Ways to Escape KYC for Good

So, why are we even talking about this? The title says it all. I'm looking to gather different strategies for separating coins bought through KYC platforms without facing issues later on. The aim here is to hold Bitcoin while keeping your privacy intact, all while staying within legal boundaries. It’s not about dodging taxes, more like enhancing privacy. This isn’t a discussion on tax evasion during trading! It’s about safeguarding your privacy for the long haul, say 10 or 20 years from now, when you might want to cash out (or buy something, which basically means the same). Regulatory landscapes can change a lot, and if your country doesn’t impose a wealth tax, you don’t have to report your assets. That way, you’re less likely to face issues like potential confiscation or the dreaded $5 wrench situation. If you're curious about the whole 'no KYC' thing, check this out: https://bitcoinqna.github.io/noKYConly/ Three Possible Methods: I usually suggest purchasing through https://bisq.network/, but I know many people already have some crypto (or even all of it) from exchanges. I’m not big on keeping two separate hoards since it can risk linking them through future transactions if you don’t use distinct devices/wallets. To totally ditch KYC, I've thought of three options. Ultimately, these methods will lead to a wallet that has no ties to your identity and still holds the same Bitcoin balance.

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.

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...

If you have such laws that shift the whole responsibility of proving whether something is legal or not to tax office, then you can consider yourself lucky - because if a taxman knocks on my door and tells me to prove the origin of money or property, then it is up to me to prove it - otherwise, I have to pay taxes, or the money or property will be confiscated. If a cryptocurrency is purchased through the KYC platform and with money that has legal coverage, and that same cryptocurrency is used to buy legal items or services, I see no reason to hide anything. Everything else that falls under some kind of concealment (for whatever reason) can be very easily done through a mixer - although it has been proven that most mixers can be broken (with the exception of CM). I think it is very difficult to achieve 100% anonymity, because those who work on blockchain analysis do not do it for a month or a year, but almost from the very beginning of Bitcoin (ask ES and its former agency).

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).

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.

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

That's actually an interesting point: if countries enforce to know the source of money, how do they e.g. deal with mined coins? What if I claim I mined all coin myself and then want to use that coin to buy a car? I even found people online arguing non-KYC coins might be worth less in the future since you might not be allowed to spend those (as you said: no proof when you bought it, for how much, etc.). These are very valid points, I must say. Tons of wallets have actually been lost forever; however, from those wallets, the coins never move. If that's your story, make sure that you mixed the coins early (like, now, for example) so you can later claim boating accident at a point in time that lies after the mixing event.

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.

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.

I'll highlight this part about taxes: This varies per country: I don't pay capital gains tax, but an annual tax (0, 0.59, 1.4 or 1.76%) on funds I own. Short-term this is better, long-term you lose more and more to taxes. The reason to pay this tax is to be able to use funds legally when I want to in the future. What if you buy 1 BTC for $10,000 and sell it for $1,000,000? As much as I wouldn't mind having a suitcase filled with money, it's much more practical if you can legally use it to buy a car or house (or a jet). Wait, I thought we live in the same country? As far as I know, I have some explaining to do if I pay a large amount in cash. And if it's not cash, the bank will require a similar explanation. This doesn't make me worry about Bitcoin in particular, they can do the same to most other assets too. It depends on the amount, and what you're trying to do with it. If you're into blackjack and hookers, you'll do just fine with a pile of untraceable cash. But if you want to buy a new Lambo, having half a million bucks on your creditcard is much more convenient than having 10 Bitcoin for which you can't explain how you got it. It's trivially easy to create more than one wallet and avoid linking them on-chain. You could even use different passwords for the same hardware wallet.

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.

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

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.

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

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.

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

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.

Wow, this thread exploded quite a bit! Excited to hear all the different opinions and experiences. 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 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. Doesn't Bisq work in your country? Too few users? 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.

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