It's a mixture of private and public. For instance anybody can create an infinite number of wallets and cycle transactions through those wallets infinitely, subject to time and/or transfer fees. And wallets are the only stored identifier - it doesn't lead to e.g. an IP or whatever, and even if it did - those could also be endlessly proxied. On top of this there are 'tumblers' that do this as a service.
So while it's completely traceable in theory, in practice it's vaguely akin to trying to track money by the serial numbers in that you can probably figure out a few points in a dollar's lifetime, but tracing it point by point to a specific entity is generally not realistic. Of course most criminals are stupid and doing something like using CoinBase hosted crypto to try to do something illicit is as good as leaving your license and phone number at the scene of a crime.
> On top of this there are 'tumblers' that do this as a service.
and using these makes no sense, since it's readily noticeable that you've used one, and using them is basically always illegal. The crypto currency ecosystem keeps reminding me of https://xkcd.com/1494/ .
This is incorrect. Things are legal unless criminalized, and tumblers are not inherently illegal, and have plentiful legitimate uses. However, money laundering or offering a money laundering service is illegal and so using one in an effort to money launder, or facilitate such, would be illegal. It's akin to something like a jimmy bar. Owning or manufacturing/selling them is 100% legal, but they're going to be used pretty regularly for illegal purposes which is, rather tautologically, illegal. Similarly, intentionally selling them for illegal purposes would be illegal.
Using tumblers is legal in countries like the USA. You may be living in a country that does not observe the legal principle that everything is permitted unless it is explicitly prohibited, but that is the foundation of the US legal system.
This is, again, not how things work. A server operator can be charged for intentionally facilitating e.g. money laundering but you as a customer have 0 obligation whatsoever, besides ensuring that the service you're using is not going to simply run off with your money.
That's your legal theory, but I think the way things actually work in the US is quite different from how you think they should work according to libertarian principles, or even according to the laws as they are written. Being a fence, buying from a fence, even selling to a fence can land you in trouble.
Any sort of economic dealings with a person you should reasonably have known to be engaging in criminal activity, is a legal risk.
I don't think you find very many registered companies whose stated purpose is running a tumbler or otherwise "providing economic anonymity" - at least not in the west.
It's not libertarian principles, it's principles of US law, and in most places in the world for that matter. The reason being or buying from a fence is illegal is because it's explicitly criminalized. You can read the legalese here: https://www.law.cornell.edu/uscode/text/18/2315 Without that law it'd be 100% legal.
I have often been astounded at the level of ignorance of people who use cryptocurrency —not knowing the difference between Binance and Bitcoin, for example, or between Tether and Bitcoin, or not knowing that an on-chain Bitcoin transaction will take several minutes to post.
Because people who hype Bitcoin claim that its value comes from it: Bitcoin is anonymous, secure, and private, and therefore can be used for illegal transactions without fear of being traced.
