UK Travel Rule (crypto)

[Urbandreamer]

Oh boy, is this a mess.

The intention is to track EVERYTHING that EVERYONE spends.
Let us be clear, this is just extending existing banking rules to crypto.
If you pay from an exchange or withdraw crypto, the government wants to know who is receiving it.

The issue is that there is NO minimum. If I buy a coffee, the government wants to know.
Here is a link to an article (broadly in favor).
https://www.elliptic.co/blog/the-uk-tra ... t-it-means

This recently caused me significant irritation and could cause problems for others.

In order to withdraw bitcoin to my own wallet from Coinbase I first had to deposit bitcoin.
The way such a transaction works is that a lump of bitcoin on the chain is split with part going to coinbase and part going (in this case back to my wallet) as change.
I could then withdraw to the change address.

Two obvious problems.
1) you need bitcoin in the first place.
2) the change address is just that. There is no requirement that it actually is an address associated with my wallet.

The second point makes the requirement ineffective while the first prevents anyone new from keeping their crypto themselves.

[Itsallaguess]

Let us be clear, this is just extending existing banking rules to crypto.

Completely fair then?

Cheers,

Itsallaguess

[1nvest]

Oh boy, is this a mess.

If I transfer bitcoin from coinbase to a paper wallet then that is as good as a currency 'note', perhaps a common value for each such piece of paper (private key) - 0.0001 BTC or whatever. I could then give that piece of paper to another as a form of payment that the recipient might just keep as-is and pass it on to someone else ... and so on. The issue there is that all former holders each might have recorded the private key and still have access to the bitcoin/value, so to negate that each new holder has to move the bitcoin to another wallet (private key), which creates a public ledger record/entry (traceable). It seems however that there's not a massive leap between that and having some form of offline mechanism to pass on such 'notes' without generating a online/ledger record entry, perhaps some form of private key that is a once only key to the bitcoin private key, where that top layer key can be changed by individuals i.e. as/when they receive a new 'note'. Some form of secure offline peer to peer transfer of private key(s). I suspect that would involve some form of trusted third party - that likely would be outside of regular controls, based in international waters/wherever.

The state in attempting to squash bitcoin risk it becoming the more preferred 'currency' (note) over that of the state controlled spyware note (Pounds). Drugs are illegal, but when overwhelming being accepted/used then the state has lost control. If the state loses control over the Pound, most using other choices, then ... devastation of that currency is inclined to follow.

Privacy rights suppression are becoming too excessive and as such is risking much. Better to miss out on some taxes, tolerate some drugs being used, rather than declining into a situation when its advantageous for everyone to be using drugs/avoiding taxes.

In practice rather than paper it would more likely be via electronic devices/methods, something like a extended form of Trezor coupled with some for of peer to peer communication becoming the adopted preferred payment/receive financial transaction method, where the Pound was relegated to only being used for benefits/tax payment (official state) transactions.

[Urbandreamer]

Let us be clear, this is just extending existing banking rules to crypto.

Completely fair then?

Cheers,

Itsallaguess

In the sense that it's equally intrusive and objectionable? Well yes.

"If you've got nothing to hide", should be replaced with "why does the state want to know where I buy my morning coffee".

[GoSeigen]

Fortunately crypto is out of reach of governments so don't worry about it.


GS

[tacpot12]

It does seem like the state is overreaching itself. However, there are ways to raise awareness of this and challenge it. You have started to do so here, but I suspect there are other forums with more crypto users who might offer more support.

Is this really much different to your bank knowing where you bought your coffee? There has to be some trace of the transaction otherwise it could be repudiated. Governments are able to make lawas that relate to have cash is handled/accounted for/etc. for tax and consumer protection, so why not crypto?

[Urbandreamer]

Fortunately crypto is out of reach of governments so don't worry about it.


GS

Just to clarify GS's snark.

Crypto exchanges (not crypto), regulated to operate within the UK, are under UK regulations. I thought that a bit obvious, but it seems that some need such things clarifying.

[GoSeigen]

It does seem like the state is overreaching itself. However, there are ways to raise awareness of this and challenge it. You have started to do so here, but I suspect there are other forums with more crypto users who might offer more support.

Is this really much different to your bank knowing where you bought your coffee? There has to be some trace of the transaction otherwise it could be repudiated. Governments are able to make lawas that relate to have cash is handled/accounted for/etc. for tax and consumer protection, so why not crypto?

Indeed, this particular premise of crypto was flawed from the outset and is a major reason I've never touched it. The essence of business and human interaction is that the value is in the trust relationship. Trustless is valueless IMO.

GS

[CliffEdge]

But this is not the same as cash.

[Urbandreamer]

Indeed, this particular premise of crypto was flawed from the outset and is a major reason I've never touched it. The essence of business and human interaction is that the value is in the trust relationship. Trustless is valueless IMO.

GS

Some might argue that, for example, the structure of the US government was set up with checks and balances. Precisely because you can't always trust human beings.
In this country we have a document called the Magna Carta because it was established that trust could not be seated with the Monarch.

Indeed there is plenty of evidence throughout history that trust can be reneged upon. Crypto Bitcoin was floated with the concept that, as governments could not be trusted with money (evidence from Roman times to present) we needed something that we could verify.

No more copper nosed coin's
https://en.wikipedia.org/wiki/The_Great_Debasement

No more devaluations. No more money printing.

Don't trust, VERIFY

Is the bitcoin quote. As you point out it doesn't offer the benefit of doubt.
Still fool me once......
Sorry but the phrase "Trust but Verify" is no longer appropriate with respect to fiat.
https://en.wikipedia.org/wiki/Trust,_but_verify

[1nvest]

But this is not the same as cash.

Crypto are a form of currency, so similar to if you bought US Dollars and then converted some of those back to Pounds for spending purposes then any FX change gains/loss are capital gain/loss reporting events. As part of HMRC requirements you're supposed to keep records - that include wallet addresses and bank statements (along with type of tokens, when and how much paid for each, when and how much you sold for ...etc.). Using bitcoin for daily spending purposes is like trying to daily spend using US Dollars, creates a plethora of record keeping requirements. It's better to just spend using a regular credit card (borrow at 0%) and once/month sell some crypt assets in a single trade to cover paying off that cc bill.

A exception could be if a Sovereign gold coin backed crypto token (SGCt) were created on perhaps the Ethereum network, as they're CGT exempt. Little different to in effect having bought Sovereigns and locked them in a safety deposit box but where digital form/value of those SGCt could be 'spent'. Transfer Pounds to coinbase to buy SGCt and any movements to offline wallets or payments to others in SGCt wouldn't require any CGT gain/loss reporting. Records however would still need to be kept for anti-money-laundering purposes (how much/when bought/sold, wallet addresses etc.) - but that would all be in the blockchain anyway. Alongside that a Futures based version could alternatively be created/used - for the likes of American where physical gold is taxed at 28% collectibles rate, but where Futures backed side steps that (so the same as other assets such as stocks/bonds). Similar to owning physical gold but where that was being securely stored and was quickly/easily traded/bought/spent (digitally). Another plus if state approved could be the retention/expansion of the Royal Mint in Wales - that are otherwise about to see 80 job losses (and knock on job losses that may involve). Better to have people working than sitting at home on benefits.

[Urbandreamer]

A exception could be if a Sovereign gold coin backed crypto token (SGCt) were created on

It's been sort of been done before.

One significant problem is that, by nature it has to be centralized. Those bank vault's, don't you know.

That means of course that the people behind it can be put in jail and money seized.

https://en.wikipedia.org/wiki/E-gold
"E-gold or eGold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) "
or if you want old school, i.e metal coins or paper.
https://en.wikipedia.org/wiki/Liberty_d ... e_currency)
"The currency was issued in minted metal rounds (similar to coins), gold and silver certificates, and electronic currency (eLD)."

[1nvest]

A exception could be if a Sovereign gold coin backed crypto token (SGCt) were created on

It's been sort of been done before.

One significant problem is that, by nature it has to be centralized. Those bank vault's, don't you know.

That means of course that the people behind it can be put in jail and money seized.

https://en.wikipedia.org/wiki/E-gold
"E-gold or eGold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) "
or if you want old school, i.e metal coins or paper.
https://en.wikipedia.org/wiki/Liberty_d ... e_currency)
"The currency was issued in minted metal rounds (similar to coins), gold and silver certificates, and electronic currency (eLD)."

Yes, but that adds trust. If for instance it was the Royal Mint then you have the benefit of trust and benefits of crypto (not having to handle physical coins yourself, being able to trade 24/7, digital transactions, offline keys etc.). Only if the intent was for misuse (illicit) activities would it be a 'problem' - but they can stick with the other crypto forms for that, along with all of the risks that entails (vanishing/crashing/whatever).

[Urbandreamer]

Yes, but that adds trust. If for instance it was the Royal Mint then you have the benefit of trust and benefits of crypto (not having to handle physical coins yourself, being able to trade 24/7, digital transactions, offline keys etc.). Only if the intent was for misuse (illicit) activities would it be a 'problem' - but they can stick with the other crypto forms for that, along with all of the risks that entails (vanishing/crashing/whatever).

Ah but as GS points out, we should all trust more.

After all, it's not as if trust has ever been reneged upon.

BTW, are you not simply replacing trust in the likes of e-gold or the liberty dollar with trust in an institution that flooded the country with adulterated silver coin's under Henry VIII? See the previous Wiki link to "The Great Debasement".

Still, I suspect that the idea of a CBDC backed by the claim that gold is held by the Bank of England or the Royal mint would have some supporters. I do have to question the assumption that the gold would actually exist though.

[CliffEdge]

Cash is pound notes in my pocket.

[Urbandreamer]

Cash is pound notes in my pocket.

Presumably you mean that Banjamins are not, because you don't carry them in your pocket and they are not universally accepted in the UK?
https://en.wikipedia.org/wiki/United_St ... ollar_bill

Come on now. You are going to have to come out with a bit of a better statement than that.

[1nvest]

Cash is pound notes in my pocket.

Presumably you mean that Banjamins are not, because you don't carry them in your pocket and they are not universally accepted in the UK?

To me 'cash' is anything that can be immediately or near-immediately spent. Pound notes, money in a bank account that can be spent using a debit card, even a credit card. Dollars or gold could be cash if the recipient priced in and accepted those directly, but commonly don't, at least not in the UK and as such are more a 'currency' - that requires time/action to FX/convert to cash.

The better form of cash from a investment perspective is credit card payments. Pound notes in your pocket lose purchase power over time (fiat, where debt is money - created out of thin air by banks to lend to borrowers, destroyed when the debt + interest is repaid). Money in a bank current account may earn 0%, also loses purchase power. With a credit card you borrow at a 0% between the time of purchase of something and the time at which you fully pay off that credit card bill (typically using savings if in drawdown, or from wages if accumulating). In my case for savings I hold stocks and gold and each month sell some shares or gold to pay off my credit card bills, typically selling whichever was the most above target weighting at that time (was relatively up). In some months the difference between when I paid for something and when I paid off that credit card bill might have seen, for instance, stocks having risen 10%, the purchased item in effect cost 10% less in not having paid in shares at the time of purchase and instead paid in shares some time later.

Other things that aren't cash might simply be considered as currency. Dollar bills, stocks, gold, bonds, whatever. Typically require conversion to cash and where that's not immediate. Takes time to go sell/swap gold or Dollars for Pounds, T+3 to convert shares or bonds to Pounds (reduced to T+1 in the US with Europe looking to follow that lead in a couple/few years time).

From a perspective of stocks, bonds, gold ...etc. all being "currencies", credit card being cash then you can selectively sell some of whichever 'currency' is the most-up (least down) each month in a single trade (to release enough capital to pay off the credit card bill). For that purpose perhaps holding US Dollars - invested in US stocks (S&P500/whatever), physical gold (perhaps Sovereigns as they're CGT exempt and pay no taxable interest), and 'bonds' (perhaps money deposited into NS&I) - provides flexibility in whichever 'currency' (asset) might be used to pay off your credit card bill each month. More often that will be stocks, followed by gold, less often by bonds (i.e. in months when both stocks and gold are down).

Increasingly the state is tracking money movements, right down to pennies as monitoring/tracking system develop/expand, along with all your thoughts/actions/movements. Moving larger amounts around, such as rebalancing a portfolio once/year that may mean moving £10K from gold to stocks or whatever - will be inclined to raise a state 'investigate' or 'more closely track' flag. Regular smaller amounts, such as selling some shares to pay off a credit card bill is more inclined to be stepped over as being 'regular' (normal/not unusual) activity.

From a initial portfolio/asset allocation of thirds each in US$ invested in US midcap stocks, gold, cash (as in deposited money earning UK base rate returns) where you spend (credit cards) a 3% SWR rate (initial 3% of the start date portfolio value, where that amount/value is increased by inflation each year) by drawing from whichever asset was the most up at the time, that can be enough portfolio rebalancing in itself



In that example case broadly time averaged around 46/27/27 stock/gold/cash weightings over 30 years. i.e. once initially loaded thirds stocks/gold/cash no other movements other than selling some of one of those assets each month to pay off a credit card bill. If I walk into a gold dealership with a Britannia one ounce gold coin they may very well exchange that for £2300 (whatever) in Pound notes, or do a transfer directly to my credit card account number.

The above chart is yearly granularity, it works out much the same however when scaled to monthly granularity, except rather than it being all-stock or all-gold that was withdrawn in any given year, the withdrawals drift around more, but still tends to average out to similar rates of how often each asset sourced spending/withdrawals.

[1nvest]

Fundamentally crypto is being dragged into also being state monitored/tracked. Isn't anonymous, can be opaque - but where each transfer initiates a ledger entry in the pubic ledger that with analysis is all revealing. With Pound notes and suchlike physical in-hand assets transactions are totally offline, are tracked by entry and exit into the 'regular banking system' records - "where was the £10,000 you're attempting to deposit into our bank sourced from - provide evidence it was from a legal/approved process/source or otherwise we wont accept it because the state might jump upon us". The present generations are happy to be enslaved, work and be taxed to levels that for many isn't even subsistence levels of living, would cost a 'master' more to shelter/feed/clothe/transport his slaves directly. Prior generations couldn't be taxed on their income/wages or savings as they considered it none of anyone else's business as to how much they earned or had saved, taxes were predominately raised/paid by businesses. Today's youth are quite happy to sell themselves in exchange for 'free' services such as Google/whatever. But not everyone - and crypto was perceived as one means to potentially achieve some levels of privacy/freedom, however that 'gap' is being closed down.

Your wages that have been deposited into a bank, isn't yours, its the banks. The shares you think you own aren't yours, on the companies shareholder register they're registered in someone else's name, not your name. The freehold you think you hold over your home isn't actual ownership of that land. But as the World Economic Forum said ... you'll own nothing and be happy, a intentional design. Just look at the present system, Labour secured a massive majority despite fewer than 15% of the population having voted for a Labour MP. Those Labour MP's that were elected - perceived as being 'representative' were immediately suppressed by authoritarianism, one of the first things Starmer did was to more than highlight how if Labour MP's didn't vote as instructed then they would be banished/punished - the Labour party MP's are largely just - expensive seat covers. There's still a small element for desire for freedom/privacy, but largely that is squashed with relatively little protest/opposition. Highlighting China as being suppressive when in the UK tracking/monitoring is even higher, as are some of its atrocities - such as dismissing that 4000+ would likely freeze to death due to withdrawal of winter fuel allowance (as measured by Labour's own figures), or mass killings by exporting Covid into care homes (Conservatives - who did little to even help such care homes in the way of provision of personal protection equipment). It would require a majority to support privacy/freedom before the likes of crypto served as it was desired/intended, and in the main there is no such majority desire. People are content to be enslaved - be just disposable commodities living in what is paramount to a open prison system.

[1nvest]

Indeed there is plenty of evidence throughout history that trust can be reneged upon. Crypto Bitcoin was floated with the concept that, as governments could not be trusted with money (evidence from Roman times to present) we needed something that we could verify.

No more copper nosed coin's
https://en.wikipedia.org/wiki/The_Great_Debasement

No more devaluations. No more money printing.

Currency debasement (print/spend more Pounds - devalues all other Pounds in circulation) and taxation are in effect no different. Tangible/fungible physical assets in hand, low/no counter-party risk is real personal wealth. That along with not being 'owned' by any single state. High net worth families often will have three homes, such as two houses in different countries along with a yacht or private jet 'home'. Hold assets such as prized paintings/artwork, gold ... etc. You could get by with just £1M, something like a lifestyle of 90% in tangible in-hand assets alongside 10% in leveraged stock holdings, where you moved from 5 star to 5 star hotels around the world in relatively low cost places. £40,000 (4% SWR) in-hand income, half of that spent on £50/night (or less) for 5 star accommodation, the other half for spending. Nomadic. https://thepointsguy.com/deals/cheapest ... worldwide/

[CliffEdge]

Hard for someone(?) to know what you spent your folding on.