This question about the risk of money laundering prosecution one could face using decentralized cryptocurrency exchanges is answered by "Generally, local laws will define concepts like "money transmitting business" and require individuals engaged in these businesses to obtain a license and comply with similar KYC and reporting obligations to a bank."
I believe this is distinct from the established practice of storing ones savings in financial instruments and trading these instruments which has existed among the wealthy for as long as financial markets have existed.
What feature of the activity are considered in distinguishing between these two activities? Some things that could be used occur to me, that could have some very different outcomes:
- Absolute amount of money involved in activity
- While this may appear the most obvious distinguishing feature, if it was then anyone properly rich would have to register before anyone using LocalBitcoins.
- Proportion of income from activity
- It would make sense that someone who derives the majority of their income from an activity would be engaged in business, but if this was the distinguishing feature then people who had their retirement income in such instruments would become businesses on retirement
- Nature of other participants
- I had assumed that one would be most liable if one is using a decentralized exchange whee no one is doing KYC compared to doing such things on a large centralized exchange such as Binance, but is that true? If the question is not "could you facilitate money laundering" but "are you running a business" one could say that using a software tool that allows two individuals to communicate is less "businessy" that interacting with a multi billion dollar corporation. In United States v. Rockcoons, would Rockcoons have been better or worse off if LocalBitcoins had at that time implemented their KYC rules?
- Nature of the business
- One may have though that buying actual assets is more investing, and buying options is more "businessy". However this would make many users of centralized exchanges businesses as margin trading is much more prevalent their, while LocalBitcoin users were dealing in the assets directly.