Is this a good way to "clean" BTC?

I recently did an AML check on some of my Bitcoin addresses and found out that I have some "tainted" coins. The service I used showed that around 90% of the coins are usually fine, but a small fraction of "dirty" coins mess up the whole address. So, I thought of a way to isolate the dirty coins like this (let's say I have 1 BTC in my main address A1): 1. Split the funds in half and send them to two addresses (0.5 BTC to A2 and 0.5 BTC to A3 let’s ignore fees for simplicity). 2. Run an AML check on A2 and A3. 3. If the dirty coins ended up in A2, then A3 should have the clean ones. 4. Now, split the funds on A2 again, sending 0.25 BTC to A4 and 0.25 BTC to A5. 5. Run another AML check on A4 and A5 to see where the dirty coins are. . . . 6. Keep splitting the coins until all the dirty satoshis are filtered out. Has anyone else tried something like this? I’d love to get feedback from more experienced users on whether this method works or not.

This won't work And may  even make things worse. Coin control is something that I would advice It helps you separate the supposedly tainted coins So you can a clean one. If you split or spend The new UTXO containing the risky coin may result in higher risk assessment. Because blockchain analyst follow transaction history Repeatedly splitting doesn't remove the linkage.

Ant this going to make things worst, because by splitting bitcoin in various wallet like the wallet A1, A2 etc all the output wallet get linked  and tainted along with the former wallet. Some AML tools monitor behaviour and not history, and once clustering is detected that could trigger even more problems for the output. Conclusions is that after everything you see that this your approach will fail to separate your tainted coin with the clean one since you can separate or unconnect the wallets from the sender wallet on the network history.

Some services don’t look past the first hop and some don’t seem to care at all and will allow you to send tainted funds directly. This method may or may not work for you because measuring the taintedness of coins isn’t an exact science. It would just be best to avoid sending those coins to somewhere where there is a risk that they will be frozen and where they will make you jump through hoops to get your funds back.

Everyone can have tainted coins because we can not control which coins and UTXOs of them we received from exchanges, merchants or anyone else like we all can have some scarce Satoshi sats. Check if you have any rare satoshi. Bitcoin Q&A: Blacklists, Taint, and Wallet Fingerprinting Andreas Antonopoulos explained about tainted coins and blacklists as well as how exchanges do their analysis for finding tainted coins. It's risky to use centralized online platforms that can mark your coins as tainted, pull KYC card, freeze your fund and terminate your accounts anytime. Reminder: do not keep your money in online accounts.

Two-way search plan of splitting tainted Bitcoin is smart tech idea but it is very dangerous in new world due to its high level of risk due to wide use of deep AI tools to watch wallets as it happens by large sites such as Binance and Coinbase. These sites do not just look at single code, they do many step tracking and follow money flowing through many wallets, so your clean code still may be marked as dirty, even if it is linked with tainted codes. I think this way is likely to fail since it will leave behind fishy trade history of many new codes. It all turns out that you are correct that it is not all of your coins that can be dirty but rule makers have taken spot of high blame where there can be no such thing as hundred percent safety after money has been shown to dirty spot.

The problem is that your 1 BTC comes from address A1 which has been flagged, the AML checker will consider the next address as a child address or within 1 entity based on the transaction pattern. I think you don't need to clean your bitcoins this way before they change their checking parameters which in my opinion is more flawed. By the way, have you also checked with several different AML checkers? Coin control is impossible in op's situation because he has consolidated 1 btc to address A1

A probably crucial information here is missing: Are all coins on A1 on the same UTXO (unspent output)? You can check this enabling coin control and see if there are different coins. If all are on the same UTXO (only one "coin" is visible), then you will probably not be able to "split" them in any way. In this case I would open a LN channel and/or swap the coins for XMR on a service which does not retain coins even if they are tainted but instead refunds you (see https://kycnot.me for examples). Or swap them in very small chunks to another coin (ETH, LTC ...). If not, i.e. if there were several times you received coins on that address and these coins are still separate, each one in an unspend output (UTXO), then you can try to split them according to the UTXO. Enable coin control. Isolate each UTXO (e.g. in Electrum go to the "Coins" tab, mark only this specific UTXO green with "Add to coin control") and send it to an unique address. After having done that process for all UTXOs, re-check the AML score of all these addresses, but use Tor and restart Tor after each address, ideally pausing between the checks. It will perhaps not work depending on the AML algorithm, maybe it considers them already tainted only because they somewhen were located at the same address. But there at least is a chance it could work.

Don’t think much about it unless you are going to use a kyc-on service in the future. Unless the coin is originating from a big crypto exchange, every coin in circulation is pretty much tainted. Now you see what they are trying to accomplish with that scheme hopefully. The problem doesn’t matter or even exists if you stop playing the game by their rules. Use decentralized exchanges and services that don’t ask kyc info and you are good.

In the future, it may turn out that the regulator will force everyone into large exchanges with KYCs (I think this is something all countries will strive for for the sake of control). Therefore, the AML problem will affect almost every bitcoiner in one way or another. I believe the "tainted" label is applied to coins that are not linked to a specific KYC, and this entire scheme has only one goal: to identify each owner of a specific wallet (bitcoin). Well, the regulator is imposing its rules - rules on a system that wasn't designed to play by their rules - and yet we still insistently try to "accept" their idiotic rules. This way, the "dirty" bitcoins will end up in the wallet of the next "owner", and the AML problem will be passed on to the buyer of your bitcoins. But if you never "enter" these bitcoins into exchanges with KYCs, then the problem really does resolve itself.

If you don't mind, can you please share with us how you ended up with tainted coins? So that we can avoid that because since I've been on here isn't never end up with tainted coins, I only heard about them online and that's it, if people aren't talking like you are right now many wouldn't even know they existed.

Of course not. It’s never occurred to me to analyze my coins, the ones I’ve earned from the forum have mainly come from casinos, and in the past from mixers—which are usually known as that junk concept of “tainted” coins. I’ve never had any trouble spending them or exchanging them for cash. As mindrust and m2017 say, unless you’re going to use a KYC-compliant CEX, don’t worry too much about it.

That's the thing. I don't understand why would anybody even own bitcoins if they will comply with the regulator demands completely. Bitcoin is the exact opposite of that idea. It is permissionless. If people willingly want to accept all that kyc-aml crap, why use crypto? Why bother? If you want the price action, buy the btc-etf. If you want to stay "safe", stay with the legacy banking. Full regulation + crypto combination doesn't make sense. I have many bank accounts and they know exactly who I am. Why would I do the same thing for the crypto exchanges? It beats the idea in the first place.

I see it as even more risks for the addresses that are used for hopping, but.. I never did such a thing and wasn't interested in it.

So basically only way is to keep coins clean is to generate new address when receiving them and keeping them separated? This means that every wallet that receives those coins later will be tainted? So if small amount of coins will taint whole wallets, eventually all the wallets will be tainted...

There is no single standard for AML checks, and if you don't understand how they work, things will only get worse, and you'll end up paying fees without any reduce of risks. The easiest solution is to use a platform that doesn't require AML checks. Ultimately, there's no such thing as "clean" BTC; it's simply a measure of whether the service will process your payments smoothly or request additional information

To be honest I didn't think on this method, but I have one address that I would like to "clean" where I recieved multiple transactions (some rewards from signature campaign and one transaction from exch which probably tainted whole address). I'll try what you recommended and do AML check after that. Unfortunately at the time I didn't know better and stacked everything on same address.

You shouldn't worry too much about the splitting if a Blockchain analysis tool isn't perfect or advanced enough to pick up exact coins that are dirty, (and as long as your coins were earned honestly). No one will rely on faulty logic to confiscate people coins. And a reliable tool will likely take many factors into account to determine whether a a coin is dirty and deserves to be confiscated. One of the most important of such factors is transparency. If what/where you earned or got your coins from is transparent on the internet and moral, you are most likely going to be allowed to pass especially if you did not directly get paid from the source of the dirty coins. Besides, a coin will have to be very dirty/evil to get you into trouble.

What you are suggesting is a waste of time, and you can never filter them out. You can simply use services and exchanges that clearly state they don't discriminate between different coins. Another simple trick is to move coins to new freshly generated addresses, but don't expect you will ever get 100% ''clean'' coins.

Exactly, I dont see how spreading assets across different wallet is the solution to tracing tainted coins because that would only put ypur wallet in danger. The exchange would definitely trace all wallets connected to that account,  which would help with tracing tainted coins and alert the danger of a possible laundered funds which could result in the exchange freezing your account and attract tight scrutiny The best way is reporting to exchange, as this would help keep a good record with the exchange for future references. In a case where it occurs again, there would be some kind of validation that keeps you safe because you built trust.