Topic: How to leave KYC for good (Read 773 times)

You're missing the bigger picture though.
First of all: privacy. In some countries, you do have to declare how much BTC you own, but valuated in your local fiat currency. By holding non-KYC bought coins, they cannot trace your purchases and payments, while you're still compliant with all laws. However, if you have KYC-bought coins, the government can trace whatever you do with them at any time.

In other countries, like yours, you only pay tax and declare your holdings, when you sell. That's even better. If you are holding lots of BTC for years or decades during which you don't need to tell anyone about it, by law - why would you want to do it? By buying via KYC exchange, more people know that you hold Bitcoin than what is required legally, so you have more risks and no benefits from it.

Another point to consider: where you live now may be a vastly different place than where you're living at the time of selling your BTC. You can't yet know if you're going to move to another state in the future, and you also can't yet know whether government will change. Laws change, politics change. Let's take for example gold: how many times was it made legal and illegal and legal again in the United States? And every time it was made illegal, all the gold was confiscated.

If you're legally allowed not to hand over public keys, and even better, not needing to declare that you own Bitcoin, that's the best protection against such a potential confiscation in the future.

These are not all, but some of the reasons why it makes sense to have 'anonymous' Bitcoin even if they're obviously 'de-anonymised' when selling at some point in the future.

Government agencies are also not idle and continue to study and block possible channels for tax evasion. Why hide the fact of buying a cryptocurrency, if in most cases we pay tax after selling the cryptocurrency and making a profit? In my country, tax is paid on profits from the sale of cryptocurrency and the object of taxation is calculated as the difference between the amount of the sold cryptocurrency and the cost of purchasing it. And soon we will have to leave our identification data when selling cryptocurrency, or the tax will be automatically deducted when it is sold. Therefore, these proposed methods are unlikely to be useful.

You are right, you can't do that on Bisq, but you can convert $10M rupees on LocalCryptos or one of the other P2P services. It will likely take you a similar amount of time, as well.

Day trades between BTC<->fiat or BTC<->stablecoin? For BTC<->stablecoin, those you can do relatively quickly with decentralized exchanges like CoinSwap.io and many others.

Also, withdrawing your funds from an exchange is likely going to take you days, you risk the exchange stealing your funds or being hacked, losing your funds and exposing your identification. Why risk storing your identity and hundreds of thousands dollars on an uninsured centralized exchange? Better to control your own keys.

This is a whole other topic, so I'd happily discuss that in a new thread. But in short, the arguments for KYC exchanges are probably: convenience, liquidity and trading options. To simply buy BTC, in reasonable amounts, you can never go wrong with https://bisq.network/ or other P2P trading means. But if you want to e.g. buy 10 million Indian rupees worth, there might not be that much liquidity on Bisq for that trading pair. And you can't do quick and easy day-trades all the time either, in case that's for you.

Coinbase was hacked because of their 2FA.

Customers' crypto was stolen, in addition to their full names, email, phone number, home addresses, birthdays, IP addresses, transaction histories, account holdings and balances.

Now why on earth would anyone use a centralized KYC exchange?

C'mon, let's be honest. Why would a criminal want all this hustle and bustle to launder money? They'll find it easier and with less footprints if they simply choose Monero. I'm pointing to the case where you could get identified on suspicious activity through the transactions' connectivity.

We all saw what happened to the Silk Road mobster. I'm pretty sure that the shrewd criminals got the point. Bitcoin isn't private enough.

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You never know how far can the governments drag on. It wouldn't surprise me if they demanded the view keys from their customers in order to move forward with the deposit of XMR. Still, though, you'd feel calmer than knowing some blockchain analyzing folks have a gander on you.

If my memory serves me, then in addition to the sale you mentioned, Charlie also recently tried to sell several large denomination coins (deciding to leave only those that had the first serial number). I'm not sure if he succeeded, but the fact remains.

In addition, it is not so difficult to track the minted coins and reach out to sellers to make an offer. After that, for an additional fee, ask the owners to at least partially erase the digital footprint leading to the buyer, given the millions of forum pages that are unlikely to be archived. And if you are looking for something and you are not a regular on the forum, then you most likely have not heard of loyce.club, so it will be extremely difficult to track deleted mentions.

Another similar old b'coin.

No - that's different to buying cryptocurrency with fiat.

All the information required for US citizens is on this page: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

Question 9 would be what the IRS would apply to signature campaign earnings, and expect them to be declared as ordinary income. Question 5 makes the point I made above - if all you have done is buy bitcoin with fiat, then you do not need to declare it.

See I sometimes have unconscious thought processes, like everyone I guess, and I don't know why I remembered this. I guess it's also because of the other thread:

How many BTC users actually care about privacy?

Which reminded me of this:


Are you sure the IRS in the USA does not require people to declare what they earn in sig campaigns when they receive it? I would be very surprised if they don't consider it as earned income. And even more so when it is from an activity repeated over time and paid in dollar equivalent.

I don't know 100% sure and I'm not going to look it up, but it seems to me to be the most normal scenario.

In that case they are added to the tax bracket. If, let's say someone earns over $50k a year and is single, they would have to pay 22% of what they earn in sig campaigns throughout the year.

If that was the case, and were declared, it wouldn't matter to hold for 10 years and let them turn into millions of equivalent $.

Another thing is that for privacy or whatever, they are not declared to the IRS.

It seems to me that when we are talking about privacy, we at least border on not doing everything the Government and IRS or equivalent wants, but if you do you sleep better, as LoyceV says, especially if the ball gets too big.

This is the first 5 BTC Casascius I found for sale (last July):
From this picture, it's obvious the address is 1CsxvRCGk9H1Fs4hQawtLp9e5PWjdD9q5Q, and it holds 5.00000002 BTC.
You can buy it for money laundering purposes, but there's always the risk of getting caught. All evidence is online, and it's quite suspicious if a rare collectible gets sweeped shortly after buying it.

How about a life hack with collectible coins? I know here on the forum people who sold and probably still sell coins with a denomination of 1/5 Bitcoins that were downloaded a long time ago. Moreover, these coins are sold with a mark-up not exceeding 10-15%. The merchant is unlikely to verify the origin of your Bitcoins if you use an escrow or chipmixer before purchasing. Thus, for only 10-20% you buy pure Bitcoins, which you can easily declare retroactively, and as a result you have a net $ 400,000. Correct me if I'm wrong, or if I missed something, (since I really think the main reason for clearing old coins is money laundering).

Sure, but you didn't pick up 20 bitcoin for nothing in 2017 like you could back in 2010. If someone claimed they had bought $400,000 worth of bitcoin but had no paper trail, then I agree that would be very suspicious and would likely lead to an IRS audit.

I'm obviously no expert in money laundering, but if you are looking to launder amounts of $50-200 million as is being discussed here, then head overseas. You can buy citizenship in a number of countries for tiny fractions of that sum, countries which have very loose tax laws or very corrupt and bribeable officials. There are tax haven countries and off shore companies which launder huge sums for below 20% in fees or taxes. Hell, most of the big banks around the world are complicit in money laundering, and perfectly legal companies such as Amazon and Starbucks manipulate the system to pay tiny percentages in taxes all the time.

Yes well, I gave that example, but the criminal could claim it was in 2017 at the peak or whenever suits him best for tax purposes.


That is not clear to me. If you would just say "below", but when you say "far below" I would like to know what you are thinking of.

To launder money you would normally have to set up a company/business and declare more income than you actually have (if you have any income at all). Money laundering with Bitcoin in the mentioned case would definitely be much more comfortable, especially if we compare it with setting up a physical business, but even if we are talking about an online one you will have to set up a website, you will have to keep fictitious accounting, you will have to pass fake payments through the payment gateway etc.

Maybe you're thinking of buying winning lottery tickets, or something like that, but it's also difficult.


That's what I've been repeating ad nauseam, in this and other threads.

I would like to see the face of the tax official if someone goes there to declare that he has $50M, saying that he bought it a long time ago and can not justify more than the movements of the last year (although nowadays the normal thing that the tax return comes to him by internet, but still, I would like to see his face).

Ohh, you restored Phoenix with Phoenix. Since it's a LN wallet, and you restored it shortly after deleting it, it makes sense from a LN point of view that the channels still exist.
Instead, if you'd import the seed into Electrum or Bitcoin Core, there would be no funds

Result from my test: Phoenix restored my 4 channels from mnemonic. The LN transaction history is gone, but my LN-balance is correct.

So I guess Phoenix keeps a backup of the channels for me.

Nope. This is exactly what I expected from the wallet, as a user this is very user friendly.

That's why I mentioned it a few times It's really great, but if you send a payment with just 2 hops and only have 1 routing node, your privacy will be compromised. However, I can imagine that you could e.g. specify that you want to use at least 2 hops if you know you have just 1 routing node.
Additionally, in Breez at least, you can manually create further channels with other routing nodes, so it won't always take the Breez node.

You can't restore channel states from the mnemonic!
There is no real way to restore channels without backups (Breez does backups to cloud if you want). They will be force closed (force close) if nodes are offline for too long though, then through the HTLC, the funds will eventually land back into your on-chain wallet, that is recoverable through the mnemonics.

But right now, your Phoenix 'mnemonic wallet' will most probably be just empty.

I didn't know this part:
Now I'm curious if Phoenix keeps track for the purpose of restoring my wallet from mnemonic. I'll test it when my kid is done with his tablet.

How can they know which transactions you do? You just send sats within your channel towards Phoenix, which then routes them to the next hop, which routes to the next hop, etc., all the way to the destination.
However if they're the only node between you and destination, then they know, that's true!

That sounds like a scam, some anonymous exchangers have demanded KYC after a large deposit. They use the privacy risk to deter people from getting back their money.

I searched a bit, and indeed that seems possible for small amounts, but not for large amounts. I don't think authorities will easily believe you though, if you claim you own $200 million in Bitcoin which came straight from a mixer.

How is that different? I'm using Phoenix Wallet, and as far as I know they know exactly when I funded my wallet, and which transactions I made. It has to be: I can use my 12 word mnemonic to restore my wallet, which means all the information comes from their server (note that I haven't actually tested this).

Oh, I'm sorry! We're talking about different things You're right, a custodial provider that generates your invoices and pays invoices for you etc., does know who you're doing business with. But I'm talking about the various non-custodial solutions like Breez and Phoenix.