Bitcoin is associated with financial freedom. However, digital asset exchanges and banks have begun to ask questions concerning money and so-called digital currencies more and more.
Those who cannot show sufficient proof of origin of funds will no longer be able to buy or sell on the open market. Even frozen funds are one of the severe consequences of an insufficient source of funds documentation. This is because of tightening anti-money laundering laws and regulations, specifically targeting Bitcoin and other assets.
As we have explained before, Bitcoin and source of funds are key topics for investors, traders, and digital asset enthusiasts. We highly recommend studying this. Much of it is still unclear though, and blockchain speculators are getting nervous.
First of all, what is the “source of funds”-thing concerning Bitcoin?
Digital asset markets have been kind of the Wild West of trading in the recent years. People could simply purchase or sell Bitcoin, and literally, no one ever cared for the origin of coins, the source of funds, or the like.
However, this is changing right now. The “crypto exchanges” are proactively asking users to show proof of their income, wealth, tax records, and other documentation that could be evidence of the user being a “no risk” customer. The same goes for banks, by the way. If one cashes out realized gains with digital assets, the bank used for receiving the funds may have a question or two.
Source of funds means real evidence. Without the proof of origin of funds, exchanges or banks will no longer want to serve you as a customer. Dr. Wright is not unhappy about anti-money laundering regulations getting tough, as he has been advocating relentlessly for Bitcoin to be the most law-abiding system ever created.
Identity, source of funds, and Bitcoin: a mess to work through with Dr. Craig Wright
The source of funds is basically the question of who you are, where your funds come from, and why you have them. This is identity but focused on wealth. In the video session, we discussed Bitcoin and identity with Dr. Wright.
In Bitcoin, identity is firewalled on the transactional level. You see the transactions, but you do not see who initiated them. One could say there is no identity within Bitcoin, but still—there is identity concerning Bitcoin. Outside of Bitcoin, we still have identities, and they can be linked to each Bitcoin transaction.
Think of the Canadian Truckers protest recently. Our article on the matter showed why Bitcoin cannot help Canadian Truckers. People are identifiable when they use digital assets. Governments may have to dig a little deeper to get the details, but it is possible. Bitcoin is not and never will be anonymous. It is private though; private enough for users to be safe but not private enough for unlawful actors to use it without getting caught.
In our video session, Dr. Wright explains that Bitcoin is a system that records and traces every transaction ever made. This allows in part to identify the involved parties concerning each transactional move. Dr. Wright said:
I mentioned in the [Bitcoin] white paper that identity is firewalled. That doesn’t mean it doesn’t exist (…). Identity should be linked off-chain.
With the uptick in the source of funds questions from financial institutions, we see the linking of identity off-chain, apart from the blockchain itself.
Furthermore, Dr. Wright explained some interesting details about the so-called Satoshi Nakamoto coins, the companies involved in these assets, and his private trust structures.
Ownership and possession, as well as identity and keys
In August 2020, Dr. Wright published an article titled “Keys ≠ Identity,” pointing out that private keys do not provide proof of ownership. This is not understood by most of the digital asset market as of now. People still think having access to digital assets is the same as owning them in legal terms. Ownership of an asset is not access to an asset, though. In the article, Dr. Wright states:
“A key can be used as evidence, but it is not sufficient in many cases to offer proof without additional evidence. In the case of a transfer of electronic coins (bitcoin), a transaction for a small amount of money in the order of less than £500 would not require additional evidence (…). For an amount over £500, on the other hand, the necessity to provide further evidence may be a requirement. In some US states, the sale of personal property goods and items requires documentation for any exchange of value of over US$5,000.”
So with your private keys, you have a part of the evidence, but not the full evidence for the source of funds or origin of wealth questions. In other words: it is good to have access to the coins you claim to be rightfully yours, but showing to have the access is not a complete source of funds documentation.
In our video interview, Dr. Wright also explained a simple and sufficient solution to register a root key, create a digital certificate, and have it as a government-issued identity key. You may want to listen closely to this (time stamped for your convenience here), as this helps with the source of funds, too.
Lost and stolen Bitcoins, alert key, and source of funds
Now think of people who have—in whatever way imaginable—lost their coins. Satoshi Nakamoto must have been quite a genius by having an alert key system implemented in Bitcoin, exactly for the reason to signal within Bitcoin if and when certain funds are in danger. The alert key has been removed in BTC, which is falsely claiming to be Bitcoin.
In the video session, Dr. Wright said:
“If you read my [Bitcoin] white paper, you will notice that I said: in the future we can add this. So the alert key wasn’t an afterthought (…). And I implemented the alert key, it was a bit of a rushed job unfortunately. And then everyone ripped it out again, rather than fixing it. That is part of the problem of many aspects of BTC.”
Hence why, Dr. Wright, the creator of Bitcoin, has publicly called out BTC for passing off as Bitcoin. BTC is not Bitcoin, even though it is promoted as such. Source of funds regulations shine light onto the digital asset market, and BTCers, with their flawed ideology, are probably not prepared for that.
Nowadays, the true Bitcoin, as intended by Dr. Wright, is well alive in the BSV blockchain, also called Bitcoin SV (BSV).
Learn more about the original Bitcoin here:
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.