Of the three (paper currency, payment processors, pure cryptocurrency), pure cryptocurrency is the only one with a structural bias in favor of fraud, by protecting bad vendors from retribution. (Paper currency exposes bad vendors to retribution because you have their physical location.) If people were forced to use pure cryptocurrency, they would prefer to build something like payment processors on top of it, to manage and drive down fraud risk.
Crime is bad actually, and people want to disincentivize it.
You present a false dichotomy, implying that we either have to restrict digital currency or accept crime, as if that's our only avenue for combatting crime.
That said, I think making a currency traceable/non-anonymous is fine as long as it's reasonable and doesn't affect the finality, availability, or neutrality of the currency.
Whilst I agree with the thrust of your post (it is, factually correct that properly using the interface between the banking system and Bitcoin is functionally close to illegal) it also seems to miss that Bitcoin P2P is illegal in the same sense as, I dunno, homosexuality is illegal in parts of the world.
It‘s more like “against social norms” than say, something objectively bad like murdering an innocent.
My sense of the article is that you’ve prompted yourself with “money laundering is illegal“, expanded that out into a long post, but not really asked the interesting questions, like why, is that desirable, what are the knock on effects, who does it benefit, etc. You stop before you get to the juicy bit!
Privacy was not one of the protections I asked for. I don't want my neighbor knowing what I spend money on, but it's fine if there's some record of my purchases law enforcement can use to track me down if I'm breaking the law.
I don't see how that's not enough for law enforcement to prevent money laundering.
Yes, adding the power to hold and freeze makes some crimes easier to prevent. That's one option. The other is to let transactions go through and prosecute afterward. That's how we handle most crimes, and how we handled all crimes in the pre-Internet era. If you buy CSAM, you get arrested. If you commit fraud, you get arrested. You don't have to submit every purchase you make to some bureaucrat for review just in case you might be spending money on something bad.
It also ~doesn't work, with more than 99% of money laundering not being caught anyway. This was never about money laundering. It was about saving processors money on "high-risk" transactions, and saving governments money on law enforcement, allowing them to put on a show of being anti-money-laundering without having to do anything expensive to actually stop it.
Imposing restrictions on other people's legal transactions is a cost that needs to be justified, and I don't see the justification when alternative routes exist.
And I suppose an American CBDC would extend these restrictive features of cryptocurrency to the $20 bill too.... That seems more likely than the creation of a legal regime to protect the original crypto dream.
Yes I don't see how the meddlers can be kept at bay with any digital currency if the users of that currency don't have guaranteed rights.
The initial promise of crypto was digital money without a middleman. Censorship resistance. Financial sovereignty. Anonymity. Satoshi Nakamoto's 2008 whitepaper describes a payment system with no bank, no processor, and no government standing between you and the person you're paying.
What does the crypto world look like today? Pretty much the opposite. Money with the most obtrusive, meddling middlemen imaginable, ready to freeze your account or deny you on a whim. ID verification for everything. Censorship thorough enough that entire categories of legal stuff are functionally unbuyable. And this is all made worse by the fragmentation: a zillion coins, networks, and wallets, most of them mutually incompatible. A confusing nightmare that somehow reproduced every bad property of the banking system and then made them worse.
Compare that to my $20 bill. Whose permission do I need to spend it? Where are the anti-money-laundering obligations and sanctions screenings on my $20 bill? Who checks my ID before I hand it over? Who steps in to make sure I'm not being scammed, or that I'm not committing fraud? Who makes sure I'm not spending it on porn?
If the technology suddenly existed to add all those restrictions to your $20 bills, would you want that?
The pure version described by Satoshi Nakamoto exists in theory, you just can't get to it. If you hold your own keys, a Bitcoin transaction is final, can't be frozen, and doesn't care what you used it to buy.
The problem is actually getting there. You have dollars, but you want crypto. If you buy it from a company, you're in for the full "banking experience" and worse: identity verification, account holds, "risk reviews", a compliance department, and so on. All required or incentivized by law.
The only way around that is to find an individual who'll trade you crypto for cash in a peer-to-peer marketplace. Ideally, someone trustworthy, who does this regularly at volume, with a reputation to protect. However, that's illegal! Anyone who exchanges crypto for cash as a business is a "money transmitter", which means they have to register federally, comply with anti-money-laundering stuff, blah blah blah, and the government really puts people in prison if they skip steps here. The developer of Tornado Cash, for example, was convicted even though his software never even held anyone's money. If you want the freedom promised by Satoshi Nakamoto, you have to trade with someone who only trades crypto irregularly, and not for profit.
The result is a peer-to-peer market that structurally cannot contain trustworthy participants. Almost anyone who trades enough is either a licensed company or a criminal. The few who remain are hobbyists and scammers, and good luck telling the difference.
So, nobody uses peer-to-peer crypto. It functionally doesn't exist. If you want crypto, you need a crypto platform. Whether you use crypto or not, your only realistic way to spend money online is in association with the credit card/banking/app system, and so you're subject to its whims.
First, there's the porn. In 2025, an Australian group that didn't like some adult games on Steam and itch.io sent emails to Visa and Mastercard about it. Steam was forced to pull a pile of games, and itch.io delisted its entire adult catalog, and froze the affected developers' payouts. (Competitors not targeted by Visa/Mastercard kept listing adult games for sale.)
In 2020 Visa and Mastercard cut off Pornhub's parent company, forcing them to remove videos published by unverified users (~80% of their videos) in hopes of getting their ability to receive payments restored. (Their competitors were not subject to the same whimsical restrictions by Visa/Mastercard, and many continued listing videos by unverified users.)
The same treatment goes for any category a payment processor decides is "high-risk" (read: expensive for the processor): guns, tobacco, alcohol, telemedicine, and so on. All of it legal, made de facto illegal by the people who run the payment platforms. My $20 bill works fine for any of these, by the way.
Then there's politics. Stripe cut off donations to Trump's campaign in January 2021. PayPal shut down Proud Boys founder Gavin McInnes' account in 2018, as well as several antifa groups -- I guess an attempt to appear even-handed. Whether you support or hate any particular ban, look at who gets to decide who gets banned and who doesn't. Not an elected government. Not a court. Some trust-and-safety team of a for-profit company.
And unlike my $20 bill, digital money can simply be frozen. PayPal will hold your balance for 180 days with no explanation, and just as you're excited about finally getting your money back, they'll add on another 180 days, and sometimes just keep the money forever. Stripe holds funds for 90 days and extends it whenever it feels like.
Crypto platforms are even worse. Freezing is a standard operation in the crypto space, whether it's an account verification hold, an identity verification hold, scam prevention, whatever. Because transactions with digital money are often reversible, but crypto payments might not be, crypto platforms are terrified of chargebacks and impose extra holds to protect themselves. Buy crypto with a credit card or bank transfer and you automatically get a multi-day hold. Trip an automated "risk" model, and your account is frozen for months with no explanation and no human to appeal to. Coinbase was sued for locking customers out for months. Users reported lockouts of over a year sometimes. And yes, sometimes the users never get their money back. And sometimes the platform ceases operations and your money vanishes, as with FTX or Celsius.
Also fun: Visa/Mastercard merchant codes classify crypto purchases as cash withdrawals, so if you're even allowed to buy crypto at all, you'll be charged a cash-advance fee of around 5%.
Banks are somewhat less egregious than other digital money platforms, presumably because they store fiat currency so people expect them to work like fiat money. Banks have some restrictions and regulations compared to physical cash. They're regulated so they can actually pay out withdrawals. That's great. A similar rule now applies to some crypto platforms, and that's good. They freeze money, but pretty much only for super reasonable reasons, and for short durations. That's fine. But banks also sometimes close accounts over politics and "reputational risk" (debanking) so banks aren't totally innocent here either.
So why is the $20 bill a symbol of freedom, while our digital money is subject to arbitrary whims, restrictions, and censorship?
Because with physical money there's nobody to sue or put pressure on. The government can't make a $20 bill file reports. The $20 bill doesn't have to care about what activists in Australia think. It can't get in trouble when you buy tobacco with it, and it can't go to prison for being traded for a different currency at a profit.
Digital money, on the other hand, is a row in a database. Somebody's database. That owner is an attack surface on your freedom. Anyone with leverage over them (regulators, card networks, the public) gets leverage over your money. Once money can be meddled with, it inevitably will be. Payment processors will impose restrictions on how you spend your money to save themselves a dime. Governments will start asking for sanctions screening, reversibility, and a freeze button. The 2025 stablecoin law (the GENIUS Act) now requires anyone issuing a stablecoin to build in the ability to seize, freeze, burn, or block the money, to comply with lawful orders.
And there's nothing to stop these meddlers, since you have no rights. You have no right to reasonable access to your digital money. You have no right to be able to purchase any legal goods or services with your digital money. Providers are penalized if they let the wrong person access money, or they fail to freeze. They're never penalized if they refuse legal purchases, or freeze unnecessarily.
Digital money, whether it's a bank balance, a card, a PayPal account, or crypto, is money when it's convenient for the people who control it. The credit card networks call crypto cash so you can be charged a cash-advance fee. Regulators call crypto money so they can classify you as a money transmitter and imprison you for trading it. But start asking about your rights, and suddenly it's not money anymore. It's just a row in a database. Scrip, to spend at the company store.
Here's what I actually want:
I want these protected by law.
Cryptocurrency as a pure technology delivers all three. But it turns out it doesn't matter how pure your technology is, because restrictions can be imposed everywhere your technology touches the actual economy. In fact, it is structurally illegal to create a digital currency that actually has these properties in practice.
Satoshi Nakamoto tried to use technology to grant people rights, but the law can always make a technology illegal or burdensome to use. It turns out that if you want rights, you have to enshrine them in law, not in code.