On illicit funds in crypto... Background The entire purpose of crypto is to build neutral, objective, transparent protocols. "Permissionless" is the phrase. It's a belief that regardless of the ethics of the *users* of a protocol, the protocol itself should simply act under the protocol rules. That honesty, that integrity, provides immense societal value. And upon such a foundation, further layers of coordination/rulemaking can be built. Coinbase as a central exchange can make its own rules about its property and systems, *built on top* of permissionless, neutral Bitcoin and Ethereum protocols. Questions When crypto funds are illicit, what should happen? Should Bitcoin nodes block illicit txs? Should Ethereum nodes block illicit txs? Should Uniswap contracts block illicit txs? Should Thorchain nodes block illicit txs? Should miners and validators be policing content? If the answer to any of those is "yes!", then we are not designing an ecosystem of permissionless, objective, protocols, are we? We're designing something else. If the answer to any of those is "yes!", then we're building permissioned financial services, but on a blockchain. Of what value is this to society? And to do so, suddenly the definition of "illicit" must be defined, and it cannot be. Illicit to whom? Illicit under what standard of suspicion, or proof? These are social and legal questions about which people will disagree. If crypto protocols are built to incorporate this social/legal layer, then they are truly useless, for they lose their entire reason for existence... objective, transparent operation. An objective protocol must permit bad actors operating on it. Mathematics doesn't "turn off" when a bad man solves an equation. Language doesn't fail to execute when a bad man speaks it. These are permissionless protocols and so too must be crypto. To those advocating that illicit funds be blocked by protocols, please explain the standards by which such things shall be determined, and please explain why you're involved in crypto in the first place? If a hack is 100, nobody will advocate for censorship. If a hack is 1.5 billion, suddenly, many do. At what dollar value shall a blockchain halt? It's easy to vilify North Korea. What about when Western governments violate law, and confiscate without due process, digital assets from a rightful owner? This is illegal, this is illicit. When our own government commits crimes, shall we permit their action across our protocols, yet when "bad" governments do the same, we put a stop to it? Should a German node operator enforce Saudi law? Should a Chinese operator enforce American law? Should chains be halted and addresses blocked before trials and legal guilt even been established? Just the *accusation* of illicit funds is enough to violate that which we claim to build as inviolate? I am vehemently opposed to crime; to actual crime: to fraud, to theft, to violence. I see open, transparent protocols as an antidote to crime, and as a tremendous boon to good civilization. Laws, which are a human *social layer,* are in place to prevent and punish such crimes and the best governments should vigorously pursue actual criminals. Dear law enforcement: please pursue the criminals that stole those funds! Law enforcement is your job, and you've taxed us upon the promise of fulfilling it. But that social, subjective layer of laws and legal enforcement, must exist above and separate from more foundational underlying strata that operate *objectively* and equally to all parties. When the human world of right and wrong, which must always be subjective, is transposed into an otherwise objective, permissionless system, the latter will fail to be so, and there is no purpose to it. In such case, let us admit we are merely building a more complicated apparatus for subjective social policy. Being decentralized is a gradient Being permissioness is not