There is a large and almost insurmountable problem facing many large Over-The-Counter off-exchange transactions; most, if not all, of those individuals making multi-million dollar purchases and sales of Bitcoin, do not want to have their identity attached to the transactions, either as the buyer or the seller, because there can be significant risks to one's physical person, one's legal person, and to one's virtual person when doing so. Simply being in the position of individually having the responsibility for control of anything of great value, places one at risk of becoming a 'honeypot' that attracts the 'Bears" to feed upon the sweetness that one's labors have produced
Because of these perpetual testing of the defenses of our monetary immune systems protecting our money from physical theft, paper theft, and virtual theft by "Pirates" in all three 'Realms'; the physical, the paper, & the digital. We can take control of our wealth for ourselves only by recognizing that our money manifests itself in 3 phases, as does water, (ice, water, & vapor) or even our Lives (body, emotions, & mind); and both our Money and our Lives are ruled by our Spirits, either consciously or unconsciously. The choice is ours to make, awaken to our surroundings every moment, or not...
Situational awareness or each surrounding moment eventually becomes a constant if one awakens to the reality of the risk of having something to lose, i.e., your LIFE STATUS, your LEGAL STATUS, or your 'VIRTUAL STATUS.
For those that acquire it, TRUST becomes the Heart of the Matter, as in Who can you trust with each Phase State of one's existence…?
The problem that comes up with this, is that all parties end up having 3rd party representatives on both sides, usually professional security agents, lawyers, and programmers providing intermediary services. One level of trust comes down to a handshake, another to a signed contract on paper, or a virtual 2-factor authentication. But this creates both a point of risk at the moment, for a short time as a paper trail, or forever on the virtual blockchain. For any contract, verbal, written, or digital there exists a need for identity verification from some independent agent, in order for the contract to be safely entered into.
One simply is prudent to know and recognize the responsibility of what may be done with the assets one exchanges to another. Often there are often times multiple intermediaries that have brought about the exchange agreement of the buyers and sellers, existing on both sides of the equation, each looking to get their piece of the pie from the transaction for their intermediary services. This leads to at best a minimum of 6 or more degrees of separation between the actual parties making the exchange, which most times either significantly delays the deal and many times kills it altogether.
For those that do not understand the needs and desires of these individuals, or often groups, that are moving 7-figure amounts of cryptocurrency around let me point out just a few of the risks involved, as I've been considering this issue for many months now.
There are:
-- Multi-day delays in funds transfer between banking institutions on the payment side, which can effectively only be mitigated by making the transfer within the same bank, and adds yet another layer of fees and exposure to the government reporting requirements of those institutions
--Legal risks exist regarding the many anti-money laundering and know-your-customer regulations, as well as recordkeeping requirements and likely suspicious activity reports submitted by the banks
-- For those on the purchasing end of the equation, there may be tax liabilities incurred depending upon who we have selected to jurisdictional authority and additional reporting headaches for dealing with cryptocurrency trading,
--A loss of anonymity regarding the wallet addresses, leading to those funds to be tagged to one's identity and tracked through all downline transactions
-- Risks on the Buyers side that are incurred as the Bitcoin itself may have already been 'tagged' and is being tracked as having been used for 'suspicious activities', (this is often mitigated by creating additional value, due to smaller compliance costs for clean freshly mined coins with no transaction history on them since their creation, all Bitcoin may be created equal, but just like people exchange with others can change that state of fungibility)
-- Risks incurred on the Sellers side, by having the transaction history of their coins back-tracked and tied to their identities and transaction histories if they are not freshly mined "clean" coins
-- Man-in-the-middle and other hacking risks exist if a digital transfer of the crypto is going to occur between hot-wallets, as well as risks of even loading large amounts of value into any hot-wallet just to do the transfer
These many issues create a relatively large shrinkage in the value exchanged by the two parties looking to transact, as there are fees and commissions paid at every step of the way. In some ways actually defeating the purpose of cryptocurrency in the 1st place, as 3rd party intermediaries create risks and feed off the free exchange of value between person-to-person. There no longer is a peer-to-peer exchange occurring and unnecessary risks and value loss are created by using these layers of intermediary representatives.
I believe my procedural solution eliminates most, if not all, of these issues allowing for truly trustless transactions between peers that do not know or need to care about the other's identity. And I am sharing this protocol because I believe in the fundamental right of individuals to exchange value freely between themselves PRIVATELY.
Financial privacy is the foundation of freedom, yet Nation-States have assumed a right to near-universal financial surveillance, which until recently they have been able to enforce. But now, informed individuals can eliminate the economic return on the investment required of violence, bypassing the jurisdiction and purview of those issuing government-controlled fiat currencies.
What I have recognized that has led me to see this procedural solution;
Value flow between the physical realm of cash/metal and the virtual realm of cryptocurrencies is being artificially restricted, the paper realm of fiat banking has been acting as a bottleneck to free-flowing movement of value between these 'phase states'. Money flow is often referred to as 'liquidity' and I suggest that we look at these 3 realms as parallel to that of water which exists in 3 phases, liquid, solid, or gas. Applying my metaphor to currency, cash and precious metals would be the equivalent of solid ice, the banking system's paper debt notes as liquid-water, and the virtual digital currencies as water-vapor.
Another consideration that I'm applying to my solution is the fact that foreign-held precious metal purchasing and holding has no governmental reporting requirements and can now be purchased anonymously. As well, with a physical exchange of passwords and digital bearer bonds in the form of paper wallets there exists no record on a distributed ledger, immutably and publicly stored for all time in the cloud…
Considering all this, here is my proposed procedure to be followed to facilitate these large OTC transactions, and I invite you all to help point out any holes or perspective risks that I am not seeing or addressing. As we crowdsource a workable industry standard procedure designed to eliminate the capital controls that centralized authorities are attempting to enforce on the free movement of wealth between free and self-sovereign individuals.
Inevitably some 'bad actors' may make use of this information for themselves but the evil acts of the few do not justify the restrictions on the liberty of the majority of value creators that have earned their wealth through non-predatory means creating a positive impact in the world.
If we outlaw financial privacy, only outlaws will have financial privacy.
Suggested order of operations:
Assuming both Buyer and Seller wish to keep their 'faces' hidden, they need only have a single trusted intermediary act on their behalf
- These individuals physically meet as a secure location with a secure internet connection, ideally with nested VPNs set up on dedicated devices for each of them
- The Buyer purchases ahead of time the amount of Gold, held in an agreed upon depository and preferably one that allows both Crypto and Fiat payments and withdrawals such as https://www.silverbullion.com.sg/
- In the Sellers presence, the Buyer logs in to that anonymous account and verifies the balance is present in the account to make the purchase with the password to the account written on its own piece of paper and visibly confirmed as accurate
- In the Buyers presence, the Seller then prints up a new paper wallet and loads the agreed upon amount of Crypto onto the freshly created 'Digital Bearer Bond' from the hardware wallet that was holding the digital asset to be sold
- The Buyer then uses their device to verify the balance held on the newly created Paper Wallet
After BOTH parties have verified the account balances, one denominated in Gold/Silver and the other in the agreed upon Cryptocurrency - They then each hand the other the Papers they printed giving access to the metal and crypto accounts and proceed to immediately change the password and upload the paper wallet into a hardware wallet
BOOM, a done deal!
With no virtual trail to be followed, no 'money' laundering having occurred, and no identities exchanged, with each individual provided both certainty and anonymity with minimal risk of fraud or theft.
Putting into practice the famous quote from one of the Bankster Emperors himself, "Give me control of the ability to print money and I care not what laws any government may make."
We simply bypass the use of the paper debt-notes issued by the Corporate States and remove ourselves from their jurisdiction, scrutiny, and control! And financial liberty is reacquired as we take back our ability to transact freely and privately between two living individuals.
So what do you all think? I invite everyone to attempt to poke holes in this solution and perhaps point out any considerations and risks that I've not seen or addressed.
And if you find value in this information, feel free to send a tip my way, preferably as Dash but as BTC or as a STEEM upvote.
Thanks in advance,
Humbly yours,
The Taoist Cryptobanker
UPDATE: I've already received some relevant feedback with a couple issues I'd like to address as well…
Regarding physical security, as the Paper Wallet becomes effectively a 'Bearer Bond' with physical possession granting ownership, the same as cash, one becomes more vulnerable to what is called the '$5 wrench hack' where your life and limb are threatened if you don't hand over your wallet.
There is a method of Operational Security that can address the physical threats as the economics of violence are no longer viable now that value can be transferred digitally and protected by math:
Hire bonded security professionals to manage the exchange, with at least one, if not more people watching the back of whoever is engaged in the transfer.
Choose a secure location somewhere public with its own security and preferably metal detectors such as on the backside of security at an international airport might make a good location, or at a government courthouse, perhaps at a high-end museum.
As the actual risk would need only exist for a few minutes, both parties would be wise to immediately share the private key and gold account password, in encrypted form sent through nested VPNs, to a trusted off-site party that would immediately change the password and upload the private keys into another multi-sig wallet and provide confirmation when it is verified as done
Have them immediately move the majority of it again into an air-gapped cold wallet, paper or hardware.
Myself I might even go into a bathroom and literally burn the paper to eliminate any physical trail as soon as the funds were verified under control with the new keys/password.
These may seem a bit extreme and out of a Jason Bourne movie, but for the amounts that are often moved around off-exchange privately in OTC deals, it would be wise to be safe rather than sorry.
I have literally been part of conversations initiated by a Crypto specializing financial planner that put me in contact with someone claiming to represent a mining pool with 130,000 BTC to sell, valued at the time as $2.95 Billion that would have been exchanged in batches of $50 Million/day and even at that would've taken months to complete! Their terms were not acceptable to most as they were selling at too high of a % and wanted the funds transferred in-house from their European bank. I can get better prices out of some BTC ATMs for only a couple grand, so that was a little expensive for those amounts and the banking requirement was also a deal killer for most. The conversation ended immediately after they shared their terms for the offer, & just as happens to most of these deals, it died on the table. Prompting some of my motivation for writing this post.
Yet another issue has been brought up by one of my associates that runs a crypto exchange; attempting to do these large OTC deals is a 'messy' proposition due to regulatory uncertainty. Governments are making it clear that BTC is not 'money', yet they sometimes have charged individuals with 'money transmission without a license'. As they consider crypto and likely Gold as well as 'money equivalents' and require one to register as a 'money transmission service', but a trade of a password granting access to metals in a foreign held vault for the private keys of a crytpo wallet does not constitute a reportable event, to anyone.
The metals only need be reported if physically transported across national borders in values over $10,000 and the amounts one may have under control that are stored in a foreign country do not require reporting to any government agency, whether purchased with USD or cryptocurrency.
My point in this post though is that if done appropriately, these P2P exchanges of value are both out of their view and the reach of banks and governments to regulate or steal. In practice any Nation-State prohibitions are as ineffective as a Shepherd attempting to put a leash on a wolf that has shed its sheep's clothing and left the herd. Recently Saudi Arabia passed legislation prohibiting their populace from using cryptocurrency at all due to it being outside their ability to regulate and control, admitting the exact point I am making:
**The Emperor is Naked and wears no clothes, freedom of monetary choice has arrived, the cat is out of the bag, and the Genie cannot be put back into the bottle.
Financial freedom is available to all individuals if one has the knowledge and the courage to claim it...**
******cont. in Part 2, The PAPER Realm, Designing our legal, taxable, and strategic structures; How Crypto-Privateers acquire their 'Writ of Authority' granting safe passage to both visible and invisible business vessels******
BTC:
1JFpPGpiVaKyQJ6sCAJHzQm7VHxx8TJmHF
Dash:
XiqCYsooHdTSDen5J6dFev4AEjim3iijpb