Topic: How to leave KYC for good - page 3. (Read 720 times)

I don't understand why I should sell a private key; but yeah is there any potential issues if you have a wallet with mixed / anonymised coins & you declare that, but don't have receipts of the buys of those coins?
Of course, this is only really relevant for the countries where not a general capital tax is required, but capital 'gain' tax. Because in those people will need to subtract their buying price from the selling price to correctly specify the tax amount correctly.
However, there is no way to 100% prove when you bought if that wallet is long gone e.g...

I've seen several topics about buying old private keys, my guess is it's for taxes. Signing a message from a formally funded old address will prove you owned Bitcoin at that time. But if someone else uses the same address to make the same claim to the IRS, you'll have some explaining to do.

No idea about CoinPlaza, but I used FixedFloat myself lots of times to go into and out of LN. https://boltz.exchange/ also comes to mind - this one is basically trustless since it does a submarine swap, while FF is trusted, more like a regular exchange. Though Boltz service fees were quite high for a long time so I didn't try it yet. Seem to be fine now though.

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That's correct. I think this whole topic leads us to a few points:
* First of all, small funds probably nobody will bother to worry about, but especially if you bought early and have lots of coins, in a future where the value will be even much higher than today, you'll get into issues when wanting to spend them.
* With larger amounts of Bitcoin, you will need to do your taxes correctly, else you'll be charged for tax evasion, which we don't want. I would still argue that there is no downside in acquiring the BTC without KYC, mixing them and dumping them into a receive-only wallet. It's possible that you need to provide proof of buy, but not sure if it's needed and where + if it's enforced. Let's say I claim I bought 100BTC at 1€ each over 10 years ago, therefore did not screenshot the exchange page and / or exchange went down and / or I switched computers and don't have the transaction info anymore. They will need to take my word for it. This would be my bet, but I'm not sure how it will really be handled. I doubt many people have receipts for their first / oldest Bitcoin purchases. Heck, what about all the p2p trades? Nobody gave you an invoice at least back in the day...

I gathered some info, adding to the initial post now. Any corrections are welcome!

That's kinda my point: governments act as if not answering them is suspicious.

I've used CoinPlaza and FixedFlat. The total fee depends on the on-chain Bitcoin fee when you make the transaction, so it pays off to compare rates. Alternatively, depositing to BlueWallet or Phoenix Wallet works too (again: fees apply). Even better: if you mix and match, it's less likely for your change to ever get tied together.

I don't really care where the bitcoin I purchase peer to peer comes from or if it is linked to someone else's KYC. All that I care about is that it isn't linked to my KYC. The first transaction I perform with it will to mix/coinjoin it all anyway.

Sure, I'll give you that, by what the government does is a poor benchmark what is ethically, morally, or even legally, right. Privacy is a fundamental human right, and not a crime.

I do do this to swap change to Monero, as I mentioned, but I've never thought about swapping change on to Lightning. Can you recommend a service?

ChipMixer costs whatever you want it to cost, and your method still links the amount of bitcoin you initially bought to your KYC. Maybe no one can track where it ended up, but they will still be interested in the fact that you bought 10 BTC.

It has been touched on but part of KYC vs No KYC also matters as to where you are and what your end goals are.
And....how much have you accumulated through KYC already.

If you bought 100BTC from coinbase when BTC was $600 and all you want to do is sell it when it gets back to $60000 then who cares.
It's not like you can hide $6 million from the tax man.

If you want to sell it off slowly, over years and years then that is a different story.


Same with general privacy. There is the saying 'any 2 people can keep a secret so long as one of them is dead'
If you have that 100BTC that you don't want people to know about, but your pissed off ex-wife / ex-husband, who you talked about it with knows, then everyone knows about it.
Even if it was just a casual conversation with a friend, who then mentioned it to someone else when they were talking about BTC.
If anyone wanted to know about your KYC or non KYC BTC then they could do a little digging and find out.


Now, if you just want your privacy it's easy.
Take any KYC coin you have, sell it, take the cash, pay your taxes (if any) and then take the rest of the cash and buy BTC face to face and be done with it.

Because just about any other way, there is a chance of someone figuring it out.
Even if you pass it through 3 anonymous exchanges, when you go to bitrefill.com to get a gift card for a burrito at Chipolte, you left a trace trace that can be followed.

-Dave

 

Authority. That's the whole definition of it.
Not declaring your assets (Bitcoin is considered as an asset, as of now) is also a form of stealing from the population. It should be taxed and that money will be used for the improvement of the country or other necessities.
IMO, it's not a paranoid act. It's protecting the asset that you bought at an expensive price. If you have a gold bar from a shipwreck that doubles or maybe even quadruple its value, you won't like everyone having the knowledge about it. Secure it and zip your mouth. Same thing as what he is trying to do with his Bitcoin.

OP, sorry I don't have much knowledge to share about the meticulous part of sending back and forth or buy, mix, and sell.

I think the point would be that if they ask the exchange how much Bitcoin I have, as far as it’s concerned I have 0 since I sold them back as much as I bought from them.

Though I think it’s a valid point to consider mixing coins from an uncertain source to prevent being linked to some fraudster selling their coin on Bisq to get rid of them anonymously.
Otherwise it could happen that when you use the coins to buy something large irl (linking your identity to them) a link to the crime could be made.

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From what I’ve learnt in this thread though, this leaves you with 2 issues:

* In case someone in the future will figure out you bought X BTC they will ask where it went and you don’t have a provable explanation.
* Even if you think of somerhing and get away with it, when you’ll want to spend the BTC, you won’t have a plausible explanation where it came from.

One option. Buy bitcoin on any exchange KYC or not. Send the bought bitcoin to the Incognito wallet app, if it's not huge ammounts, or even if it is, convert to monero, send monero to an anonymous exchange.

Safepal has an anonymous binance international that still allows you to withdraw up to 2 btc a day. You can use the binance app part of the safepal wallet to conver monero back to btc.

And it's all cheaper than using a bitcoin mixer or other methods which are like 15 dollars or more per mix or transaction. this method costs pennies to mix on incognito, and that's probably all you need to do, but the monero transaction is just to be on the safe side and have a multi anon layer of protection.

If it's a couple hundred euro's, nobody is going to care indeed. I was assuming larger numbers: what if you're sitting on 1000 Bitcoin? Would you prefer them to be anonymous, or rather be able to sell some when you want? It's not even enough to buy a decent jet!
More seriously, even 1 Bitcoin is enough nowadays to trigger alarms at your bank, and I wouldn't be surprised if 0.1 Bitcoin sets off similar alarm bells a few years from now.

As for assuming you're innocent until proven guilty:
From a government perspective, davis196 is right. Wanting privacy is suspicious, and despite all privacy laws created by government, government itself doesn't follow them. Even the Dutch tax agency still doesn't comply with the GDPR, which became active 5 years ago.

Please draw it, because from the way you explain it, your wallets are very strongly linked together.

I'll add a suggestion to your list: use an instant exchanger to convert the change into (custodial) LN (or any shitcoin you want for that matter).

Where I live, that will result in a fine for missed taxes in the past years. I'm not sure how it's calculated, but I sleep better without the risk. I don't have to declare anything I buy indeed, only the total I own (on my annual taxes). If all you have to pay is a one-time capital gains tax when you sell, that might actually work (if you can convince them the money didn't come from an illegal source).

Would it be possible to keep the change amount in "the wallet you cannot spend from" small enough to just forget about it for years? If you don't consolidate them, nothing gets linked!

Is Bitcoin really fungible if we are already dividing it on KYC and non-KYC, or dirty and clean Bitcoin?
I regret that all this years nobody added any good privacy improving protocol code changes for Bitcoin protocol and all this talk would never happen today.
Sure, this could mean one more fork, but I am sure majority of people would support this change and that would kill other privacy altcoins.
Bitcoin is now so big that exchanges won't delist it because of that change, and regulators may complain but they would have to accept it sooner or later.

How can you know the origin of Bitcoin you just purchased without KYC?
It can come from some hack or it can be connected with some other person who purchased that BTC with KYC.
This would make your second option useless in reality.

Isn't growing taxation of everything (maybe even breathing air soon) exactly that, stealing financial assets, and it's nothing strange for governments.
In past they confiscated gold, alcohol, land, weapons and everything they wanted if enough people didn't complain.
I would not be surprised if in future they try to confiscate Bitcoin or anything other than their CBDC tracking currency nightmare.... if people comply.

I obviously can't speak for other countries, but the US government will class it as whatever brings them the most benefit in that particular situation, with different branches of the government classing bitcoin as different things as the same time. When it comes to taxes, it is classed as a property, not a currency.

If that is your privacy model then that's fine, and your set up obviously achieves that, but your model does still leak quite a bit of information. I have no desire to let the guy I buy meat from at the farmers' market know that I've also spent x amount of bitcoin at an electronics retailer, sent y amount of bitcoin to an exchange, or received z amount of bitcoin from a signature campaign payment. Any and all coins I receive first go to ChipMixer or coinjoin or are swapped directly for Monero, sometimes a mixture of these three things in varying orders, any change outputs are rare, if consolidated are only ever consolidated with other non-privacy breaking outputs, and are fed back in to the CM/CJ/Monero cycle.

This is completely true, but for me personally it doesn't really matter... What matters to me is that the "bulk" of my funds is anonymous... I really couldn't care less if people are able to see how much BTC has gone trough each of my historic addresses, as long as they are no longer funded with  anything more than a couple weeks worth of signature payments at this point in time. This way i can use some plausible deniability... Did i spend those funds? Did i lose them? Did i gamble them away? They have no way of knowing how much btc i actually hold, they can only scrape together how much i used to have at a certain point in the past, but not how much i have right now or which addresses are currently funded... Offcourse, this would not work if i re-used addresses, which i only do for my tipjar and my sigpayment address, so i consider those values to be semi public knowledge.

I know, you can achieve much better privacy, and privacy is important... It's just that this level i achieve in this relatively simple way is good enough for me.

EDIT: i just want to clarify that i do agree that your method is better (privacy wise), i know this to be true... However, i know that if i make things to complicated for myself, i'll probably mess up sooner or later... My method gives me a tradeoff that's reasonable for me personally: one wallet i cannot spend from, one wallet for spending... change always goes to the wallet i cannot spend from, and once some funds have accumulated in the wallet i cannot spend from they need to be mixed (or coinjoined) to top off the wallet i can spend from... Not perfect, but simple enough for me

Wow, this thread exploded quite a bit! Excited to hear all the different opinions and experiences.

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So you recommend to hold non-KYC Bitcoin ('better safe than sorry' kinda approach), then when you want to spend them in the future, declare 'ok I have X BTC which I bought at the time Y for amount Z' and pay the taxes on it? As far as I know you don't have to declare everything you buy (e.g. taxman doesn't know when I bought the laptop I'm typing from and for how much money), except when you sell or something like that.

Or what would be your recommendation to go from BTC to Lambo in 20 years?

Oh yes, absolutely it's easily possible, but I like to be better safe than sorry and these things aren't too expensive anyway

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Actually very good points, I must agree. Also such a radical regime change doesn't happen overnight, so I guess it does leave you time to move if you really need to.

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Doesn't Bisq work in your country? Too few users?

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That's weird: on one hand, it's not considered money, but possession (thus there is tax when BTC value increases & it's sold again), on the other hand a 'Bitcoin trade' is not seen as a trade of goods, but a sale and there is tax to be paid as well.

That was by design: This topic is all about liberating yourself from KYC coins, of course the best thing is to never even get coins that are connected to your identity!

I agree that protecting privacy is a big point for non-KYC coins. And 'stealing from population' has indeed happened + the probability of a state wanting to seize something that can destroy the current financial model and thus their power through the central bank is surely higher than seizing other random stuff from people like their home.

I understand what you are saying, but you are still linking your transactions together which is reducing your privacy.

Let's say you have 5 outputs in your mixed wallets. All are completely unlinked to you and unlinked to each other. Over time you spend all 5 of these outputs to a variety of places - buying some goods online, buying some goods in person, trading for fiat, sending to a centralized exchange. With all 5 transactions you send the change back to a brand new address in your KYC wallet.

You now consolidate those 5 outputs along with a couple of other outputs, including one which came from a signature campaign payment and one which came from a centralized exchange. After consolidating, you mix the coins, so the output is again private. But in that consolidation transaction you have linked all 5 of the original transactions together, and you have linked them to your real identity in a number of ways. Any of the recipients of those 5 transactions can see the other 4 places you have spent coins and can link you via your public signature campaign address to your online username. The exchange you use can also link your real name and address to your online username and the 5 vendors.

Now, having identified a number of addresses in your KYC wallet which are known to belong to you, those addresses can be watched for future consolidation transactions, linking the change from other mixed transactions back to you and therefore linking those transactions themselves back to you.

Change is one of the worst things for your privacy. I usually try to avoid creating change at all via careful selection of UTXOs or ChipMixer chips, buying additional goods or services, adding it to the fee, adding it to the payment as a tip, or donating it to charity. If I do create change, then it is better to either mix it individually or consolidate it only with other change outputs where linking the transactions together does not result in a loss of privacy.

There might be some misunderstanding here: when i spend funds from my "mixed" wallet, i use on or more unspent output(s) that came directly from chipmixer or coinjoin as an input, fund the address of the seller (or exchange) and send the change back to my "KYC" wallet.

Sure, the seller (or exchange) now knows that the USED unspent output(s) in my "mixed" wallet used to belong to me, they know the change in my "KYC" wallet belongs to me aswell, so when i consolidate the change with the other unspent outputs in my "KYC" wallet to go trough a mixer, they can be linked together... But all those unspent outputs can, one way or another, be linked to me anyways. The output of the mixer, however, is completely private.. So all unspent outputs in my "mixed" wallet are private up untill the point i decide to spend them... And at this point, there is no use speaking about privacy, since most of the places where i sent my funds either had to send a physical item back, or were regulated exchanges.

Best "they" can do is: know most of the unspent outputs in my "KYC" wallet, wether they came from sigpayments, exchanges, odd jobs or change from my "mixed" wallet doesn't really matter to me... HOWEVER, they can not know any unspent outputs in my "mixed" wallet, since those outputs came directly from chipmixer or from a coinjoin session with my wasabi wallet. I do not, under any circumstances send change back to my "mixed" wallet... Doing so would void my privacy..

I'll try to draw a diagram if i have some leftover time at the end of the working day... Explaining a setup using multiple wallets is kinda hard for a non-native speaker

As others have mentioned, this usually isn't the case. Most jurisdictions which tax bitcoin consider buying a good or service with bitcoin as a sale of bitcoin, and therefore you are liable for capital gains taxes.

You also missed Option 4 OP: Never complete KYC or buy any KYC coins in the first place. It's very easy to keep all your coins away from your real details when you never hand them out anywhere. If I had coins I had bought through a KYC exchange, then I would simply send them all back to that KYC exchange, sell them, withdraw the fiat, close my account, and then go check out Bisq or LocalCryptos.

This is a potential privacy risk in your set up. Consolidating a bunch of change transactions will link your mixed transactions together, and even worse if you consolidate the change with an input to an address linked to your real details.

Right, because that's never happened before. (/s)

Absolutely incorrect. I protect my privacy not because I have anything to hide, but because I have nothing I want to share. If you are doing nothing suspicious, then you'll have no problem posting your social media and email accounts usernames and passwords so we can all have a good look at your private life. No? I didn't think so.

But why would the authorities ban Bitcoin and then try to confiscate Bitcoins from the people?
This doesn't make any sense to me.This is basically stealing financial assets from the population.
If the authorities end up knocking at my door asking for my Bitcoins,I will tell them that I have sold everything,even though such case scenario is highly unlikely to happen.I wonder how they will prove me wrong.
OP,the whole topic seems a little bit paranoiac.Trying to be anonymous and to use mixer means that you want to hide something-your income and your wealth,which looks always suspicious in the eyes of the authorities.
They might assume that you are conducting tax evasion or other financial crimes

The problem is, we don't have any local decentralized exchanges in our country. we only have the same exchanges that are asking for our identity when you need to withdraw your BTC. I think it's because of the recent Ponzi scheme where they used our local exchanges to show their victims the amount inside the wallet. When the Ponzi scheme was busted and they went to check the account, that huge BTC is lost and nowhere to be found. I think this is one of the reasons why the updates about KYC has been made and no one can move such huge amount again in the future without explaining where the money came from.

Well, AFAIK, there is indeed a cap on how much cash you're allowed to spend (eventough i did not follow the discussion), i'm unsure whether or not the banks give you a hard time when you try to deposit to much... I've never deposited more than a couple hundred euro's at once, and it usually right after new year, when my parents give a bunch of cash to their children and grandchildren, so it's pretty obvious the money isn't coming from fraudulent sources. I barely touch any cash at all, my wallet usually contains 20 or 50 euro's just in case i ever need it, but i only have to pass by the ATM a handfull of times each year (at maximum). All in all, i have no experience with withdrawing or depositing large amounts of cash.

I'm merely saying that in most western european country's, you'll have the right not to give incriminating evidence against yourself, so they can try to make you give you your ledger's pincode, but afaik, they cannot punish you if you don't (some exceptions might apply, but i don't think they'll cover a couple hundred euro's in tax evasion).

Full disclosure: i'm not a lawyer nor an economist nor an accountant... Everything i know is gathered from reading online sources or talking to third parties. If the corona crisis taught us anything, it's that not all online sources or third parties are equally reliable... So, it's possible i might have misunderstood some of the principles. Don't take any of my words as an absolute truth