Firstly, it doesn't matter because any Bitcoin you acquire should be ok. It is the exchanges' duty to block or freeze funds from illicit transactions before you can actually acquire and withdraw them.

Secondly, a lot of the coins come from fractional reserve, meaning they only exist in the books of the exchanges. Since not everybody at once is going to withdraw, you'll get some of the "real" ones when you withdraw from an exchange into your wallet.

Thirdly, if you are concerned that your Bitcoin has ever been used for illegal things, are you also concerned that your fiat money has ever been used for illegal things? It most likely has. Now what?

It's not your duty to think about whether Bitcoin is legit, clean, or not; it's the duty of the exchange, if there is even a need for that. When Bitcoin is deposited into a centralized system, I guess the system checks if the address has been flagged for scams before or not. If they pass those processes and it's successfully deposited into the exchange account and an order is being created, then those coins have been mixed with other coins.

That's to say you can't buy an illegal coin from an exchange, even if they are illegal. If something were to come up in the future, the exchange and its authority would be held responsible for it.

Ideally, the Bitcoins on Exchanges are first and fore most REAL, in a state of EXISTENCE.  I really do however wonder how many of them truly do have enough Bitcoin in their Wallets to cover every single Satoshi of their users.

If this is the case.  Then the Bitcoins can come from multiple sources.  But they most likely come from a combination of Bitcoins invested in by the Exchange and Bitcoins deposited by the users.  Most Exchanges have to start with a set capital of Coins whenever they open a new Coin listing.  If they want to list Ethereum, they have to first invest a couple hundred thousand in it and create orders or they just rely on demand and offer.

There is NO such thing as dirty or clean Bitcoin.  The Bitcoin you get is as dirty as the bank notes in your physical Fiat Wallet, or as dirty as the Fiat you have in the Bank Account.  How do you know the owner before you of the bank notes you own was not a drug dealer?  You do not, and this is why you do not care.  Bitcoin offers Transparency, something Fiat does not offer, and this is not a reason to classify Bitcoins as dirty or clean.  There is no taint in Bitcoin.  In fact, considering the amount of transactions bank notes are used in, it is very likely you own EXTREMELY 'dirty' Fiat bank notes that have gone through drug deals, tax evasions, robberies and worse.

Two out of the three options available are valid means of building the balance sheet of an exchange in bitcoin and other cryptocurrencies. There are exchanges who are also into bitcoin mining and they get profits from transaction fees and service fees.

There are no dirty bitcoins, just those that are reported to have been used for illegal activities. It is difficult to determine what transaction a UTXO has been involved in since it was mined, you can only try to use blockchain data and run that over different searches to know if it turns up for any illegal activity.
It could be important further years down the line. Today there are only restrictions by exchanges for mixed coins.

- Jay -

Lemme take Binance for example, there are lots of people who trades with it, since they have spot trading and future trading, margin.
There are lots of institution that have deposited lots of funds into these exchangers for the purpose of trading, I also believe that those exchange have people who trades for them as well. It's a combination of buyers and sellers that sum up the total bitcoin in those exchanges you are seeing while trading or trying to convert anyone coin to which you preferred.

You don't need to worry about whether the bitcoin you buy on an exchange is "legit" or "dirty." In fact, the whole concept of "dirty" bitcoin is overblown and largely a myth perpetuated by those looking to create fear and uncertainty around cryptocurrency.

First of all, while there have been some instances of bitcoin being used for illegal activities, such as money laundering or drug trafficking, this is no different from any other currency. The reality is that the vast majority of criminal activities still use cash, not bitcoin.

Second, the vast majority of CEXs have strict regulatory requirements that they must follow to prevent illegal activities. This includes performing KYC checks on their customers and monitoring transactions for suspicious activity. If a CEX is found guilty of money laundering, they can be fined and shut down by the financial authorities. In fact, the requirements for CEXs to prevent money laundering and other illegal activities are often stricter than those of many banks.

I agree, maybe the OP's concern is that he might used a fake exchange that are quite impossible since there's a lot of known exchanges that are not scam. Exchanges are the one who checks every addresses if there's something fishy happening in your account, for them to ban,freeze and your ip address. Of course if their any transactions succeed then it means that circulating of coins already happened. Just like in the fist money, which circulates in the market as long users use it.

They come from the fees that are accumulated from all trading volume, and the purchases of BTC supply that the exchanges make with those fees. Most of the exchanges listed were launched some time ago, their liquidity is based on coins accumulated at extremely cheap prices which enables them to cater for very high volumes and thus, increase their holdings consistently via fees.


Why wouldn't this just fit under "other"? Do you really think that drug dealers are using centralized exchanges to conduct their business or that they are a top 3 category of exchange volume? We're in 2023, not 2013


There's no such thing. Dirty and clean coins are a part of an agenda to make some coins less valuable than others. That's not how it works. If you buy coins from an exchange, you don't have anything to worry about.

The answer to your question should pretty much be "All of the above" based on the options you provided..
But for option number three, must it be drug dealers swapping bitcoin for cash and cash for bitcoin?
Are you saying that each time I buy or sell bitcoin on the exchange, I become or I'm seen as a drug dealer? Na, I don't think so..

Hmm, I don't know about other users, but for me, this is pretty much not important, I mean most exchanges use some mixing services, after buying and withdrawing bitcoin from an exchange, I don't think it's possible to tell which bitcoin was or is dirty and which was or is not.

Buying OTC from huge existing exchange and institutional investors, this is included the miners. No need to included criminals, they only have a mere of them.


By the exchange definition, dirty bitcoins are only considered if it has from hacked funds especially from hacked exchange, or simply if the bitcoin coin from mixing, and in other case from gambling platforms.