Banks can get your money back... because money in the fiat banking system is mostly a permissioned bank account (#1417296) without exits. Meaning: the target bank can call whoever you transferred the "stolen" money to and have it back by lunch.
“Stealing your money,” in this context, means basically moving some money from your bank’s electronic ledger representing your account to another bank’s electronic ledger representing the thief’s account. Your bank can call the thief’s bank and be like “that was theft, give us our money back,” and the thief’s bank probably will. Banks are quasi-law-enforcement agencies, and they will cooperate to reverse fraud or theft.
BUT, if you magically manage to transfer it -- say overseas, and withdraw in cash,
the theft might be irreversible. The thief might have moved the money to another bank, and then withdrawn it in cash from the other bank, used the cash to buy art or casino chips, and rendered the money untraceable and removed from the electronic system allowing its recovery. In that case, you’re not necessarily out of luck.
"What happens if someone hacks into your crypto account and steals your Bitcoin?"
Well, first, there is no such thing as "bitcoin/crypto" account but let's pretend you held the coins at, say, Binance. Then yes...
Also:
Last week, hackers took Binance, the big crypto exchange, for about $6.3 billion of customers’ cryptocurrencies, on the order of 5% of Binance’s assets. It’s apparently the largest crypto hack ever. “The fate of all crypto exchanges is to be hacked and lose their customers’ money,” I have said many times around here, and Binance can’t outrun fate.
is striking how normal and traditional-finance-y the response was. Step 1 is to freeze the hackers’ bank accounts
Also, if you steal dollars on-chain, you're back in the same trap as the traditional banking system... duh, reversible and freeze-able:
A lot of the stolen money was in USDT and USDC. Those are stablecoins, blockchain-based tokens each representing a $1 deposit at Tether and Circle, respectively. Those tokens are redeemable for $1 at Tether or Circle, and they are traceable on the blockchain. When someone hacks into Binance and steals some USDT and USDC, Binance can call up Tether and Circle and say “hey please freeze those tokens.” (Tether and Circle answer the phone when Binance, the biggest crypto exchange, calls: Binance is in a sense their main customer.) Tether and Circle can easily do that: They can see where the tokens went and [add the thief’s blockchain address to a blacklist, so that it can’t transfer any of the stolen tokens.
Easy peasy, law-enforcement squeezy:
"The result is centralized financial intermediaries (Tether, Circle) performing a quasi-law-enforcement function and reversing transactions to return stolen tokens to Binance."
leaving a $3.3 billion hole of irreversible theft. Binance is not subject to much in the way of capital and customer protection regulation. On the other hand it’s a big lucrative business, and not run by idiots. Step 2 is that Binance’s shareholders eat the remaining loss:
Very tradfi.
The crypto ecosystem has matured enough that now it can rely on trusting well-capitalized central intermediaries who have reputational and business reasons for reversing fraudulent transactions. No doubt Satoshi Nakamoto would find this very annoying.
BUT, Levine has to add:
...for the rest of us, it is very normal and sensible! You should be able to get your money back when it is stolen from your bank!
Also... Should you launder money for obvious criminals?
I mean, maybe not. I am on record saying that if criminals can't turn their bitcoin into goods and services, Bitcoin is (mostly?) broken. #1540813.
...but I don't think I, personally, am obliged to help them out in laundering it. But if I were, I'd make sure to charge them properly.
If you run a casino, and some guys in masks run into your casino carrying bags of cash, and they go up to a cashier and plunk down a sack of $1 billion and say “we need to turn this into chips right away,” how many chips should you give them? I feel like “$500 million worth” is a perfectly fair answer? They are expressing a high demand for liquidity, and you are taking a certain risk in this transaction. You should make sure it’s worth your while.
No, no, I’m kidding; casinos are subject to strict anti-money-laundering compliance requirements, and of course if masked men run into your casino with obviously stolen cash you should not help them launder it at all. Crypto has not matured to that point, though.
Also, not "poor execution" --extremely high demand for liquidity!
the hackers paid up like 15% for immediate liquidity in size, which I am not sure I would call “poor execution.” Like I get that it’s poor execution in the context of a normal trader doing normal trades, but in the context of laundering stolen money, 15% does not seem especially egregious. The value of immediacy here was unusually high, and the hackers got what they paid for.
Tether and Circle froze the $1.8 billion of stablecoins that the hackers still held, but not the stablecoins they had already traded for Ether. But that is to some extent a matter of Tether’s and Circle’s discretion
apparently money stuff is open now?!
I've been pondering this a lot lately. Is the fact that theft can more easily be reversed in a centralized, fiat system actually a plus?
I think it may be impossible to have "no trusted third party" without having "irreversible transactions."
But additionally, irreversibility is desirable in many online payment flows (eg. anything where the customer is purchasing something that is delivered digitally).
Probably, though, bitcoiners could stand to have a bit more nuance in their thinking about the use-cases where trusted third parties are desirable.
Can you name 1 example of a situation where you would want to have a trusted third party, instead of 1 on 1 payment?
I don't think any of these are important enough to sacrifice the censorship resistant properties of bitcoin, but I do think they are real situations that will lead users to pause before choosing to use Bitcoin.
Point 1 is happening with fiat A LOT. So does not apply.
Same for point 2... not sure what an intermediate should add? A company doing this will be out of business pretty quick...
Point 3 idem... if i send money to a whrong bank account... i am at the mercy of the receiver.. no bank will reverse it...
This is based on EU by the way, we do not really use credit cards here
a plus... for whom?
It's great for consumers, since it's a free insurance policy. Not great for the system overall (bc nothing is certain, hence e.g. chargebacks and transactions taking forever or subject to hold-ups/freezes) nor even consumers since they
a) ultimately have to carry the cost of this insurance
b) live/operate in a system with control/surveillance/permission everywhere.
But yeah, in the narrow example of "someone stole your money," it's great
It's the classic example of diffuse costs (higher systemic costs for everyone due to inflation; living in a controlled/permissioned environment) vs acute benefits (you can visibly see and feel the benefit if you are the one who gets stolen from; you feel more acute security that even if you get stolen from it can be made right)
The insurance is NOT free, it is backed by you, via governments in the end.
The fee is just delayed and deluted through inflation and taxes (and haircuts/bail-ins in the near future...)
15% sounds pretty cheap for "clean" cash. I remember reading somewhere that money launderers sometimes pay up to 50% to make it "clean".
The recovery process really shows how much crypto still relies on centralized intermediaries. That's why I'm more interested in systems that let people use native BTC as collateral without wrapping, bridging, or handing it to a custodian. Less reliance on middlemen is a step in the right direction.