Masternodes are doing mixing as they are coinjoin servers. They are also not-private and the owners can be identified via public IP addresses (at the very least, the host can be and instructed to shut down). What will masternode owners do when they start being charged with illegal money laundering? https://bitcoinmagazine.com/articles/dutch-authorities-ramp-fight-against-bitcoin-money-laundering/
Masternode owners going to jail?
- Thread starter xdashguy
- Start date
halso
Active member
I just had a look at active dash nodes. From the source I was looking at over 1200 nodes had an unknown IP. Presumably they are using the tails MN blinding solution that was posted before Xmas. If MN operators are truly worried about this risk. They can blind their IP.
freshdopamine
Member
Now how does the whole network blind their IP address?
TroyDASH
Well-known member
Maybe sell their MN to someone with more balls, or to someone who knows better how to take extraordinary measures to protect their privacy. Or maybe they will learn how to do that. Or, maybe MNOs will send a message to the dev team that they want a different privacy solution implemented, or that they want to implement a solution where individual MNs can opt out of supporting PrivateSend and receiving PS fees. Or, maybe they will take it to the courts. Or maybe they suck it up and just deal.
So many possible things can happen that aren't your jail FUD.
Solarminer
Well-known member
Remember the blockchain is forever. It doesn't matter if they pass a law 5 years from now. As soon as Coinfirm starts tracking every transaction as of last last year, the pieces will come together. IPs to Dash address to all the block rewards each IP received. Pretty easy to go after nodes for not paying taxes. So they get the id of the node operator. Then jail for not paying taxes and add mixing(money laundering) on top. Even if the node operator can prove they paid taxes, they will be charged with money laundering.
But don't be worried. I am sure Evolution will fix it next year.
TroyDASH
Well-known member
The government doesn't need a startup company like Coinfirm in order to do blockchain analysis.
TroyDASH
Well-known member
Let me just say for the record, I really don't think it is the subject matter of this thread which is causing some of the negative responses. The community, and especially masternode operators, deserve to know what kinds of regulatory risks might exist and this is a perfectly acceptable topic to discuss. The problem is when the discussion is pointed with generalized statements or assumptions that seem very much like they are intended to evoke fear in the audience -- that's the reason for the troll marks.
Note how the OP phrases things:
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Masternodes are coinjoin servers. Masternodes are doing mixing. what will masternode owners do when they start being charged with illegal money laundering? Asked and answered with the thread title "Masternode owners going to jail?"
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The reality is more complicated than that. It has not been established whether an applicable law might consider the masternodes to be "doing" the mixing, or if the privatesend users are. Masternodes are similar to centralized coinjoin servers but that does not mean they would be treated the same as coinjoin servers under a law. In addition, the law is different from one country to the next -- this article discusses regulations in the Netherlands only. The extent of the regulations is unclear and there are still pending Dutch court cases.
This is something we need to be conscious about because any precedent that is set from the Netherlands could potentially manifest itself down the road in other jurisdictions. Which, to my understanding, is a big part of why the core team has already contracted with a law firm, so that masternode operators can be informed about what the law could mean for them and to guide both their personal decisions and also their masternode votes.
IF this turns out to become a real problem, then masternodes and the dev team will need to make some decisions about the best way to respond to the situation and move forward. Remember that the regulatory climate is out of our control. It is prudent to talk proactively about planning for different possibilities, whether that involves strengthening protocol-level privacy for masternodes, non-protocol-level privacy for masternodes, or changing something about the way we do mixing. But it is not a foregone conclusion where the governments are going to come down on this, and it's also not a foregone conclusion that MNOs would not be able to respond with anything other than selling or going to jail.
My 2 duffs --
Note how the OP phrases things:
-------
Masternodes are coinjoin servers. Masternodes are doing mixing. what will masternode owners do when they start being charged with illegal money laundering? Asked and answered with the thread title "Masternode owners going to jail?"
-------
The reality is more complicated than that. It has not been established whether an applicable law might consider the masternodes to be "doing" the mixing, or if the privatesend users are. Masternodes are similar to centralized coinjoin servers but that does not mean they would be treated the same as coinjoin servers under a law. In addition, the law is different from one country to the next -- this article discusses regulations in the Netherlands only. The extent of the regulations is unclear and there are still pending Dutch court cases.
This is something we need to be conscious about because any precedent that is set from the Netherlands could potentially manifest itself down the road in other jurisdictions. Which, to my understanding, is a big part of why the core team has already contracted with a law firm, so that masternode operators can be informed about what the law could mean for them and to guide both their personal decisions and also their masternode votes.
IF this turns out to become a real problem, then masternodes and the dev team will need to make some decisions about the best way to respond to the situation and move forward. Remember that the regulatory climate is out of our control. It is prudent to talk proactively about planning for different possibilities, whether that involves strengthening protocol-level privacy for masternodes, non-protocol-level privacy for masternodes, or changing something about the way we do mixing. But it is not a foregone conclusion where the governments are going to come down on this, and it's also not a foregone conclusion that MNOs would not be able to respond with anything other than selling or going to jail.
My 2 duffs --
AnarchicCluster
Well-known member
They don't but it is easier just to contract Coinfirm instead of creating entirely new office dedicated to tracking cryptocurrencies.
On another note. I don't think Masternodes actively mix coins. They only help to facilitate mixing.
Think about it this way: 3 guys come to a table put the same denominations into a hat on the table and then take out the same amount they put in, so they have the same amount of money but probably not the same banknotes. Masternode owner in this case is the owner of the hat.
I may be wrong but as far as I know this is how mixing works. Masternodes don't mix those coins but they certainly help, what could still be viewed as a felony in certain jurisdictions.
However, since masternodes can be set up pretty much anywhere with an internet access, they can be run in a country that allows for such activity.
Edit:
I'll add one more thing. I believe the network has hired a lawyer to assess masternodes' legal situation in the US. I don't know when we are going to get the report on that but it is in the process.
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TroyDASH
Well-known member
It might be easier, but when you're a government with infinite resources and some of the information gained might be classified or have national security implications, I don't think they would be contracting with Coinfirm. Maybe a much more well established defense contractor if anything, otherwise it will just be done in-house. I am sure the government already has more informed blockchain analysis in place with Bitcoin than Coinfirm has.
Yes that is my understanding as well -- technically, 'facilitating' mixing like the way masternodes do, is different from actually mixing. We don't really know whether regulators would make that distinction though.
Solarminer
Well-known member
Nah, I have already been labeled a concern troll. So was thedashguy - which means the xdashguy gets associated with that username but the two are not related. I would be surprised if any of the core team didn't label my posts as trolling.
That legal proposal might come in handy with this question. If only we had an update. <Pray Emoji>
hit <troll> here
While you're busy pointing out the language used, let me show you some other language...
https://www.theregister.co.uk/2017/01/23/western_union_fined_586m/
""Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs," said FTC Chairwoman Edith Ramirez."
...
""As a major player in the money transmittal business, Western Union had an obligation to its customers to ensure they offered honest services, which include upholding the Bank Secrecy Act, as well as other US laws," said Chief Richard Weber of Internal Revenue Service–Criminal Investigation (IRS-CI).
"Western Union's blatant disregard of their anti-money laundering compliance responsibilities was criminal and significant. IRS-CI special agents – working with their investigative agency partners – uncovered the massive financial fraud and is proud to be part of this historic criminal resolution."
...
""As a major player in the money transmittal business, Western Union had an obligation to its customers to ensure they offered honest services, which include upholding the Bank Secrecy Act, as well as other US laws," said Chief Richard Weber of Internal Revenue Service–Criminal Investigation (IRS-CI).
"Western Union's blatant disregard of their anti-money laundering compliance responsibilities was criminal and significant. IRS-CI special agents – working with their investigative agency partners – uncovered the massive financial fraud and is proud to be part of this historic criminal resolution."
WU, one of the most established money transmitters out there and they still fall foul of the law. And you're busy hoping for clarity and guidance??
Even if it were established that MNOs aren't solely responsible, they are the number one target because they are the easiest to target for maximum publicity (deterrent).
And you all have yourselves to blame for being manipulated by the the government mole (kot) that sold you the compliance dream.
And still, unbelievably, this will STILL probably get marked as trolling... that in itself tells you how deep the brainwashing goes...
crowning
Well-known member
You'd be surprised, but I don't mix my income from my Masternodes because a) I already pay taxes for it, and b) I want to prove it when necessary.
About the money laundering/mixing: your, or the governments, arguments apply to every retailer/shop/business which accepts fiat money.
Not at all. Police regularly talk to local businesses where they are investigating money laundering and counterfeiting. For example, where people are canvassing to change small value notes into larger notes.
TroyDASH
Well-known member
Your article sounds like it has more to do with fraud than laundering. Even so, it's not a secret that there are AML laws. The fact remains that there is little to no legal precedent for how the law will treat decentralized mixers, and nothing on Dash's particular mixing mechanism either. This is the whole point of the legal counsel. If there is a legal risk to masternode operators, then we can talk about what actions we need to take, whether it's pushing the MNOs underground to be able to evade the law, or changing how we do things to give MNOs an option to be compliant. I am sure the community will not all agree on the best way forward if this were to occur, in which case perhaps we can use masternode voting to gauge the sentiment. This is something that should be on the radar but it is not appropriate at this stage to be sounding the emergency alarm.
The claim that kot is a government mole is completely baseless and adds nothing but to discredit yourself.
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The discredit goes to dash, not me. If actions speak louder than words, then it's his actions, not mine, that gave dash the compliance route. WU is compliant, look where it got them. It wouldn't hurt if you researched the history of WU and the Bells before you brush off the WU story as irrelevant.
TroyDASH
Well-known member
Apparently they were not compliant. It's not irrelevant, but it also isn't the same thing as Dash's decentralized mixing system. We need to take more things into account when assessing legal risk than just some instances of the laws being enforced when companies are found to be out of compliance. It hasn't been established whether MNOs are going to be considered to be out of compliance in present system.
I wonder if you would be interested in a budget proposal that goes something like this: "If US regulators were to pass a law or interpret an existing law to mean that MNOs are not in compliance with AML, would you rather support focusing on (1) developing increased MN-privacy measures to help MNOs avoid being caught breaking the regulations, or (2) developing a method to allow MNOs to be compliant with the regulations." ?
You say it hasn't been tested / established but how do you think that test comes about? Even if a lawyer says MNOs are not complicit in money laundering, someone's still going to get their ass busted before it goes to court and truly tested. Who's going to be the guinea pig? - Evan? - you?
And even then you're talking about a single country. It seems you have decided, on the behalf of all MNOs, that the legal test for a decentralised project should start in the US. What happens if the first test case is an MNO getting busted in another country?
Btw, I've pondered similar proposals, however, I'm pretty sure end-users wouldn't want to see hypocrisy from MNOs. If only we had a robust mechanism to ask end-users what they want....
TroyDASH
Well-known member
It's possible for regulators to issue statements/guidance or pass laws, before a case gets brought forward. Doesn't always happen that way though which is why I think it's fine to be talking about the what-if scenario and to have a plan.
I used the US as an example, the proposal could just as well say if a trend develops among countries with their policies, or hypothetically if it were to occur in their jurisdiction.
The end users should not force the MNOs to act in a certain way when the MNOs are the ones with more stake in the network, the MNOs are the ones providing the service in the first place and the MNOs are the ones who are exposed to certain privacy risks that end users are not exposed to. Also, MNOs *are also end users*.
Obviously, the network needs its end users but the end users are not all of one mind. Determining the sentiment of end users, or potential end users, is important because it directly affects the demand for the currency. I believe that the correct incentives are already in place for the MNs to gather all available information and decide to do what is best to sustain and grow the network ie protect their investment.