Topic: KYC propagation beyond my ownership (Read 399 times)

Your idea supports a bitcoin governance principle: transaction transparency and accountability. This precaution may prevent unauthorized coin use after transmission. Post-transaction abuse liability is disputed. Bitcoin's public ledger provides traceability. Thus, proving bitcoin expenditure or transfer is easier than it seems. However, off-chain transaction data like products or services transferred may be valuable. Bitcoin promotes financial sovereignty via peer-to-peer transactions. Thus, this value must be maintained when cooperating with legal institutions and following the law.

The simplest way to stay out of all those problems that you think might occur is to have some proof of spending them, whether you've donated them to a charity, given them to a friend, or used them to buy something online, you should have some kind of proof that you actually did that so that if something illegal is done using the coins propagated by your KYC and investigations link it to you, you can show the proof and unlink the activities from you by proving that you've spent them earlier.

Though I'm not really sure if you can actually get in trouble for this or not but by doing that, you can definitely avoid getting in trouble even if something goes wrong. That's why it's always important to have some proof of where you've spent your Bitcoins so that you can show it to authorities when questioned.

To be honest, this is something alarming, and also, we have some incidents where some people are falsely arrested because they are involved in such kinds of transactions in the past. That is why you really need to calculate and know what you are doing before you start giving them your personal information because it will end badly if they think you are the mastermind of such malicious transactions. As of now, we haven't heard any severe matter regarding this but this is something we need to consider when we are about to send our KYC to some random exchanges available out there.

if you are worried about this then there are currently many ways to make transactions without using KYC, one of which you can use P2P when buying Bitcoin because P2P does not use KYC so you will not worry about it, but I am sure if the person commits an illegal crime by that person then you will not be involved even though there is a transaction that occurs, The important thing is that you have no problems with the Bitcoin you have, and don't think too long because all problems must have a solution.

A very interesting question not only because there is a no visibility in the area but also you can be an easy scapegoat in such cases. answer to this question doesn't exist at all because even the law itself doesn't properly exists. Obviously in this scenario you'll be considered as the culprit but if you have proofs showing that these are genuine transaction bonafide which you made in good faith I don't think you have anything to worry here.

With centralized exchanges, you can never know what else has changed in their rules, why, as o_e_l_e_o correctly wrote, they can suddenly declare "dirty" even bitcoins bought on another centralized exchange. And at the same time, they often say that they do not disclose their algorithms for determining problematic transactions. That is, when interacting with a centralized exchange, you have to completely rely on the fact that it will not deceive you. All funds transferred to it instantly end up in its full and undivided power.

And you correctly write in the first post that they will transfer all your KYC data on the first request to anyone, not to mention how many leaks of critical data from exchanges occur. And the fact that you potentially become a convenient suspect, even if you later manage to prove your innocence, will lead to a waste of time and nerves.

The less we interact with centralized exchanges, the better, in my opinion. And we should never go through KYC for bitcoins at all.

Unlike bank accounts where we have our name and all the documents submitted while in Bitcoin there is no such documentation all we can do is to claim we received the money from someone when you sold your car but the transaction I'd can't serve as solid evidence that you received it from someone else. But when we have such monetary system the laws also will be created based on that which will ensure we are not involved in shady practices.

It’s scary indeed. What’s even scarier is that unless you have a freshly mined BTC, if you get to have one with a very long history you have no idea how far back they go to check it. It could be 100 transactions. It could be the last 365 days, who knows? You’re just sitting there waiting for your deposit to be confirmed while some random company nobody’s heard of is looking at a history that often doesn’t even belong to you, attributes it to your name and punishes you for it.

I agree with you here, just show them all of the proof that you have that you didn't use Bitcoin for illegal things. Just prove.
Because for sure most transactions now already have proof especially if it is done online transactions.
These days, exchanges now started to have KYC, and only a few are left without (some are also complying with regulations or just to prevent fraud).

But why messing around with custodial services, forfeiting the ownership of your coins to questionably protect your privacy from centralized exchanges and such, at the very moment when decentralized, privacy-friendly, non-custodial solutions exist (i.e., Bisq)?

From the Twitter post you shared, I think that's the best reply:

People who don't have custody should rather be educated to ensure they have that (and privacy later on).

Honestly I have never thought about the Bitcoin transaction like that. I’m not sure how it is possible they will blame you for being the original holder because when you purchased it then it probably came from the exchanger right? So why hasn’t possible that they would also further track from where exchanger got it? Exchangers do not just make the bitcoins out of blue and they will be getting them exchanged in their escrow or on their wallet from the other users of their exchanger. Moreover, whenever you are sending it to someone it doesn’t really prove you are the first hand owner of the same? If that’s the thing then damn I will need to rethink the way I am using my bitcoins.

Don't walk away from that. RUN away. Seriously take your BTC and convert it to another token and then convert it back.
NO. JUST NO.
That is how you loose your BTC. Either when there is a bug in the programming or the entire thing turned out to be a scam or there are so few people using such an obscure thing that it's worthless.

-Dave

Something else occurred to me as a possible work-around to this issue. I don't know a lot about it yet, but there seem to be various Bitcoin "cash" (not BCH!) projects like "Cashu" that seem to offer privacy benefits for Bitcoin:

https://cashu.space/

https://twitter.com/callebtc/status/1644618535593824257
(Calle is the creator of Cashu.)

In most places so long as you can show it was no longer under your control it's not your problem.
No different then if you sold your car for cash and the person who bought drove it away from your house and then used it to be the getaway driver in a bank heist.

Do you have a bill of sale for the car or did you just take the cash and hand over the keys?
If you do have a bill of sale can you prove that it is legitimate? Did you make a copy of that persons ID or did they just tell you their name?
If they did show you their ID and you made a copy is it legitimate or a forgery?
And so on.

This really can be applied to just about anything. So, can it happen? Yes. Is it worth worrying about? No.

-Dave

This is pretty scary! To suddenly lose one's coins to seizure by an over-zealous exchange simply due to the history of those coins.

Any and all coins are at risk of being flagged by centralized exchanges. Centralized exchanges use different blockchain analysis services which have different criteria and different blacklists for which coins they will and will not accept. What is acceptable to one exchange may not be acceptable to another, and vice versa. I previously did a quick analysis which showed one particular blockchain analysis service thought that 25% of the coins coming out of Binance should be blacklisted. You could quite easily buy all your coins through a regulated KYC exchange and find them seized when you deposit them to another regulated KYC exchange. Never mind all the other risks which come with using KYC exchanges of zero privacy, zero security, the possibility of scams, insolvencies, hacks, data leaks, etc., and the possibility the government shutdown or seize all their assets at any time.

If you are worried about your coins being seized by centralized exchanges (as you should be!), then the best course of action is not to acquiesce to their insane requirements or to change your behavior to suit them. Rather, it is to avoid using centralized exchange altogether. Bisq, AgoraDesk, and RoboSats are good exchanges to look in to instead. More available here: https://kycnot.me/

Tell that to the thousands of innocent users who have had exchanges seize their "tainted" coins.

This is well think about, something that most people can't see coming,  it's a job well done OP, and yes your thoughts are very possible to come into play.

The best way to avoid this entirely is very much available and easy, start using a peer to peer Bitcoin trading platforms then you will need to worry less about your thoughts, I don't see any other ways to avoid this and it's possible that this has already happened to someone before.

If you have passed KYC on any platform before, stop using them and find a P2P platform then no one can trace anything back to you.

You cannot be held responsible for the crimes committed by someone else!
What if you send fiat money to someone and he buys something illegal with the fiat money you gave him? Do you think that the authorities are dumb enough to arrest and sue you instead of the other guy?
You are the not the last owner from a chain analysis perspective. The guy you have sent the BTC is the last owner. It doesn't matter if he isn't KYC verified. KYC verification is done mostly to fight money laundering and tax evasion(even though it's not that effective). KYC cannot stop you from buying something illegal with your BTC(you could use a mixer).

When you send your Bitcoin to a charity, it means you know who's the person you trade or the site you have sent.

When you make a deal to buy an used car on craiglist, you're also know the previous owner and his contact because you must be have a conversation with him before.

My assumption, chainalysis isn't only look on the last KYC they could get from centralized exchange, but most people who use Bitcoin could leave a trace because they're not run full node, using real IP address, using a spyware browser e.g. Chrome etc.

I heard of this actually happening.

Someone withdrew from an exchange to their own wallet. From that wallet they sent to some individual. That individual ended up sending it to a mixer. And a few months later the person who withdrew from the exchange had their account closed.

Sending to a few wallets doesn’t make a difference since the exchange thinks it’s still you. And they don’t want to risk an investigation so it’s easier just to close accounts.

Why KYC is extremely dangerous – and useless.
If we do not about such danger from KYC, when we already did KYC some times on some platforms and realized its danger, it's too late. KYCed and you are known on those platforms and perhaps publicly too if data leaks happen.

Not KYC exchanges are reviewed on https://kycnot.me/

To answer your question directly:
- You will not be at risk of prosecution if you can quickly prove that you did not broadcast/were involved with the transaction
- You will need to provide details about the recipient and your relationship with them to the extent of being able to save yourself.
- Not cooperating may land you with penalties or punishment, or under watchlist.

You are right that the risk is posed in this situation. You must not only be cautious of who you are sending to, but what they do with the coins...sometimes, you might be questioned many transactions down the chain if no one can be identified up until you.

This is the danger of KYC...even though you did nothing wrong, you will be inconvenienced (inconvenienced, at best).

You don't really need to worry about that if you buy it from P2P trading you're probably going to be fine even though you get Bitcoin is linked to some illegal transactions, Maybe at some point, if your using a certain platform the worst case scenario is they are going to freeze your money, but in my experience, it doesnt really make sense since there will not be enough evidence to support there claims if you actually link to the transactions. I mean there are a lot of mixers out there maybe they could ban all of the transactions that came from illegal mixers but surely it's going to be a big issue for their platforms.

Also, your KYC doesnt really link to your Bitcoin so you don't need to worry about it, there are only a limited amount of Bitcoin so no one really knows if your Bitcoin is linked to illegal transactions, and if yes there are already a lot of transactions happened on that BItcoin does it mean that all of that transactions are illegal. In my experience, just don't worry about it if you didn't really do anything that is illegal you have nothing to fear about it, unless if you actually have some illegal activities.

I think there is always a process to determine who is the person involved in that illegal activity.  The thing that the address changes, there is a hint that Bitcoin had already changed hands.  If you worry about this kind of event, you can use a mixer service so that you can clean the traces of Bitcoin even if your friend uses it for illegal activity.


I also view it that way but come to think of it, there is no proof that his friend is the one who owned that Bitcoin unless the address was also KYC'ed or have link to his friends identity.  I do not know if it will work in court but I now realized that sending Bitcoin to a non-KYC'ed address and that address is used for illegal things might bring problem to the KYC'ed source address.

I do not know how this holds ip in court but with every transaction in the blockchain a recorded hash is created, this will signify that a transfer of assets has happened and it has helped people be absolved of crimes in the past at least in the community and local friendship circle level, but my line of thinking is that if you can use it as an immutable and verifiable evidence for stuff like this, then that makes it all the more a capable form of evidence when shit hits the fan and you find yourself persecuted for crimes you didn’t commit, with only leads redirecting you to cops being anything but these transaction hashes I’m talking about.  

It depends on the level of the illegality committed by the receiver because if the receiver's wallet is flagged for money laundering or scam activities of means all connected addresses will also be looked at and investigated, but if the involvement of the address and its overall transactions volume have not exceeded a significant amount that could attract the investigator's attention you may easily be ignored.

But that doesn't mean you are totally avoided or off the radar, you are just overlooked, so you have to watch who you send your coins to and what they use them for unless on the p2p level where the transaction may be off the chain.

This is to demonstrate that centralized exchanges can jeopardize our privacy, and Bitcoin is anonymous, which is why we are urged to use the peer-to-peer manner of purchasing Bitcoin rather than centralized exchanges.

And, as many have mentioned, if you must use a centralized exchange, always mix your Bitcoin to maintain your privacy.

I don’t know where you’re from but if you buy something with Bitcoin p2p and you’re afraid of the situation presented in OP, think about creating a written agreement for the purchase. You should have there your (and the other peer’s) information, including your address and the receiving one. In case something goes wrong, you’ll at least have a signed document which is infinitely more convincing than a journal where you write down entries.

But since you’re this paranoid, and for a very good reason, I have a different advice.

Are you on a loss currently with your KYC-ed Bitcoins? What I’d do is I’d sell it back to an exchange, print and archive that transaction plus bank statements, withdraw cash and go somewhere I can buy BTC without needing KYC.

Afraid of the different price BTC will have by the time you’ll buy BTC? Do you have enough savings and will to “risk” doubling your holdings for a day or two? Let’s say you have 0.1 KYC-ed BTC, currently worth around $3k. Go get yourself another 0.1 BTC but without KYC. Now sell your KYC-ed BTC immediately and you’re care free.

There’s no point in having these fears, seriously! Don’t let these attacks on BTC catch you. There’s no such thing as taint. It’s just an attack to keep us away and scared.

This is indeed a fascinating and crucial question that I haven't pondered before. As an initial user, there is a possibility of being traced if you have gone through the KYC (Know Your Customer) process during your purchase. If you have concerns about such a scenario, you have a couple of options. Firstly, you can choose not to use KYC or opt for reputable instant exchanges that do not require KYC verification. Alternatively, you can consider utilizing local resellers to acquire Bitcoin or purchase USDT (Tether) and then exchange it for BTC. By avoiding KYC procedures altogether, you can mitigate the risk of potential harassment or unwanted attention.

No coins from decentralized exchanges are not flagged or tagged tainted and as such you can send your coins out from them to any wallet or exchange. The reason bisq and it likes was suggested for you was that if you can’t buy coins except from exchanges then do so with decentralized exchanges, this way nothing can be traced back to you because the exchange doesn’t have any information related to you. But for convenience reasons if you are scared the funds you are sending out will get you into trouble then the mixers are complete safe, although you might be worried about getting them out without having it tagged. There are just few centralized exchanges that do not accept coins from them. Other than that mixers are safe to use

Think about it from a point of view of investigator. You found an address used by a criminal, let's say drug dealer. Then among their transaction you find a transaction that leads to an address (your address) which received funds directly from exchange. Keep in mind that exchange wallets are very publicly known. Now the investigator can contact the exchange, and the exchange would likely provide them your identity, and you will get questioned by authorities over your connection with the alleged criminals.

But each of these steps can fail. Maybe investigators won't be interested in those addresses, because it would be clear to them that those belong to bystanders. Or the exchange will refuse to cooperate with law enforcement. Or the investigation is ongoing in a far away country that doesn't cooperate with your law enforcement. 

From a chain analysis perspective, yes. You are the last (only) known owner of those coins. But the investigation carried out by the police or other law enforcement agencies is not limited to chain analysis. In the case of some kind of crime related to "your" coins, you will probably be invited to an interview where you will simply provide evidence that the coins have changed hands and that you no longer have anything to do with them. On the other hand, with the information you provide, you may even help police detectives identify the real criminal.

What i believe is that the bitcoin is no longer is your custody and whatever they finds out may not be subjected to you rather tracked down to the new holder. However, there will be a trace to your wallet if the wallet pass kyc in a centralized exchange though the trace could be termed to the amount of bitcoin that is used for the crime or for illegal activity. Just as they have suggested p2p at this point would be more preferable if your not confident of using centralized exchange to buy bitcoin. I think here is when you would like to make used of mixers if you are that comfortable with it.

Good question but this should not appear strange to you and this are situation that can happen to anyone even those outside of crypto-currency. Imagine you gave your care to your friend to run a close by errand and he just quickly uses it to commit a crime and unfortunately the plate number was spotted but not your friend. Logically after the plate number must have gone through some checks you would first be called in for questioning then you would have to prove your innocence, it's unfair but it sure does happen so in this case you have to maintain innocence and then investigations are Carried out

Or better still don't give our you sensitive information to any exchange there are Decentralized exchanges you can choose from.

You can get more information about decentralized exchange on this link
https://www.google.com/amp/s/cointelegraph.com/learn/what-are-decentralized-exchanges-and-how-do-dexs-work/amp

No, it is a valid concern. So I don't think you are not unnecessarily paranoid.

---

Bitcoin is pseudonymous by nature and it has a public blockchain. The concept of fungibility and taint is also preserved to be discussed here. Some entities flag and consider some bitcoins as bad/dirty or good/clean. Some governments maintain a blacklisted address. Some mining pool was trying to filter a specific utxo. Also, A mixer coinjoin operator collaborates with the blockchain analysis company to scan the bitcoin before they are able to be mixed.

In regard to your case, I think you have found an understanding of the matter. For further options to acquire bitcoin in a more privacy-preserving way, consider the non-KYC solution. Also, I suggest this resource for related information about Bitcoin privacy: https://www.lopp.net/bitcoin-information/privacy.html. 

I think this kind of scenario speaks on the importance of mixers in the cryptocurrency space. The fact that they can at least hide your transactions make it more safer for you to send your BTCs to someone.

But think of it this way- if you have given paper money to someone and that someone uses it for illegal means, does this mean that you have propagated or enabled the person to commit the wrong done? I think not- it still boils down to the person in which he/she used the BTCs for, whether legally or illegally. If this were the case, I am confident that nothing would happen to you and no one would be able to question your intentions.

If you are really skeptical about it, then you may also exercise the option of purchasing BTCs in exchanges that do not require any KYC documents to be submitted.

First of all, I will like to correct the motion that there is nothing called "KYC Bitcoin" but rather we have Bitcoin that could be bought on an exchange that uses KYC (i.e Know Your Customer), whereby you are required to submit some documents to allow you buy, sell or trade Bitcoin. Secondly, the moment you gift your coin or it leaves your wallet you loses ownership of it to the next person.
However, I have seen situations whereby people get arrested simply because someone bought a coin from them through p2p with a stolen fund and when traced they happen to be the suspected victim, whereby in such case if only you could prove that you are innocent, you are likely to get allow free, which is why it's good to always use a reputable exchange.

I understand where you're coming from, but it's quite unlikely that anything unfortunate would happen to you, even if the Bitcoin you sold or moved was involved in illegal activities. You can simply show the transaction ID that it is no longer in your possession, but generally, it's doubtful that you'd get in trouble. I also had a similar question regarding KYCed Bitcoin, which is tied to your identity if purchased through a centralized exchange, but it was mostly regarding the taxation of cryptocurrencies.

Unfortunately, if you have transactions on centralized exchanges, it'll always be shown that you have purchased crypto in the past. This is why P2P exchanges come into place—to avoid being screened, even though it's quite unlikely, unless we're talking about thousands of dollars worth of crypto.

Chain analysis is obviously not an exact science. They are using their best guesses to track bitcoins. If you don't do anything illegal you don't have to worry. Chain analysis can never prove you did something once you have bitcoin from a wallet it knows you own to a wallet it doesn't know you own. So if you send bitcoin to someone else chain analysis at best cannot prove you still have it, or otherwise if it can connect that other wallet to someone else then it can prove you don't have that bitcoin anymore. So the only way chain analysis can prove you spent bitcoin on something illegal is if in fact you did spend bitcoin on something illegal like doing that illegal spending from a wallet that they know you own through KYC.

Your worry is a bit like worrying that you'll be in legal trouble if you own a store and a criminal who stole money comes into your store and buys something and you are worried about facilitating the use of illegal money. You did nothing wrong, you are not the criminal, so you're fine.

Also realize that the number of people who do illegal things with bitcoin is very small, so not only can chain analysis not prove you did something illegal that you didn't do, its also extremely unliikely you're gonna be sending money to someone who then goes and does something illegal with that money.


No need to worry yourself over needless things. If you don't worry about this sort of thing with fiat you shouldn't worry about this sort of thing with bitcoin.

Thanks for the various replies!

It seems that, in the case of KYC Bitcoin, keeping good records of the UTXOs sent to others or received from others would be important. Say I buy a used car off Craigslist. If I keep a careful record of the UTXOs involved in the purchase, and possibly also "KYC" on the person I bought it from, then I could always provide that as "proof" if the Bitcoin were ever to be used for something illegal and traced back to me. Hopefully it's an unlikely scenario, but at least keeping records would make it easier to put up a defense if there were to be an issue down the road.

I think it's starting to make more sense to me now. I appreciate the insights.

You can't protect yourself from buying coins that may be tainted, just the same way you may have used a 'tainted' dollar today without worrying about it, just use BTC freely and if you ever buy tainted coins that creates a problem for you with the authorities, which will unlikely happen, you can prove your connection with the coins.

Worry about flagged or tainted coins when it is within your control, for example when you use CoinJoin or Mixers, do not send such coins immediately into a centralized exchange, you can try to break the chain first or spend it through a p2p exchange.

If this were to be the case then all money from banks would carry same propagation and can also link the original sender of the money because all your details are in the bank. If this is not happening in the traditional financial system why would this be a problem in the crypto space?
People uses fiat received from other people on shady deals all the time I have never heard such money is being traced to the original sender. Is the situation not similar?

This all depends on how the KYC BTC is being spent, and it also depends on the gravity of the crime the new owner used it to commit. Since there is no name tag on every particular address, the address and its coin can only be traced back to you through the exchange where you purchased the coin. If they hand over access to the authorities and they are in pursuit of the person who committed a crime using the BTC purchased by you, They will call for your attention. Your documentary and explanation are the only things that could prove you not guilty and innocent. Even if you are not being charged for any crime, if the case is further investigated, you will be regarded as an active witness in a criminal case.

There is just cause for concern. What are the guarantees that when buying from others, there are bitcoin of them without a KYC (one of the past transactions) or have a connection with criminal money? A criminal trail can lead to you, a completely random person in this case, law enforcement agencies. My point is that the shadow of the activities of the previous owner of bitcoin (or one of them) can fall on you.

Probably, only a direct purchase from miners will help here.

Here, too, there are no guarantees that the service doesn't collect data about its customers and law enforcement agencies will not get access to this data, as was the case with the chipmixer.

The question is more confusing than complex.

This is very thoughtful of Op. I have never reasoned something of this nature and I also think that majority of the people in this forum have not also thought about this. But if this is the case, I'm beginning to be scared of centralized exchanges. One can actually be implicated for what they know not about.
No wonder someone like o_e_l_e_o use to emphasis on privacy every time you see him write.

I understand your concerns of buying Bitcoin from Non KYCed marketplace so as precaution you can mix your coins before using it on any KYCed platform so the traces of those Bitcoin will be erased but we can't ensure anything that we receive from the mixer which may arise further query. However It's worth noting that even if your coins are flagged, it doesn't necessarily mean you won't be able to use them. It just means that they may be subject to additional scrutiny and investigation by exchanges or other entities that have to comply with government regulations. So if you didn't involved in any illicit activities and have the record for your income then you can survive.

Thanks. But though I may conceptually be "signing full ownership to a new recipient wallet", from a chain analysis perspective, there may be no way to know that that new wallet is associated with someone else. It could just as easily be another wallet I created. (Of course if the new wallet has KYC Bitcoin associated with the new owner, that would presumably associate the Bitcoin transferred from me with their KYC. Right?)

Viewing it from that perspective can somehow be right. Yes, after you buy Bitcoin through exchanges which requires kyc your identity is actually tied to the ownership of that coin. But after you have used that coin or transferred it to another users, you are actually signing full ownership to a new recipient wallet.

 You don't have any  reason to worry how the new owner spends it. If he carries out illegal activities, sure it would only be seen on the Blockchain that you were the previous owner of that coin. But I don't think you would be penalized for that.


 

Thanks for the reply. And for the pointer to kycnot.me (and others).

I'm curious if coins obtained from all non-KYC sources of Bitcoin are equally at risk of being "flagged". Say I buy some Bitcoin off Bisq. Is there a risk I might never be able to send it to a CEX or other "government compliant" entity as it's flagged? In an ideal world everything would be P2P, and this would be a non-issue, but that's not the reality at this stage. Maybe I'm being unnecessarily paranoid, but these are the questions that come up as I'm trying to learn. Thanks again.

Since it is only you that provided KYC that can be used to trace the transaction, it can be traced to you. It will be assumed that you know the person you sent the money to. You might be requested to reveal the identity of the owner of the wallet you sent the Bitcoin. This is one of the risks of using a centralized wallet, you will always be the first contact when something goes wrong. Using a decentralized wallet will give you the privacy you need.

This is same with with tainted fiat money on bank. You will be subject for investigation but with right proof or documentation on how you spend Bitcoin then you will be off the hook on the analysis chain of transaction. I don’t believe on tainted Bitcoin especially if the original coins is already splitted in smaller parts and use in different timeframe that will for sending to different ownership.

I think the person who directly send the Bitcoin to the culprit will be the main subject of investigation because most Bitcoin might be come to the hands of illegal transaction since Bitcoin was used on dark web marketplace payment during the early days.

I never think anything like that before, because if i do, i may be paranoid of using bitcoin for any transaction using an exchange or any crypto-related service that uses KYC. Also, I don't think it would be necessary in chainalysis to know the owner of the origin of every bitcoin/transaction since then where the bitcoin comes from, because if they do, you will not be considered as the first owner of that coin nor the exchange/service you buy from, it might came from other platform before the exchange so on and so forth.

If you are really afraid of this, you can either :

-use a P2P service for the original purchase of your BTC, without KYC, so you don't have to worry about all that.
-or use a coin mixer before sending it to your friend, but you risk to flag the coins doing that

This is another excellent reason not to use a CEX to buy your coins. There's no point in using them, as we have Bisq, Peachbitcoin and many others at our disposal (kycnot.me is your friend).

As for the substance of your question, it's complex, the real question is more: why would an agency be interested in your friend's activities ? He would need to truly exagerate to get them to look for you following a transaction he might have made with the coins you sent to him...

Hi all,

Sorry for the confusing title. I'll try to explain:

What if I buy some KYC Bitcoin through an exchange and then move it to a wallet. And then, let's say I either give some of that Bitcoin to someone else (maybe a charity or a friend), or use it to buy something (maybe a used car off Craigslist). At this point, from my perspective, I no longer own that Bitcoin (i.e. it is "beyond my ownership"). But now what if the person who now "owns" that Bitcoin uses it for some illegal purpose? I would have no knowledge of that transaction, but my KYC has "propagated" to the new owner. If that transaction were to be traced, assuming it hadn't been linked with KYC transactions with the new owner's identity, I would still be the last owner of the transaction from a chain analysis perspective, right? This is not something I've heard discussed before (but admittedly I'm new hear). Seems like a risk.

Thoughts?

Thanks.