American venture capital group Andreessen Horowitz (a16z) says crackdown on 'cryptocurrency' money laundering should focus on despicable foreigners rather than noble and honorable American operators .
On October 14, technology-focused a16z's head of regulation and head of legal affairs Michelle Kober and Jay Ramaswamy, respectively, announced “concrete measures to combat money laundering'' related to digital assets. ” posted a blog detailing the issue.
The authors start with the obvious, stating that “money laundering is extremely difficult to combat” because it mimics legitimate activity. But they insist that “money laundering is never an issue.'' cause Therefore, this is “not a cryptocurrency-specific problem.”
The authors argue that money laundering has existed even before virtual currencies, and even if virtual currencies disappear, their absence will “enable the small number of criminals who use virtual currencies to move their ill-gotten gains.” Or they will simply relegate it to other tools to cover it up.” The authors seem to see no connection between the rise of cryptocurrencies and the subsequent surge in the volume of ransomware attacks and “pig butchering” scams. Those “few” criminals are very busy.
The authors propose a three-point strategy, including expanding federal agencies' extraterritorial jurisdiction to target “bad actors abroad” with some ties to the U.S. financial system. “Strengthening” the Treasury Department's law enforcement capabilities to target noncompliant exchanges, kiosks, and other money transmitters. and facilitate information sharing between the public and private sectors.
The authors call their strategy “technology-neutral,” based on their assertion that “it is widely agreed that programmers do not and should not be prosecuted for developing software.” claims.
Indeed, given the successful and ongoing prosecution of the developers of the Ethereum-based coin mixing service Tornado Cash, it is unclear how widely recognized this idea is. It is unknown. Tornado Cash is a favorite tool of North Korean “cryptocurrency” hackers. laundering their ill-gotten gains.
“Tornado Cash will function just as the defendant and his co-founders developed Tornado Cash,” a Dutch judge who sentenced developer Alexei Pertsev to 64 months in prison this spring said. he pointed out. Therefore, the operation is completely their responsibility. If the defendant wanted the possibility of taking action against the abuse, it should have been included. But he didn't. ”
Also, a year ago, after the Treasury Department imposed sanctions on Tornado Cash, a16z filed a court brief condemning the sanctions, stating that the sanctions were a “serious threat that not only impacts our portfolio companies but also blockchain.” Recall that he said that the It's an ecosystem that goes far beyond this case. “So it's more amicus pecniaebut let's stop reasoning.
everyone is guilty and no one can be blamed
The a16z authors cited the $3 billion settlement the US Department of Justice (DOJ) reached with TD Bank last week to support their argument that cryptocurrencies are an afterthought in money laundering. Kanak fraudsters cracked down on violations of bank secrecy and money laundering laws that benefit drug traffickers and other fraudsters.
While there is no question that traditional financial channels are used to launder money, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) filed its own consent order in the TD case. And, surprisingly, there is a “cipher” element to this story.
Starting on page 59, FinCEN details TD Bank's customers, identified only as Customer Group C, who “allegedly operate in the sales financing and real estate industries.” Group C initially told TD that it did not expect wire transfer activity to exceed $25,000.
In fact, Group C has transferred more than $1 billion through TD, with more than 90% of its inflows coming from “UK-based virtual currency exchanges” and more than 60% of its outflows from “virtual asset-related services.” Colombian financial institutions that also provide remittances. ”
Despite initial claims against TD Bank, Group C “transmits an average of more than $100 million in wire transfers each month, most of which apparently facilitates third-party cryptocurrency transactions, and sends them to Colombia, China, and the Middle East. countries.”
During the period in question, Group C “received more than $650 million from international virtual currency exchange platforms, the purpose, ultimate originator, and source of the funds were unknown to TD Bank.”
Clearly, TD Bank's compliance watchdog was either asleep or outright complicit in allowing these unspecified virtual currency entities to act outside the regulatory framework. . And the fact that TD executives don't seem to be going to jail will make your blood boil. But Garland said the Justice Department hasn't necessarily finished prosecuting the case and will wait for the other shoe to drop.
increase volume
On October 16th, a16z published the latest installment of its annual “State of Crypto Report,” in which (surprise!) the future of cryptocurrencies was discussed by a16z founders Marc Andreessen and Ben Horowitz. He claims it's so bright that he has to wear shades.
Key takeaways from the report include that cryptocurrency “activity and usage” is at an all-time high. This is a little strange. This is because crypto news sites continue to express concern over the fact that even though the fiat price of the major BTC token has skyrocketed, its trades and volumes remain sluggish.
This phenomenon is particularly evident at the retail level, suggesting that the unwashed masses have washed their hands of a deep-seated interest in converting their savings into “cryptocurrency.” But reading a little more into a16z's report, the increase in “usage” is almost entirely due to users tossing utility-free meme coins for fun and (to a lesser extent) profit. You can see that.
a16z notes that the number of monthly active crypto addresses in September was 220 million, an all-time high. But 100 million of those addresses were on Solana, and another 22 million were on Base, the Ethereum Layer 2 network managed by the Coinbase (NASDAQ: COIN) exchange.
Solana and Base are both meme coin factories, churning out thousands of new tokens every day. Few, if any, of these tokens have any actual purpose other than functioning as chips in illicit “crypto casinos” and have a shelf life longer than the gestation period of a tsetse fly. is even less.
Nevertheless, memecoins continue to be created, and people continue to bet on them, hoping that if just one token becomes the moon, the returns will be astronomical. . Real money gamblers joke that the lottery is a self-imposed tax on people who can't do math. Meme coins are not much different, many people play, a handful earn big scores, and the rest never get their money back.
Back in April, a16z chief technology officer Eddie Lazarin asserted that memecoins were “undermining the long-term vision of cryptocurrencies,” adding, “At best, they are like dangerous casinos. Or a series of false promises masking the casino.'' Perhaps he missed the internal memo about how bullish all the 'exploitation' was on the sector.
Rejection status
Other claims in the a16z report include that cryptocurrencies will become a “key political issue” in the 2024 US election. The report found that crypto-funded political action committees (PACs) were the single largest outside spenders in Congressional elections, with FairShake, the largest of these PACs, accounting for nearly a third of the funds. omits the fact that it is received from a16z. However, campaign advertisements funded by cryptocurrencies do not often mention cryptocurrencies. That's because virtual currency is a very important issue for voters.
Stablecoins have (reportedly) “found product-market fit” and account for nearly a third of daily cryptocurrency usage. Stablecoins found this a good fit by “enabling fast and cheap global payments, among other uses.” In the case of market leader USDT (Tether), which has a market capitalization of $120 billion, nearly 70% of the stablecoin market capitalization, its “other uses” include criminal activity. all kinds of crimes.
a16z also celebrates the rise of Ethereum Layer 2 like Base. This is because transaction fees on these networks have plummeted following this year's Dencun upgrade. While this certainly caused a surge in activity (the aforementioned meme coin mania), it also caused a drought of transactions on Ethereum's base layer. This means validators, who control the network's proof-of-stake (PoS) consensus mechanism, have a lot of work to do.
L2 was intended to address Ethereum’s long-standing scaling bottleneck, and its success means fewer ETH tokens will be “burned” compared to newly minted ETH tokens. This “inflationary” dynamic has been widely blamed for ETH's inability to keep up with the soaring fiat price of BTC, with Ethereum co-founder Vitalik Buterin recently saying that L2, which he considers to be “not decentralized enough,” This may explain why he is threatening to rain fire and anger on the world. '
But don't worry about that. In a16z’s view, L2 is proof that Ethereum is “getting more popular and more efficient.” After three issues, you'll begin to understand that a16z's mass reporting comes with pom-poms and a marching band. Because it's rare to hear anything discouraging about the wretched bunch of scum and villainy called “cryptocurrency.”
See: Solutions to overcome blockchain regulatory hurdles
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