Coinbase could do it, but if someone sent these "bad" coins to your personal address? Let's say if you're major NFT owner or if you're collecting money for your non-profit via crypto.
What I saying is that just for $10,000-100,000 you can literally taint 90% of crypto ecosystem.
You wouldn't be, if you were an unwitting recipient, precisely because as a recipient you can't actually control who sends tainted crypto to you. In this hypothetical, just report it to the feds and they'll provide an address for you to send the "gift" to.
You'd only get into trouble if the feds see a large, ultimately untraceable transaction from your crypto accounts prior to the "gift," in which case you'd have to explain to their satisfaction why you had a large untraceable transaction followed shortly by the recipient of tumbled crypto. (It's doable, you just have to be able to explain it.)
There are other possibilities - for example they can maintain a list of tainted coins, and declare them illegal to transact. This can then be enforced at the level of exchanges.
Is it censorship resistant? Couldn't state easily enough attack it at any sufficiently large point it contacts with real economy? They degree certain wallets being tainted. And then promise to jail anyone who deals with coins from these, receive them and transmit on to anywhere but government controlled wallets and face jail time? For one scenario, or just tell exchanges or like to confiscate any coins coming from certain addresses...
How are you going to sell it though? It's very likely that exchanges have blacklisted addresses involved in large-scale crimes, and wouldn't touch the coins. They make large sums of money through legitimate business, and don't need that kind of risk.
I don’t think you have a choice to accept a deposit or not, do you? You can’t stop people sending you coins. And sending them back costs you money so you wouldn’t do that.
Here’s an interesting question — if you receive BTC from one of these addresses as payment for something, do you refuse it? You know it’s stolen and you might worry someone else who you might pay in the future would be able to track down that it’s stolen, so do you ask for “clean” BTC that isn’t linked to known theft?
I don’t necessarily know the answer here. This is something that you can’t do with paper bills
FYI, BTC is not fungible. Otherwise companies like Coinbase wouldn't be able to ban people's accounts if they transfered in BTC with a tainted history.
This is something I would worry about. If a particular piece of bitcoin becomes tainted because it's associated with dirty money (or whatever), and I receive it as a payment, will it become harder to spend or of less value? What if it goes onto some sort of blacklist?
To use the recent parlance, can my money be "cancelled" by popular opinion?
If Bin Laden sends $100 USDT to you, your address will be tainted because Osama sent you coin and proof of that will be in Transfer Log of ERC20 token. So if you send any amount of that token anywhere, recipient address will be also tainted, doesn't matter if it was Bieber part or Osama part.
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