Topic: How to leave KYC for good - page 4. (Read 755 times)

None of these options will work if you are already living under a totalitarian regime or your country is rapidly moving towards becoming one. Consider migrating to a more crypto-friendly place if you happen to have KYC-ed bitcoins, with which, by the way, you can buy a flight ticket to escape the hell. Otherwise, even the very fact that you purchased or possessed bitcoins in the past may result in an oppressive government sending you to jail. After that, they will seize all your property of whatever kinds, your car, your house, your wallets: everything will be lost, stolen, or destroyed. If your rights aren't protected in the first place, if man dictates the law, then don't rely on it and instead choose the place where it is the law that dictates man.

I'd be worried. Not every asset poses a threat to the government's sovereignty and monetary monopoly.

I'll highlight this part about taxes:
Wait, I thought we live in the same country? As far as I know, I have some explaining to do if I pay a large amount in cash. And if it's not cash, the bank will require a similar explanation.

This doesn't make me worry about Bitcoin in particular, they can do the same to most other assets too.

It depends on the amount, and what you're trying to do with it. If you're into blackjack and hookers, you'll do just fine with a pile of untraceable cash. But if you want to buy a new Lambo, having half a million bucks on your creditcard is much more convenient than having 10 Bitcoin for which you can't explain how you got it.

---

---

It's trivially easy to create more than one wallet and avoid linking them on-chain. You could even use different passwords for the same hardware wallet.

Depends on the legislation, mining is currently considered in a lot of places an economic activity so you would have to pay profits on that activity. There are a lot of taxation models for those right now, one in which your income is determined by the price per coin when you mined that block, and this one sucks in my opinion, and the other when you transform those in fiat currency.
When it comes to businesses, those laws are all over the place, it matters a lot in which country you reside.

But no, don't think that claiming you have mined those coins you will get exempt from tax, even the results of hobby mining are taxable.


By who? What is the point of denying somebody to spend those coins when you could let him do it and then ask him to pay the taxes?
Besides, how do you block somebody from spending those coins, if you have an account on an exchange and you deposit those you have already made them clean coins as you're verified, if you sell them on a BATMs they have your ID, so basically every non KYC coin will become KYC verified when you use them, even if it's for pizza delivery.
Blocking dark coins and keeping them forcefully outside the clean economy is counterproductive in my opinion.

Yeah, i'm pretty lucky to be born in a country that doesn't tax personal investments AND legally can't force you to incriminate yourself...

The thing is: the justice department and tax authorities in my country do try to put pressure on people to disclose things like cellphone pin numbers... They even bring discussions in front of the courts, and there have been cases where people were punished for not disclosing self-incriminating codes, but only in very high level cases involving multi million dollar drug rings or straight up murder. But it's a grey area, and i don't see them punishing me for not giving them the PIN to my hardware wallet so they can prove i was getting a very small amount of funds from small side projects that i haven't disclosed to the tax authorities TBH... I'm pretty sure that if they'd try, the evidence would be thrown out by any judge.

That's actually an interesting point: if countries enforce to know the source of money, how do they e.g. deal with mined coins? What if I claim I mined all coin myself and then want to use that coin to buy a car?

I even found people online arguing non-KYC coins might be worth less in the future since you might not be allowed to spend those (as you said: no proof when you bought it, for how much, etc.).

---

These are very valid points, I must say. Tons of wallets have actually been lost forever; however, from those wallets, the coins never move. If that's your story, make sure that you mixed the coins early (like, now, for example) so you can later claim boating accident at a point in time that lies after the mixing event.

You're lucky, indeed in most countries, you will need to come up with the source of the funds if the IRS makes an inquiry, the failure to do so will end with all the money and assets you can't justify seized.

And this is a major problem with the so-called non-KYC coins, if one follows one of the steps OP mentioned, what are you going to do in the long run with those secret coins, no matter what you try to do you will leave a trace, it's one thing to hide some coins and a private key it's something totally different when you will actually use them, well, why are you keeping them, not so that at one point you will use them to buy something? And at that point, unless you somehow use them only to buy stuff from private sellers, you use small amounts and exchange them again in a private deal for fiat for groceries you will end up being caught (if!) the taxman wants to. You get a $10k car, you have not wired a single penny to the buyer, you have not withdrawn anything from the ATMs for 3 years so you would have an excuse you have fiat stashed away, how are you going to explain where that money comes from?
Keeping a low profile will work, but any large purchases would land you in trouble, especially if you have decided to retire at 30  

I'm not certain that this could work, since in the same way one can buy coins without KYC, he can also spend without KYC. Or he can donate.
Or in certain cases one can claim that he wanted to just trade and his account was hacked and coins withdrawn to a wallet he doesn't have.
Also, you cannot imagine how many people use to lose their seed or private keys in fishing accidents  

Making a credible story is up to you. The fact that they don't know the underlying tech may or may not work in your favor.
I am not convinced that they can go that easy after you - even in an authoritarian state - with or without trying their 5$ wrench. And the number of bitcoiners is rising day by day, making it harder and harder to pick those worthwhile to put effort in making them confess.

I'm not sure my logic was clear enough, I hope it was.

The idea is that things can change in the future and even though everything's fine right now for you, it's possible that e.g. if Bitcoin is banned in your country in the future, it's possible for authorities to obtain info about how much coin you bought on KYC exchanges, knock on your door and asking for those Bitcoins.

XKCD 538 kind of way:
https://xkcd.com/538/

In that instance, mixing doesn't help you. It would be more helpful to have a way to prove you don't own them (e.g. sold on exchange or exchanged for some goods).

If you have such laws that shift the whole responsibility of proving whether something is legal or not to tax office, then you can consider yourself lucky - because if a taxman knocks on my door and tells me to prove the origin of money or property, then it is up to me to prove it - otherwise, I have to pay taxes, or the money or property will be confiscated.

---

If a cryptocurrency is purchased through the KYC platform and with money that has legal coverage, and that same cryptocurrency is used to buy legal items or services, I see no reason to hide anything. Everything else that falls under some kind of concealment (for whatever reason) can be very easily done through a mixer - although it has been proven that most mixers can be broken (with the exception of CM).

I think it is very difficult to achieve 100% anonymity, because those who work on blockchain analysis do not do it for a month or a year, but almost from the very beginning of Bitcoin (ask ES and its former agency).

I keep 2 wallets: a "KYC" and a "mixed" wallet. If i buy, exchange, trade, earn any funds, it goes directly to my KYC wallet. From there, it goes to chipmixer and/or wasabi and it ends up in my "mixed" wallet. If i spend anything from my mixed wallet, the change goes back to my kyc wallet... usually i don't spend anything from my non-kyc wallet, so >90% of what i spend has been mixed or coinjoined.

My country doesn't add taxes to certain investments made as a private citizen in order to invest a smaller amount of your money you earned from your job... So, when it really boils down to it, i'm not even evading taxes, however my country's tax office is known to bend the rules in their favor (the rules are not black and white, and have a really big grey area). If the taxman ever knocks on my door, i'm going to use the principle: "innocent untill proven guilty". I'm not obliged to tell him where my funds came from, where i spend them, how i mixed them... If he wants to give me a fine, it's up to him to prove without a doubt that i did something illegal (which i didn't, at least not in the way i interpreted the law in my country).

I guess everything depends on which country you live in: i'm pretty sure that in a lot of country's i'd be evading taxes if i didn't declare every buy or sell i made... I'm just lucky the politicians in my country aren't tech savvy enough i guess...

That option 3 caught my attention. I think that this point of view, although it would make sense, it's incorrect from IRS (or similar) point of view.
But I'm not that good in this kind of things, so I would like to see others' opinion, especially if they did bought goods with Bitcoin - how did they fill their tax papers.

Why?
As the topic title implies, I'd like to collect different ways to unlink coins that people bought through KYC on-ramps without getting into trouble later down the road.
The goal is to hold Bitcoin without losing privacy, but still complying with the law. We're not trying to evade taxes, just to improve privacy.
This is not about evading taxes while trading! The idea is just to keep your privacy while still being on the safe side in, say, 10 or 20 years time, when you'll want to cash out your holdings (or buy something with them which is usually seen as the same thing). Also governments, laws, everything, might look a whole lot different from today. So if your country doesn't collect wealth tax, thus not requiring you to inform anyone about your holdings, you won't be subjected to potential confiscation or $5 wrench method.

If you're further wondering why 'no KYC', consider giving this a read:
https://bitcoinqna.github.io/noKYConly/

3 Possible Methods:
I personally like to always recommend buying through https://bisq.network/, but the reality is that many already have some amount of coin (or everything) bought from exchanges. I'm not a fan of 'having 2 stashes', as there's the risk to interconnect them through future (multi-input) transactions if you don't have separate devices / wallets.

To 'leave KYC for good', I came up with 3 options so far. As an end result, these methods all provide a wallet that has no links to your identity and contains the same amount of Bitcoin funds.

Option 1: Provably sell Bitcoin on KYC exchange again, then 'start fresh' by buying non-KYC Bitcoin and send to a new address / wallet.
+: Nobody can prove you own Bitcoin, not a company (exchange), not anyone they're selling your information to, and not anyone who goes asking like government.
-: Selling is usually (more info later) a taxable event and you will have to declare it.

For option 1, keep in mind: Also the non-KYC coin you will acquire need to be declared if your country collects wealth tax. Since they just want a fiat valuation and no public keys, you don't lose your privacy since your identity won't be linked to your addresses, unlike when owning 'KYC Bitcoin'.

Option 2: Mix the KYC Bitcoin through https://chipmixer.com/ or https://coinjoin.io/en and send to a new address / wallet.
+: No taxes to be paid, since Bitcoin is not sold.
-: The exchange will still know you hold X amount of Bitcoin and authorities can get that information very easily. You will still have your privacy since they won't know which address belongs to you, so they can't trace your purchases. In case your country collects wealth tax, you will also have to disclose your holdings anyway, but at least when disclosing non-KYC holdings, there won't be a potentially scammy exchange company also having this data and potentially selling it.

For option 2, keep in mind: Also the non-KYC coin you will own after mixing need to be declared if your country collects wealth tax. Since they just want a fiat valuation and no public keys, you don't lose your privacy since your identity won't be linked to your addresses, unlike when owning 'KYC Bitcoin'.

Option 3: Provably buy something with Bitcoin you would have bought anyway (e.g. a car) and spend the cash you would have spent on that object on new non-KYC coin.
+: If your country accepts that this is an object-object trade, there will be no taxes and your identity will own no Bitcoin afterwards (keep a receipt to prove the trade).
-: Most countries don't see a trade with Bitcoin as a trade of goods, instead treat it as a 'sell' of your Bitcoin and you need to declare the sell & pay the tax. So it doesn't really bear any benefit over option 1 in these countries.

---

In my eyes, Option 1 is the safest. Let's say in the future, wherever you live, laws will be passed e.g. to confiscate or heavily tax Bitcoin gains or anything of that kind, you will be able to prove that you sold the BTC and don't own any. This doesn't work in countries with wealth tax though, since you need to declare holdings value annually.
Also keep in mind, in some countries you pay less capital gains tax when hodling coins longer, like Germany. According to https://dejure.org/gesetze/EStG/23.html Bitcoin gains are tax-free as long as you held for 1+ years. So in that case I'd make sure funds didn't move for +1 year, then sell at exchange and buy again via an anonymous exchange.

Option 2 will be easier to do (less steps) and tax-free short term (since you're not selling anything), but you might get into trouble in the future in case government wants to e.g. confiscate Bitcoin holdings or something like that, since they'll be able to prove you bought amount X of Bitcoin. The information that person A owns X amount of Bitcoin may also be sold by the exchange (or 'lost' in a 'hack') and used to try to scam you or stuff like that.

The last option is more a niche thing since you'd need to live in a country where Bitcoin is widely accepted but it will allow you to prove you spent the coin (e.g. on-chain transaction including hash of the invoice) and there shouldn't be any tax issues you need to make sure your country counts this as a trade of goods and not a Bitcoin sell.

---

General recommendations:
1) Don't hide your Bitcoin from taxman if your country requires to show your possession at end of year.
2) Keep secret keys forever to prove you had a certain amount of Bitcoin at the time that you state you bought the coin at. Preferably also keep a paper trail up until a current-day wallet that you have, and if you mixed in between for anonymity, keep a receipt of the mixing.

It seems, it doesn't even make so much sense to go from KYC coin to non-KYC coin if just holding. If you want to hold it anonymously, you can mix them, then if you'll spend a little part of it, you'll be more anonymous. But you'll have a proof of buy time through the exchange and the mixer receipt which shows how they ended up in your current wallet.

I see no issue in buying non-KYC Bitcoin but keeping the keys where those coins arrived and maybe screenshots of the trades (e.g. of Bisq user interface). This will be needed to prove you actually bought them as early as you state you did and that you were able to afford them at that point in time.

Declaring your BTC correctly - it depends a lot on where you live (who would have guessed ).
Some information I gathered so far: ^{!!!CORRECT ME IF SOMETHING'S WRONG!!!}
* IT: Need to disclose your holdings end of year, but pay taxes on gains when selling a sum of over 51,000€. ^[1]
* FR: You pay taxes on the gains when selling, no need to disclose holdings earlier. ^[2]
* NL: You pay taxes on your holdings on 1st of January. Need to disclose your holdings end of year. ^[3]
* CH: You pay taxes on holdings, gains, or none at all depending on canton. ^[4]
* DE: You pay taxes on the gains when selling, if you held for <1 year. No need to disclose holdings earlier. (trading BTC for a material object or other coin is considered a 'sell', gains considered income & up to 600€ in gains from all of your appreciating assets together are tax free.) ^[5]
* AT: You pay taxes on the gains when selling, if you held for <1 year. No need to disclose holdings earlier. (trading BTC for a material object or other coin is considered a 'sell', no tax-free limit)^[6]
* FI: You pay taxes on the gains when selling. No need to disclose holdings earlier. (trading BTC for a material object or other coin is considered a 'sell', no tax-free limit)^[7]
* USA: Pretty good FAQ can be found on IRS webpage ^[8]

For all countries where I mentioned 'no need to disclose holdings earlier', I'm pretty confident it's fine to buy Bitcoin without KYC, not tell anyone, then when you'll sell or pay with the Bitcoin, you'll write down when you bought the Bitcoin and for how much fiat. If they don't trust you, you can use the private keys that you received the funds on (like Bisq private keys) to sign a message for them and prove you did buy when you say you did.

Also keep in mind I'd not recommend trading into and out of XMR over mixing, because trading is taxed in most countries, so you'll have to keep records of those trades as well, and pay taxes on them, so it's really unnecessary instead just mix them or submarine-swap them into a Lightning wallet and out of it again. Keep in mind it will not be easy to transfer full coins over LN due to usually smaller channels.

An interesting point for EU in general:

^[1] https://www.ilsussidiario.net/news/bitcoin-come-pagare-tasse-in-italia-normativa-criptovalute-e-dichiarazione-redditi/2161267/
^[2]https://cms.law/en/fra/publication/bitcoin-taxation-in-france
^[3] https://blog.blockpit.io/en/crypto-taxation-regulations-netherlands
^[4] https://blockpit.io/en/kryptowaehrungen-steuern/schweiz
^[5] https://www.winheller.com/en/banking-finance-and-insurance-law/bitcoin-trading/bitcoin-and-tax.html
^[6] https://www.bmf.gv.at/en/topics/taxation/Tax-treatment-of-crypto-assets.html
^[7] https://www.vero.fi/en/detailed-guidance/guidance/48411/taxation-of-virtual-currencies3/
^[8] https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions