Can Tainted Bitcoins Really Exist?

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    In the eyes of some, there exists Bitcoin that is less than pure as a result of connection with criminal activity, and should therefore be regarded as tainted Bitcoins. The question that begs to be asked, though, is whether or not the Bitcoin is to blame for the decisions of the criminal, and what to do with the coins if they are indeed tainted. For most people, Bitcoin involved in criminal activity is no more tainted than cash and other valuable items involved in the same types of activities. Those same people would argue that if the asset was no longer tied up in criminal activity it should be fair game for the rest of us.And, in fact, those calling Bitcoin's tainted may very well have something to gain from those "unwanted" Bitcoins.

    Tainted Bitcoins: A Myth or a Worry?

    To get down to the reasons behind why people might call Bitcoins tainted, we should consider the transactional history of those coins. New Bitcoin's, for example, have little to no previous transactions on record which means there is far less to be traced when analyzing the activity of those coins. In a sense, new Bitcoins can be considered "pure" as a result. The longer the Bitcoin's have been around, and the more hands the coins have passed through, the more likely it is for an interested party to be able to track those coins back to the current owner. 

    If, by chance, one of those previous owners happened to use the coins for illegal activity, the same coins can end up in just about anyone's digital wallet . The argument for tainted Bitcoin's states that the taint from that elicits activity can travel with the coin to the new owner, plus bringing increased risk.

    The other side argues that the coins are not to blame for their previous owner's activities. Much like the cash in your wallet would not be considered tainted if the previous owner five times over came by it by illegal means. As long as you came by that money legally, most people would not consider that cash to be ‘tainted’. The decision as to whether the coins you aquire are, in fact, tainted seems solely on your own perspective. 

    To take that a step further, looking at the wallet responsible for the illegal activity would be a more logical response. The person behind the criminal activity would have to utilize certain tools to procure and move their digital currencies. Wouldn’t it make more sense to go ‘taint’ the wallet instead of the coins that pass through it? 

    We aren’t the only ones thinking that Bitcoin should not be considered tainted, either. The US Marshals Service seems to think the whole tainted Bitcoin concept is pretty moot. If they didn’t, they certainly wouldn’t auction off seized cryptocurrencies, just as they have no qualms about reselling other items of worth taken from criminal proceedings, such as planes, boats, cars, and homes. 

    The US Gov draws the line at how the coins are procured. Did you get your Bitcoins legally? If so, the whole argument for tainted Bitcoins may be a thing of myth. 

    Yet another factor leading to the idea that taint is nothing to worry about is the fact that it is near impossible to understand and prove whether coins currently present in an innocent wallet owner are being manipulated by a hacker. There is still enough anonymity involved with Bitcoin transactions to make that level of transparency very rare. 

    Taint Discrimination

    Despite the widespread belief that Bitcoin and other cryptocurrencies cannot, and should not be considered tainted, There are numerous firms running today that seek to both classify and and freeze so-called ‘tainted’ coins. Due to the lack of information cryptos usually have, these firms use anything at their disposal to determine whether particular coins should be labeled as being dirty. 

    Once a crypto watchdog firm has declared certain Bitcoins to be impure, a Bitcoin owner runs the risk of having their assets frozen or forfeited. There are a few things that users can do to ‘clean’ their coins, such as the use of a mixing tool, but firms flag coins with mixer history as well. As these types of firms generally work with large, centralized cryptocurrency exchanges, it is on those platforms where care must be kept should you possess any ‘tainted’ coins - if you even know that your coins are tainted, that is. The risk boils down to frozen assets if your coins have been deemed dirty, or if it comes to the attention of the watchdog firms that you have put your coins through a mixer. 

    There is an obvious problem with this issue, and that’s how do you know whether your Bitcoins are being discriminated against before it’s too late? It is virtually impossible to track coin that you purchase on an exchange, and it is even more unlikely that you would ever be able to identify when and where illegal activity came into contact with the very same Bitcoins that you have in your possession. 

    Final Thoughts

    No matter what types of exchanges you use, and however you came across the cryptocurrencies in your possession, a word to the wise would be to utilize mixing services to fight against entities that wish to track and label your cryptocurrencies. The more people who can shuffle their coins in services like Samourai Wallet and others like it, the less likely it will be that crypto analytics software will be able to accurately track the world’s crypto. As Bitcoin and all the others are swiftly making moves into the mainstream, it is imperative that we remember where it all started. There is no good reason to give up the immense benefits that are inherent in cryptocurrencies, such as anonymity and security. 

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