Topic: How to leave KYC for good (Read 720 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.

My point was that if you are laundering money, you can do so at rates far below 20%.

Because if I'm not running my own Lightning node, then I'm relying on someone else to open my channels, generate and broadcast my payments, generate invoices for any incoming payments, monitor and close my channels. An individual Lightning node in the route my payment takes might not be able to see the final destination, sure, but the person or service hosting my wallet for me will.

How this? The node provider (like the Breez node that all little Breez app nodes connect to) can't look inside the payment and see the destination. They just see the next hop; it's like onion routing.

Would you apply for KYC at a company that has no office?

As far as I understand money laundering, paying taxes isn't what they're concerned about. Let's say you've earned $206 million as a drug smuggler:

You'll be like this:


I'm pretty sure paying 20% on tax would be a very good deal to be able to legally spend $165 million.

Which is part of the reason why you should only ever use addresses once and be very careful about creating and consolidating change inputs, as I've discussed above.

Lightning can be better, but if you are not running your own Lightning node over Tor (which I would guess the majority of people are not doing), then you are either broadcasting your IP or you are revealing everything to your third party node provider.

Sure, but that is also a very ineffective way for a criminal to launder money due to taxation. If I buy 20 bitcoin at $50k each and sell them tomorrow at $50k each, I have realized no capitals gains and therefore owe no tax. If I claim that I mined my 20 bitcoin ten years ago, then I have now realized $1 million in capitals gains and owe whatever the tax rate set by jurisdiction, usually somewhere around 20%.

I agree, but I like to believe that they would accept a signature from an address that held 20BTC 8 years ago as proof that you acquired it 8 years ago, even if there is no trace to a current funded wallet.

That's good advice, since we established in this thread that how it will be handled, varies heavily by country. I didn't expect it to be this vastly different depending where one lives, but it makes total sense. Also any of the info I gathered could easily be wrong / outdated in 1 or 2 years time as laws change all the times. Sigh.

Yes, it's kind of like the fish that's in the water and doesn't even realize it's in the water because it's its normal environment.

Anyway, we are talking about in theory having bought and never spent without KYC.

It's one thing if you bought Bitcoin years ago, they're at one address, and you've never touched them. Even if you bought from a decentralized exchange, or Localbitcoins in person, it's easy to prove they are yours and you won't have a problem.

Another case would be if you have made transactions, but they are traceable, and you can sign messages.

But then we have the other case in which you supposedly bought Bitcoins years ago but they have passed through a thousand places, maybe you mined them but you can't prove it and they have passed through mixers and crypto casinos (which also help to lose track) and you declare this year that you have X Bitcoins for a long time.

I still think that if you can't trace the steps you can face a problem especially depending on the amount. If we're talking about $1k, you're not going to get in trouble anywhere. At a bad one they will apply 0 purchase cost but they are not going to start a criminal investigation.

I say this because if you declare say $1M saying that you bought 20 bitcoin cheap 8 years ago, but the only thing you can justify are the last transaction that was made from a mixer to the current address or addresses a month ago, that the treasury of a country let you declare for the price you say and the date of purchase that you say without being able to justify it, what they are doing is opening the door to money laundering everywhere.

Any mobster who wants to launder drug or arms money, could buy Bitcoin, run it through a mixer or several, casinos etc. and say he bought it a long time ago for $200.

I don't think the US or any other country's treasury will tolerate this.

The best thing to do, no matter which country you are in, is to consult a specialized tax advisor.

Gotcha! So I guess it’s not very clear cut what authorities accept as proof of buy time of Bitcoin.

I see! Here’s another point though: from my research, in most countries buying stuff with Bitcoin is considered a trade. So if you e.g. live on bitcoin (transfer all your salary into BTC and swap back to € via Bitcoin-cards and bitrefill or buy in shops that accept bitcoin) you’re essentially a high frequency trader
So people doing this I feel need to be extra cautious about their legislation and if it’s not gonna bite them in the ass in the long run. Like, it will be super hard to keep track on when you ‘bought’ and ‘sold’ how much BTC for how much fiat. So if a good amount in BTC accumulates by just spending less than what you earn, and Bitcoin price goes to the moon, a person can really get in trouble. I feel this is talked about way too little.

I know right! That’s always been one of the arguments for Bitcoin though, but I think being pseudonymous in your Bitcoin purchases ist most practical through LN. It proves to be very tricky to hold apart various addresses e.g. when using one to order something to your home, all anonymous purchases linked to that address get deanonymized and stuff. Lightning makes it much easier.

I'm saying: "it depends" For tax records and credibility with authorities, it's probably best to keep as many paper trails as possible. But for privacy, it's best to completely get rid of all of it.
So it depends on the reason you're using a mixer, and who you're trying to hide your trail from.

Exactly!

If you're an active trader making a living out of trading, you'll have to pay income tax on your profit. But there's quite a large gray area between "active trader for a living" and "trading once in a while".

For most people, the creditcard company knows all their darkest secrets

Wait, didn't you recommend to keep the receipt so you have a paper trail and can prove when you bought the coin? Or are you saying it's fine to trash the receipt, but keep original keys, so you can prove e.g. you possessed 100BTC in 2012 and possess 100BTC now, so those are equal amounts, and you're good, even though there is no connection between them?

Because without mixing receipts, the 2012 coins could have been lost or gambled to 0 and the 'new' 100BTC could have been acquired through illegal activities in the mean time.

Interesting, so this means NL would be worse than DE for HODLing, but better for traders, right? Since they don't care about your stash growing or shrinking, just about its total value at a given point in time.. Interesting.

Yeah, I have to admit: right now it seems to me that if you just buy to long-term HODL, it's not really too bad to have KYC coin, since:
1) If you live in a place with wealth tax, you have to declare holdings annually anyway, so you can't be 'anonymous' in a way that nobody knows how much you own. However, if you hold non-KYC coin at least there's no company (exchange) knowing your holdings, just the government.
2) If you live in a place with capital gains tax, it would be possible to keep verifiable evidence of the purchase for non-KYC coins of course, but it's easier to prove you bought on an exchange. And if you don't spend the coins until a very long time in the future, nobody can use your Bitcoin info to track your purchases etc. Maybe just exchange a small fraction for LN-BTC and spend that on stuff if you need.

I see one major point for holding non-KYC Bitcoin, which is if you also spend a little from time to time and want those transactions to be anonymous.

Also, reading more through all the laws lately (hence less activity on the forum lol): Germany so far looks very good. If you can prove that you bought your Bitcoin more than 1 year ago, you can sell (or trade for a property, car, etc.) without taxes.
Still be careful on the aspect of 'where did the money to buy your BTC come from' though. Let's say you transferred funds from an old wallet to a new one (yesterday) and threw the old one away (we already established in this thread not to ever trash pk's but let's assume this can happen): you must be able to prove you bought the Bitcoin yesterday, since you have no way to prove you bought them a long time ago, by destroying the old keys. So if you acquired tons of Bitcoins yesterday, but are atm homeless, things won't add up in the future and you might get into trouble about 'where does the money come from', even though there won't be a tax evasion issue in Germany due to +1yr holding.

I get the feeling many Americans don't realize how good a deal that is!

I suppose it depends in your jurisdiction. If you have been evading a wealth tax, then of course you will have to face the consequences as and when your tax authority finds out. But if your jurisdiction only requires tax to be paid when you cash out, such as with capital gains tax in the US, then I'm not sure what else you should do. The IRS have specifically said that if you have only bought bitcoin, and not sold/spent/traded it, then you do not need to declare it. I struggle to see how they could prosecute you for not declaring your holdings when they have specifically said you don't need to (although that's not to say they wouldn't try).

Well, I think we already talked about this in another thread. I'm not convinced by your analogy because when it was easy to win 600 bitcoins playing a few hands of poker, those 600 bitcoins were not worth $30M.

If you suddenly appear today before tax authorities and declare 600 bitcoins, it's very suspicious that you haven't declared anything before. That's why I was giving the example of Al Capone, they couldn't prove that he had murdered, extorted, etc. The only thing they could prove is that he had more money than he could legally justify.

Let's say you have an average salary of $50k per year. You haven't sold (or declared) anything when those 600 BTC have turned into $100K, $500K, $1M, $2M, etc? That's very suspicious. Not impossible but suspicious.

This will also depend on the country and its tax authorities. I wouldn't gamble my wealth and my freedom trusting that the country's authorities will understand how Bitcoin works and that if I show up with $5-30M out of nowhere, they will let me pay taxes without any problems.

If you show up with $30M today in a country where there is Wealth Tax let's say from $1M onwards, you will have more problems.


Yes, but I asked him what amounts we were talking about:


Not to suddenly declare $5-30M of which you cannot justify the origin.

I lost my basement in a tragic boating accident.

If you keep the receipt, you risk compromising your privacy, which is why you used a mixer in the first place. If you want all traces to be gone, you should not keep the receipt.

They ask for the total amount, in euro, on the first day of the previous year.

Short translation: miscellaneous possessions, such as Bitcoin and other investments. This also includes for instance the 8 tonnes of gold you have in your basement.

That's very good to know, thanks! I mean in a worst-case scenario, that's still better than having it seized or something. Especially for the early adopters I mentioned, who most might not have have the OG keys anymore: if one would sell a $1M Bitcoin in the future that they bought for e.g. 100$, taxing 999,900$ vs. taxing 1,000,000$ doesn't make too much of a difference.

I'd like to believe that as well, but I guess only future will be able to tell.

Right, right, makes sense. I'll make sure to find the old private keys for the majority of my funds, for sure and try to spread awareness about this issue then! People need to know they need to basically keep the wallets on which they first receive their Bitcoin purchases (even if later moving funds to e.g. hardware wallet) until they sell for cash or use it to buy stuff.

Damn, I just now realized how important this will be in the future. I feel, it should be as popular as "not your keys, not your bitcoin"! For sure it should be second after that phrase! And plastered over all decentralized exchanges and p2p marketplaces: "Please store the private keys on which you receive your BTC - even after sweeping!"

Then they should boldly state "Keep this receipt until caching out for fiat!" as well.

I'm wondering (iirc in NL) how do you 'declare' your holdings? When filling out tax stuff, you put in the BTC amount that you hold? Or public keys? Or the EUR amount?

It's the other way around: If you buy the private key from an address that held 100 Bitcoin in 2010, you can sign a message that proves you already owned 100 Bitcoin when it was very cheap. In other words: you earned from legal capital gains, and not from selling drugs on the dark web. So you'll pay taxes, but stay out of jail.


Any decent mixer gives you a signed receipt. If the mixer is credible, it can act as a paper trail.

"LoyceV" doesn't have a passport and didn't get Bitcoin through KYC. But I as a person I am not hiding them from taxes. So I'd say I'm a bit in between.

If you are unable to prove the time (and therefore the price) which you acquired an amount of bitcoin, then the most likely outcome is the IRS assumes your cost basis is zero, therefore charging you capital gains tax on the full price you sell/trade/spend it for.

There has never been a time in history where people were freely giving away millions of dollars in bills, or could freely earn millions of dollars with a few hours of computing time. If you were in bitcoin early enough, you could earn 100 BTC from mining two blocks on your home computer, or claiming from a couple of faucets (which used to give out 5 BTC), or doing an odd job for someone, or even just asking nicely for someone to send you some. Or maybe win 600 BTC from playing a few hands of poker. I don't think simply having 100 BTC of unjustifiable origin is enough to land you in jail. I think you'd have to commit actual tax evasion first.

Alright, then I'll better try to find those pk's Just to be on the safe side..

From the thread you mentioned, though I found this interesting, since it corresponds with what I'd assume would happen when asked about the origin of non-KYC coin:

You write when you bought it, write that you got it in the past from a private person or anonymous exchange and pay the taxes on the gains (if you live in one of the countries that I listed in my OP which only cares about the sale of Bitcoins (income tax vs property tax)).

By the way; what if someone bought Bitcoin in 2012, mixed it, etc. and now has an equivalent amount of coin, but in another wallet; since the amounts are comparable, if they still got the keys to the 2012 wallet, they can prove they bought it a long time ago, right? Even though there is no clear paper-trail to their current wallet?

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This convo went pretty much to this topic's boundaries and even a bit off it. I think for more discussion on taxes etc. this thread might be better suited, but I added tax info in my OP as well, please don't hesitate to comment if you know more about one of the exemplary places I listed and its laws and if something's wrong. Or if you want to have a place added.

I'd suggest to continue on the topic of going from KYC coin ==> non-KYC coin since that was the original idea, so any new suggestions except Options 1 & 2 are welcome! Option 3, I came to realise, is considered a sale of Bitcoin in most places, unlike my initial assumption that it would be handled as a trade of goods.

The larger the amount, the more risk you have of encountering a serious problem. Just think that Al Capone, with all the crimes he committed, was eventually convicted of Tax Evasion.

If you can sign a message as LoyceV says, it would be one thing, but showing up with 100 BTC with an origin you can't justify to the authorities is like showing up with $5M in bills you can't justify, you will most likely end up in jail.

This is what I was talking about in another thread.

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

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.

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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.).

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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.

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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.

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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.

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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