jmigdlc99 is correct, i only wanted to add one thing: the rumour bitcoin is anonymous and cannot be tracked has always been a myth. From the very beginning, bitcoin was not designed to be 100% anonymous, the best it ever did was being pseudo-anonymous.
jmigdlc99 has already indicated that converting BTC <-> fiat is one of the identification points. However, buying BTC with fiat and buying physical good with BTC is just as dangerous.
Exchanges use KYC regulations, localbitcoins might attrackt undercover LE buyers/sellers, ATM's have camera's... Every website is tracking your ip... And every on-chain transaction is on an unencrypted public ledger forever...
Although what you have said is right and government is too serious to trace the transaction details but what about when we are dealing only in cash not involving the bank transfers from localbitcoins? There will not be any identification point, i think government can't tax bitcoins over the network, your bitcoins are only taxable when converted to fiat.
Like i said in my previous post, localbitcoins isn't 100% safe either:
- localbitcoins might log your ip
- if you verified your account in some way, they have that information
- law enforcement might be setting up a sting
- there is GPS data from both you and the other party
- there might be camera surveilance at the place where you do the transaction
Sound paranoid? I'll leave you with this coindesk article, it was the first one that popped up when googling for "localbitcoins sting"
https://www.coindesk.com/localbitcoins-user-pleads-guilty-undercover-sting/
