How to Sell or Buy Crypto Anonymously
As is well known, anonymity is one of the basic human rights. In May 2015, the UN Human Rights Council published reportwhich directly calls anonymous use of the Internet part of basic human rights:
“Encryption and anonymity allow people to exercise their rights to freedom of opinion and expression in the digital age and should therefore rightly enjoy robust protection,” from UN report22.05.2015
This task is especially relevant when dealing with finances. Fiat and Bitcoin were originally conceived as anonymous and private money, but in practice in the 21st century, the state seeks to track all transactions, and the user's identity can be determined if he has not taken security measures.
▍ Exchanges
On crypto exchanges, you can freely buy and sell crypto directly with other exchange users (P2P exchange, card-to-card payments). The exchange guarantees the security of the transaction, i.e. the crypto is released only after the recipient receives the money:
To circumvent sanctions, the exchange uses Aesopian language when describing cards: “yellow card” means Tinkoff, “green card” means Sber, etc.
Just ten years ago, most crypto exchanges allowed you to register anonymously (using your email address) and work anonymously without restrictions, we all remember the legendary BTC-E. But today there are practically none of them left. Yes, you can still register anonymously, but you won't be able to buy/sell crypto anonymously.
All exchanges are subject to KYC rules and require identity verification for almost any activity, including P2P trading.
Theoretically, you can buy someone else's account on the darknet and work from it, but this is not the most convenient way. Fraudsters often do this, so counterparties on the exchange should be carefully checked.
There is another option. The P2P exchange list always includes comrades who exchange crypto not for a bank card, but for cash:
So, if you have an anonymous account, you can directly contact these users and carry out an exchange operation.
▍ All coins are dirty
It is important to understand that all bitcoins are “dirty” to some extent, except for those just mined. To determine the degree of contamination of coins at a certain address, there are AML (Anti-money Laundering Check) verification services like
:
Various payment systems and vendors use the services of AML vendors to check the purity of coins arriving in users' wallets. If the contamination is high, the account/wallet can be blocked, depriving the owner of access to funds.
To clean and anonymize coins, so-called mixers have been developed, which mix coins from different users in one wallet and then distribute them to recipients. The most famous was Tornado Cashan open source, fully decentralized mixer whose code published on GitHub.
Mixers hide the source of funds, i.e. the sender and recipient of the transfer. From the outside, it looks like hundreds of transactions came into the mixer and left it to hundreds of addresses, but from whom and to whom each individual transfer was intended is unknown.
How the mixer works:
In August 2022, leading contributor Alexey Pertsev arrested on suspicion of “involvement in concealing criminal financial flows and facilitating money laundering by mixing cryptocurrencies through a decentralized mixing service,” the site was shut down and the repository was removed (copy restored). In May 2023, a Dutch court sentenced programmer to a prison term of five years and four months.
In general, now you can use other services to mix coins, such as Mixer, Whir And Wasabi Wallet.
How the IRS Tracked the Laundering of Dirty Bitcoins
In February 2022, for cashing out “dirty” bitcoins
two Bitcoiners: businessman Ilya Lichtenstein and his wife Heather Morgan,
and the author is quite
on YouTube under a pseudonym
.
The couple were found to have passwords to wallets containing $3.6 billion in coins, some of which were stolen from the Bitfinex exchange in 2016, and then, after many transactions, eventually ended up in their hands.
The arrest of the couple showed how easy it is to figure out the identities of Bitcoin wallet owners who do not adhere to the basics of information security. For example, they register Google accounts in their real names and store unencrypted files with personal documents in their own names in cloud hosting (that's how the investigation found them).
Note: The couple was not accused of hacking the exchange, only of cashing out “dirty” money. While the guys were withdrawing $500 a day into fiat, no one bothered them. But then they wanted to cash out a larger sum, and this turned out to be more difficult. Investigators from the IRS (US Internal Revenue Service) tracked them down.
Let us emphasize once again: Bitcoiners suffered just because they didn't keep their anonymityThey are not accused of anything else.
Exchangers
In practice, the easiest way to anonymously sell/buy crypto is to exchange it for cash rubles/dollars through an exchanger. There are currently dozens of exchangers in the Russian Federation that do not require a passport or identity verification, as on the exchange. In fact, they operate in a gray area of legislation, but still in the legal part of this gray area.
You can choose an exchanger on a platform like Exnodewhich monitors, collects reviews, ratings, etc., in order to avoid falling victim to scammers.
In general, such exchangers appeared in the late 90s for exchanging WebMoney (WMZ), when Bitcoin had not yet been invented. WebMoney was the prototype of modern USDT, but the Internet was not yet ready for digital money, so they did not take off. Although exchangers worked in the same way in Moscow and other cities, practically no different from modern USDT exchangers.
Now everything has become more technological: online exchange for cards has appeared and P2P exchange directly between usersBut in terms of cash, nothing has changed.
To sum up, to anonymously buy/sell crypto you need, in a minimum set:
- create an anonymous wallet;
- use mixer for transactions;
- exchange crypto for cash.
Private money
As an afterword, I would like to add that money does not necessarily have to be issued by the state. The theory of private money is most fully set out in the work of the Nobel laureate in economics Friedrich von Hayek
(1976), where he essentially predicted the emergence of Bitcoin and other forms of electronic money. The only difference is that Hayek proposed allowing any bank to issue its coins (bonds), and now non-bank structures are also involved in this.
According to Hayek, the economy benefits from the emission of many types of private money that compete with each other. In fact, the state should not necessarily interfere in monetary relations between citizens. But now we see that the state has taken away people's right to issue money. The legislation of many countries prohibits citizens from issuing their own banknotes. Fortunately, cryptocurrencies are effectively canceling this ban as a technological archaism. And this is part of the general cultural process that Bruce Schneier calls the decline of nation statesPeople's identities are increasingly tied less to a paper passport and more to an online profile, and physical residence is no longer so important.
In any case, in a digital society it is important to maintain anonymity of transactions. At least to avoid accidentally getting into an unpleasant situation with dirty money.
