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3) Well, basically: Alice wants to send $100 to Bob. Should she be allowed to? After it's sent, if she requests a refund, should it be sent back?

SBF

@SBF_FTX

Sep 27

4) Right now: a) cash is essentially fully free. You can hand a dollar bill to anyone. It's never reversible. b) ACH transfers only work from one person who has been whitelisted for an account at a bank that's whitelisted by the fed, to another. And they can be reversed!

SBF

@SBF_FTX

Sep 27

5) So ACH uses a whitelist system: you can only send someone money if a set of institutions have explicitly said so. Cash just always works, as do bars of gold.

SBF

@SBF_FTX

Sep 27

6) There are tradeoffs here. In favor of restricting transfers: a) you can cut off terrorists b) you can protect customers who accidentally sent money Against: c) state overreach for political reasons (economic censorship) d) commerce is much clunkier and doesn't 'just work'

SBF

@SBF_FTX

Sep 27

7) Safety vs Freedom, I guess. Whitelists--like how ACH works today--provide lots of safety. But they make transfers, innovation, and commerce very difficult. Free systems--like cash--are clean and simple and, well free. But they could be used to launder money.

SBF

@SBF_FTX

Sep 27

8) So what does crypto do? Well, right now, if Alice wants to send $100 to Bob: a) if Alice or Bob are sanctioned--e.g. on an OFAC list--then it is generally illegal. b) otherwise, it is generally legal also, crypto transfers are not reversible.

SBF

@SBF_FTX

Sep 27

9) In other words, crypto uses a blacklist system: you can't send funds to/from a person or entity that is specifically blacklisted, but otherwise you are free to do as you wish (at least for peer to peer transfers).

SBF

@SBF_FTX

Sep 27

10) I think this is a good compromise. Why? Because: a) it means that anyone who is facilitating financial crimes can be blacklisted by e.g. OFAC and cut off b) but for everyone else, transfers just work: they're seamless and permissionless.

SBF

@SBF_FTX

Sep 27

11) You get most of the protection by blacklisting a few bad actors; and you get most of the freedom by otherwise allowing free commerce.

SBF

@SBF_FTX

Sep 27

12) And so what does that mean for, e.g., Tornado Cash being sanctioned? I think, basically: I understand why it happened, and that it's important to prevent illicit finance. And it was still a blacklist--if an extensive one--not enforcing a whitelist for transfers.

SBF

@SBF_FTX

13) What's important is that we not bleed over from blacklists to whitelists. That sanctioning North Korea doesn't slowly slip into only allowing economic activity with a few trusted parties.

12:43 AM · Sep 27, 2022Twitter Web App

Replying to

14) For more info on FTX's sanction compliance, see here:

ftxpolicy.com

Sanctions Compliance Tools for Crypto Market Operators

In this post, we identify and describe the key tools used to implement a sanctions compliance program - in part as a summary educational tool but also as a demonstration of the level of resources and...

Replying to

This is the problem. We cannot trust government to not overreach and start blacklisting for all sorts of politcal purposes and power grabs. When has the govt been a responsible body to trust. Its exactly why keynesian economics is a joke. The people throughout history cant behave

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wait a minute... are you trying to wash crypto? because this sounds like washing crypto.

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More a sliding scale on what's being accepted or provided? Exchanges can't know where the fiat will go, so it needs to know where crypto is from. A diamond dealer should ask a questions on cash. A newsagent takes any coin not stained with blood. And a dog charity, whatever 🤷

Replying to

You should distinguish between enforcement at the protocol layer vs the application layer. More often than not the use of either black or white lists is just last law enforcement. There are many ways to stop illicit finance that don’ require restricting innocent people.