFAC fits in because they do the sanctions.

 

Sasha:

And they’ve added Bitcoin addresses too. I think that the OFAC is, in my opinion, one of the scarier parts about the fungibility discussion around Bitcoin because first, they added two and then I think,  six months later they added another couple. And then more recently, they added around 20 new addresses. So any Bitcoin in those addresses is essentially frozen, and there’s no guidance that I’m aware of as to how far removed a transaction from that address is before it would be considered safe for an exchange to hold it. Perhaps it’s one hop. I’ve heard Carol Van Cleef, she’s an attorney that’s been around this space for quite some time. I’ve heard her say it was up to five hops. I’ve never seen that written anywhere. I think that’s just her best practice approach to it. And I hope I’m not misquoting her there, but I think that this OFAC thing is a little bit of a danger, and also it really requires KYC to be taken even at a dollar level of transaction for anyone that’s registered with FinCEN, which you need the name of the person to be able to search the OFAC list on it. And it’s really impractical. And as you mentioned, it technically applies to all types of business transactions. Like anyone walking into a grocery store, if they’re on a sanctions list, they shouldn’t be allowed to even take cash and buy something at the grocery store. But it’s not upheld or it’s not enforced. And I haven’t seen OFAC enforced very much on Bitcoin either, even though it’s there as a looming threat. And certainly, every compliance program I’ve come across has to take great efforts not to be in violation of anything to do with OFAC, or just making sure that you’re collecting at least the person’s name. So that you can do the search, really we should have the address too. Where do you think it is going? Where do you think it will go in terms of how many addresses are on the OFAC list? Or how much privacy is going to be enforced? Or whether Bitcoin can continue to transact in some level of anonymity?

 

Rafael:

Well, the OFAC Bitcoin addresses thing is interesting. I mean, I don’t particularly think it’s so serious, because creating a new address is very easy. You can create basically unlimited addresses and you shouldn’t be reusing them. And it’s not that bad. They can just keep adding them and adding them. And it’s not like they’re gonna, one day, add up so many that we don’t have any more left. I don’t know what the maximum number of possible public addresses you can create with one private key is, but it’s a lot. Probably hundreds of thousands or who knows? Millions? Hundreds of millions? I have no idea. But it’s a lot. So you can create new addresses. I don’t see them putting certain addresses on the list as being a major fungibility issue. But for those Bitcoin that are in there, I mean they can still be moved if somebody has the private keys. So I wouldn’t say that I think they’re frozen, because other people may be willing to take them. And there are lots of people that accept Bitcoin as payment who aren’t financial institutions, who wouldn’t even know. If you had your Bitcoin on one of those addresses and then you went and bought like a t-shirt from someone, they’re not going to know that they got OFAC Bitcoin because they’re not a financial institution, and who checks the OFAC for t-shirt sales? So they can still move and then they can get mixed in with other people’s coins and then eventually, the record is just not clear enough to blame anybody for anything, I think. As far as the hops go, it would be nice if five hops cleared your Bitcoin, but I’m not sure that that’s the case.

 

And the reason why is because it’s really easy to create hops. I could just take all my Bitcoin right now and just send it five times in a row. And then on the sixth time, just send it back to myself. Now I’ve created five hops. I don’t think that solves the problem on its own, because like I said, it would be great if it did. I hope they do that. But from what I’ve heard, the analysis companies are basically the only hops they care about are the hops between addresses that they know. So let’s say you withdraw your Bitcoin from Coinbase, and then it hops around 25 times. They don’t care about that. They just want to know next time it hits an exchange that they know the address to, like it ends up at cracking. Now they’ll say, “Okay, we’ve got Coinbase person A ,and we’ve got crackin either person A the same person, or person B.” And so they’re trying to get around this, create some hops for anonymity situation. But I don’t know how effective they are at that. And as more people begin to coinjoin, and as other technologies develop, the technology I think is always going to be ahead of the regulators and ahead of the surveillance teams. It’s just the way it is. And I think the way it should be, but I’m not sure what’s going to happen with how many hops it takes to clear the Bitcoin for the reasons that I mentioned.

 

Sasha:

One of my friends pointed out one fail safe way to clear the Bitcoin is to have the US government or some government agency sees it, and once it goes into their possession and then they auction it off, then it’s the same as coming from a minor, it’s very safe.

 

Rafael:

I think if the government is the one that you’re worried about, then getting it from them is the safe way to do it. But obviously that’s not practical for most people. And I’m not sure that they’re even auctioning off any at the moment. So they did sell some before after the Silk Road. Maybe there’ve been batches after that, but those were the last ones that I remember.

 

Sasha:

I’m pretty sure they seized a lot of Bitcoin in this helix case too.

 

Rafael:

Oh, that’s true! And some other recent cases like that.

 

Sasha:

Raphael, this has been a great discussion. I really appreciate your input on this, on the privacy. I haven’t come across too many lawyers that really know the ins and outs of it like you do. So I really appreciate your taking the time to talk to us about it. Where can people find you if they want to hire you for some work? Or what kind of clients are you interested in working with as well?

 

Rafael:

Sure! I appreciate that. And yes, happy to be here and happy to talk to you about it. I probably wouldn’t have written our article by myself. So I don’t want to downplay your contribution. It was your article before it was our article. And so it was good to have the motivation to do it with someone else documents. So in terms of where to find me, if you Google crypto lawyer, my website is TheCryptoLawyers.com, but if you Google crypto lawyer, it should be easy to find from there. Google has blessed me with a good position. And you can find me on Twitter, @CACryptoLawyer. And in terms of clients that I’m interested in taking, I do this kind of bank secrecy act, FinCEN work, and also deal with state money transmitter licenses, or SEC investigations or litigation, or disputes with exchanges. Various kinds of work. I’m happy to talk to people, if I’m not the right attorney to help them, I’ll almost definitely know the right attorney and have happy to refer them to that person.

 

Sasha:

Awesome! Excellent! Well, thank you so much and we appreciate your time and look forward to maybe our next article, who knows when that will be.

 

Rafael:

I agree. Thank you. I appreciate it.

 

Sasha:

Alright, thanks Raphael. Have a great day.

 

Raphael:

You too.

Top 5 “Alleged $400M loot at BitMEX” Tweets

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Currency Transaction Report on Money Services Business

Currency Transaction Report on Money Services Business

The Currency Transaction Report or CTR is one of the two primary means by which financial institutions comply with the Bank Secrecy Act and provide information to the government for analysis.  Read more about it by clicking the document below:...

Paycheck Protection Program Forgiveness Application

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The Grand Jury Subpoena

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Top 5 “#FincenFiles” Tweets

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Welcome to the HODLCast BITBONICS! Today's twitter search was about “#FincenFiles” Here are the top 5 tweets! Number 5, from @bennd77 Lulz . . . https://t.co/YtFLrZmryW— Nunya Bidness Wumbo Tacos 🌮 ⚡️🔑 (@bennd77) September 21, 2020...

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Bitbonics – Top 5 #Oil Tweets

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Top 5 tweets about Nova Scotia, Canada

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Top 5 #StableCoin Tweets

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Top 5 “Federal Reserve” Tweets

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Top 5 #Fungible Tweets

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Top 5 #unemployment Tweets

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Top 5 #tether Tweets

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#Bitbonics #Top5 Richard Burr

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Top 5 #VirtualMeeting Tweets

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Top 5 #Inflation tweets

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Bitbonics #Top5 #Oil

Sasha Hodler · Bitbonics - 2 - March 11 #oilWelcome to the #HODLCast #Bitbonics - Today is March 11, 2020 and the #top5 tweets about #OIL were: Number 5 @incugneto said, My dad had a saying when oil would have a significant crisis or price shock of some kind that sums...

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  HODLCast Weekly Newsletter  March 9, 2020 I hope everyone is doing well and staying healthy, this virus feels pretty scary. Some rumors suggest that China has actually cemented some of their quarantined population into their dwellings. Business seems to be...

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Crypto Mom to the Rescue!

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Wallet Education & Innovation – Ballet

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LLC, PBC, or NonProfit?

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Ready for your Title 31 Exam?

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International Breach of Contract

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THE LONG ARM OF NEW YORK

THE LONG ARM OF NEW YORK

WILL BITFINEX AND TETHER PROVE THEY DID NOT DO BUSINESS IN NEW YORK? Today Bitfinex and Tether, replied to the OAG with two documents, an affidavit by their attorney, Stuart Hoegner, and a Reply Memo supporting their Motion to Dismiss. Bitfinex and Tether are...

The Saga Continues… USAG v. Bitfinex/Tether

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SUMMARY of the May 9 FinCEN Guidance

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“This guidance does not establish any new regulatory expectations or requirements.” https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf TL;DR An MSB needs to register with FinCEN, (it’s free, you file Form 107), get an...

SUMMARY of the May 9 FinCEN Guidance:

FinCEN's recent guidance begins with the caveat, “This guidance does not establish any new regulatory expectations or requirements.” https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf TL;DR An MSB needs to register with...

The FinCEN Travel Rule

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I came across a new (to me) aspect of the Bank Secrecy Act recently — rule [31 CFR 103.33(g)] (the “Travel Rule”) which requires all financial institutions to pass on certain information to the next financial institution, in certain funds transmittals involving more...

Grow Your Blog Community

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Design a Stunning Blog

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Now You Can Blog from Everywhere!

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Bitcoin Hedge Fund Rules

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Florida Money Transmission after the Espinoza Opinion

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Bitcoin & the FBAR

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The Bitmain Lawsuit

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SEC’s November 16 Comments

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Operation Choke Point

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Know Yo Customer

Know Yo Customer

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Mr. Terpin v. AT&T

Mr. Terpin v. AT&T

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OCC Banking Charter for FinTECH

OCC Banking Charter for FinTECH

Is this The End of State-by-State Money Transmission Licensing? The Office of the Comptroller of the Currency, U.S. Department of Treasury (“OCC”) came out with some big news on Tuesday, July 31, 2018. Now crypto (fintech) companies can apply for special-purposes...

Removing a member from an LLC

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Unfortunately, business relationships don’t always work out as expected, and you may need to remove your partners from their equity ownership / member position in your LLC. Hopefully this process is clearly defined in your Operating Agreement. If not, it can quickly...

Giving Tokens the Hammer

Giving Tokens the Hammer

The 2009 invention of Bitcoin has forever changed financial technology. Through the rise of economic innovation, Cryptocurrency makes it possible for any person or company to create a coin or token linked to their brand—and to give it a plethora of functionality. Some...

CFTC Employees are now allowed to Trade Crypto

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Upon first seeing this headline, my thoughts were, “uh oh, things are going to get a lot less productive over at the CFTC!” I remember my first few months of trading, it can be highly addictive!  The important thing here is that we got another layer of clarity to...

Bitcoin & Taxes

Bitcoin & Taxes

After the recent ruling in the case with Coinbase, Bitcoin Tax has been a hot topic, and I wanted to try my hand at navigating it. This is not legal or tax advice.Only 800-900 Americans reported any bitcoin tax related events between 2013-2015, even-though there were...

Bitcoin & Estate Planning

Bitcoin & Estate Planning

Bitcoin & Estate Planning Agenda: 1. Get a will 2. Make a tax plan 3. Dig some holes in your backyard (or find an executor you trust) Disclaimer – This is not legal or investment advice. T'is the season to be... morbid. Have you thought about what would happen to...

What is Bitcoin

What is Bitcoin

What is Bitcoin? Over the past few weeks, as the Bitcoin price has soared, lots of people have been reaching out to ask me, "What is Bitcoin?" It prompted me to start this blog- and while I am a licensed attorney in Florida - I want to preface that this is not legal...

Celebrity Backed ICOs

Celebrity Backed ICOs

Anyone who endorses ICOs or any kind of Cryptocurrency should be careful not to overstep the Securities Laws and potentially be prosecuted for a Pump and Dump scheme. After the recent Senate Hearing on Feb 9, 2018, Securities and Exchange Commission (“SEC”) Chairman...

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