Alright so here’s the bad news about buying Bitcoin – everyone that you don’t want to know about it (Uncle Sam, the IRS, law enforcement) is very likely going to know that you have purchased Bitcoin.
Some people genuinely don’t care about that, and if you are one of those people, good for you.
If however you do care about government overreach, let’s talk a little bit about KYC/AML, which are acronyms for “Know your customer / Anti-money laundering.” These are rules that many governments have in place in order to track where people are moving their money. The best argument for why this is OK is that law enforcement wants to make money laundering difficult. This is why when you are buying a home in the U.S., the banks need to have a paper trail for where any new money that you have acquired came from.
What does that have to do with Bitcoin? Since Bitcoin is pseudonymous, it’s possible for someone to create a new private key, send Bitcoin to it, and if done correctly the owner of that wallet will be impossible to track. Yes, the Bitcoin protocol uses receiving addresses that are easily viewed on the Blockchain, but if those funds don’t come directly from an exchange that has a person associated with it, it is possible to keep that wallet from interacting with on ramps and off ramps that require KYC. But for exchanges, law enforcement requires every U.S. exchange to “Know their customers” by requiring a picture of state or government identification, and more.
Many Bitcoiners see KYC/AML as an example of government overreach and will go out of their way to find certain ATMs (often with a 10%+ premium) that will sell Bitcoin (up to a certain amount) without requiring an I.D. Also there are services which provide the ability to buy non-KYC bitcoin.
So why should you want non-KYC Bitcoin? Here are a few reasons:
- You prefer to keep your wealth hidden from an overreaching government
- You have concerns that Bitcoin will be regulated/banned in the future
- You have concerns that the Government will outright seize Bitcoin from citizens in the future (see executive order 6102)
- You wish to be able to participate in a circular Bitcoin economy in a private way
I’m sure there are other reasons someone would want to be able to transact with Bitcoin in a private way. Fortunately there are ways to acquire non-KYC Bitcoin, but everyone should be aware that those avenues are disappearing every day.