Wallet inspection

These days, it feels like banks are asking for some kind of audit on your funds before they even start keeping records. But honestly, I can think of a ton of ways that could backfire. Like, you might send them your transaction history as a text file, but not directly more like through your accountant or lawyer. Then, what if you’ve got some coins that were used for buying weed or something else sketchy? You can’t really trace where your coins came from when you accept BTC payments broadly. So what are the consequences of that? If you want to deal with coins that didn’t come from a standard Coinbase purchase, you’re gonna have to pass these audits. Seems pretty risky to me since you have no control over past transactions, and you’ll have to attach your personal info to your wallet addresses, which isn’t great for privacy. Otherwise, you’re kinda stuck with BTC for only smaller transactions. Has anyone here actually gone through these audits for using your funds in a business or for reinvesting? I’d really like to hear about your experiences dealing with these companies.

I haven't had a bank audit my wallets, but if you know you may "have to" go through this in the future, it may not be a bad idea to use a different wallet to buy weed Or anything else you don't want the bank to know, I can think of a enough legal purchases that are none of their business.

Im not sure about your situation, but banks need a source of funds, an audit gives a sense of confidence to the bank. The bigger the amount the more you are going to need it. The thing is, the weed example was literal. It's not that im buying weed with the wallet and sent it to Silk Road or something. Let's say that you have a receiving address (like for a sig campaign to put an example) and the guy that sends you the money, bought weed, or the guy before the guy that paid this guy, and so on. These Chainalysis type softwares go back several hops. So if you go there and dox your wallet in order to be able to do anything with it, and you have blacklisted addresses, they are now tied to your wallet. The company keeps these records, they may do nothing with it or who knows. The thing is, blacklisted addresses now exist next to your dox. That is the problem. I was told that there are different ratings of how riskiness for banks and depending on the rating it may or not be a problem. So if you have like 1MM worth of payments through many years, the payments are already on the wallet, you cannot cherry pick this or that address. You have to give them the entire transaction history and get the wallet audited. If it's good to go then you can do some actual investments beside buying groceries on Bitrefill or whatnot. That's why I was asking if someone has any experience dealing with these companies at all.

Banks will not care about the hops those coins have passed to you before if you can produce at one point solid evidence that you got them in a legal way. The whole tainted thing is just some idiocracy created by ironically crypto companies in order to steal your funds, they will ask for that and that and then seize your coins and demand more and more proofs for god knows what evidence just with the hope of you giving up on those funds. But more important banks don't deal with BTC, they deal with fiat, and there is little to no importance for them what coins you have, they care about your worth in fiat and that's all! Those audits are for private deals, it's for companies trying to get loans on their assets, pass financial inspections, issue reports or try to get a listing, lock their funds in custodial wallets as collateral, and so on and on, your average bank will not give a rats' ass about your coins and neither will they be interested ever in dealing with your Bitcoin transactions history they will ask you for your strictly $ values, how much you earn how much you spend what's your company profit and assets!

Just as crypto banking transactions can be easily traced backwards by the bank checking all the channels the money has passed through. It will not matter to the bank if the person who paid you for your plumbing job received the money from a illegal source as long as you can prove you provided that service up to that quotation. The same applies to Bitcoin. Chain analysis also will not even know exactly what the last payments were made for, except it were a high profile criminal activity. - Jay -

That's the basics of fungibility. And it's also why I've been saying the notion of "taint" is an attack on Bitcoin. Governments and banks can't stop Bitcoin, but they can make people afraid to use it.

I remember that have had this kind of concerns in the past: https://bitcointalk.org/index.php?topic=5484570.msg63635991#msg63635991 Why so much? Why are you so concerned with the funds you receive or spend? We had a great conversation in the old thread, so I advise people to go and read there too, because I don't want to repeat myself here.

Probably, in such a situation, it can be advised to sell Bitcoins through intermediaries who do not care about the “purity” and “whiteness” of the coins, and use the received fiat money to buy “white” Bitcoins.  For example, Bitcoins can be purchased directly from miners.  You can also purchase previously confiscated bitcoins from government officials (at special auctions).  You can also buy bitcoins on centralized platforms that support KYC and AML procedures.  Overall, all of these problems arise because Bitcoin, unlike Monero, is a non-fungible coin.  Each Bitcoin has its own transaction history.  The Bitcoin blockchain is transparent.

It was obvious. Exchanges were their tool to propagate that idea and I am certain the attack will only get worse as Bitcoin grows. Anyone who is scared of "tainted" coins now will have eventually jumped off the Bitcoin train at some point. - Jay -

This is one of the reasons why you should never reuse addresses. Split your coin in multiple addresses,  do not buy weed or whatever with an address which holds most of your coins. However,  bitcoin is pretty fungible. You can always use p2p an services like exch.cx, which basically gets any coin you send them

BTC is fungible and there is no problem with the BTC network in itself, the problem is with the government and centralized institutions attacking BTC's fungibility with things like 'blacklisted addresses and coins'. BTC blockchain is transparent and the network is pseudonymous, but users can get a good level of anonymity with privacy tools like mixers and CoinJoin, and if they also use p2p services and avoid reusing addresses.

That's not going to help OP if he's looking for a "wallet audit". All those transactions will raise questions. You can't have privacy and show your entire wallet at the same time.

So just to be clear, this is a wallet funds audit, not a source code audit, right? Why would anyone want to do that? It's not like they are businesses or anything anything, with financial compliance obligations.

Correct. It feels a lot like sharing your complete cash purchase history. There's not even a legal requirement to keep track, so you could simply ignore this advice and start fresh once in a while:

I don’t agree with you here....  Initially, Bitcoin coins do not have the property of identity and fungibility.  Cash and Monero (XMR) have properties such as identity and fungibility.  Mixers, CoinJoin and other software tools aim to solve this problem, but are not a panacea.  As for the actions of governments and centralized institutions, these actions do not surprise me...  Bitcoin challenges them - and they are trying to curb it and bring it under their control.  Bitcoin was originally conceived as a decentralized global currency independent of governments and centralized institutions (an antagonist to global fiat currencies).

A lot of people refuse to use cryptocurrency to be used for capital in building projects especially if they would have to go through banks for the main reason you said: audit. Submitting audit to a bank would reveal everything about you and your past transactions which a lot feel is an invasion of privacy that is why they do not do it that much. If a bank were to check your audit and see some red flags, they might not continue to do business with you or worse they might get you investigated. Even if you have no direct involvement with any illegal activities, it is best to check from where you are receiving your bitcoin from.

Oh really? So if I borrow 1 Bitcoin from you, you want the exact same Bitcoin back?

If bitcoin is not fungible, what will you get after sending small part of your bitcoin? There are inputs, outputs with Bitcoin transaction and we have them because bitcoin is fungible. If bitcoin is not fungible, we hardly to spend it, miners will not receive transaction fee and they will only receive Coinbase reward for each block found. Bitcoin miners will have to find block by solo mining because they can not share Coinbase reward or transaction fee. https://en.bitcoin.it/wiki/Fungibility

Not true. Bitcoin is fungible just like cash is. If I give you $100 in cash and you give me $100 in cash, then the only thing we both need to do is to make sure the dollar bills aren't fake. If they are both legit, then we are exactly where we started from. If I give you $100 in BTC and you give me $100 in BTC, then the only thing we both need to do it to make sure the BTC is legit. Luckily, bitcoin does that on its own after some block confirmations. So we just need to wait a little.

Fact: Bitcoin is fungible if you practice self-custody and trade decentralized. If you're using a third party, then you're obliged to accept their terms of use, some of which might interpret Bitcoin as non-fungible. Various exchanges which cooperate with chain analysis companies might have blacklists of coins that are perceived as "bad". This defeats the property of each unit being interchangeable with every other, hereby fungible. But, hear me out. Third parties defeat every property of Bitcoin, not just fungibility. Pseudo-privacy, transparency, self-custody, being permissionless, everything. So, just don't use third parties, and you can thank me later.