Holding KYC Bitcoin and non-KYC Bitcoin

[Poker Player]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.

We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

I know some of you on the forum are big fans of privacy and non-KYC and I would like to know what you think about it.

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[Kong Hey Pakboy]

Bitcoin ATMs will surely be regulated when time comes, if you feel like it's a lot of money and you believe that it can still be more in the near future, you might want to look for other options. There's one that's popular right now which is a treasure man, you give them your bitcoin and they turn it into cash and bury or hide it somewhere where you and the treasure is going to be the only one that's going to know the location but that too has it's own risk since you are putting your faith in someone online.

[Mbitr]

This is definitely an interesting conundrum and I’m sure a lot of people are thinking a similar thing.
A lot will depend on taxes and cryptocurrency regulations where you reside. Certain countries are more beneficial re - taxes. What I would say is that don’t be afraid to talk to tax advisors and if it does cost you a fee at least you will be saving a lot in tax - definitely saving a lot more in comparison to exchange fees when exchanging relatively small amounts constantly.

[dothebeats]

This occurred to me as well. A local exchange that I was using for quite some time temporarily blocked my account for some reason as I cannot justify the source of my bitcoins. Mind you, I stay in a country wherein bitcoin or any crypto-related laws aren't even drafted or being thought into consideration in 2017. I was able to regain control of my account by explaining and showing proofs that I buy cryptocurrency on another exchange and just transferring some to that account. It was a hassle as I also needed to provide my proof of income before they release my account. Had those funds reached a considerable sum on that account, I'll have a hard time explaining why I got those and how I got those.

To date, I still have no legal knowledge on how to deal with such, and I'm still looking for something that can at least help me explain things on the gains that I have on bitcoin and crypto that I transfer over to that exchange. Or I could just go the traditional route: P2P trades whenever I need some cash and that's it.

[Lucius]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.

If he bought BTC with legally earned money, and if there is evidence of a transaction with Localbitcoins, then it is not a problem to prove the origin of that BTC if it is ever necessary. It is a completely different matter if the purchase was made live for cash.

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

Using an ATM usually means paying a big fee - and in order to send money to Coinbase, he has to deposit it into his bank account first - I don't see how to legalize the whole thing this way.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

The best thing is that you can very easily take Bitcoin with you anywhere in the world, and also that you can always sell it for cash to someone in person. Bitcoin is always easy to spend, there are so many online stores that accept it - and anyway with every purchase we pay VAT which in my country is on average about 20% (max 25%). Personally, I do not want to pay another 20% tax on capital gains, because I do not live in a country that deserves it, given the degree of corruption and the way taxpayers' money is spent.

This of course is just my thinking, and everyone should decide for themselves.

[jackg]

We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.
One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

I often do this when it crashes and conveniently convert fiat to btc for the same amount and then I have that transaction in the records...

Realistically though, this was more of a way to pre-empt my bank account so they don't block me for suspicious activity if I want/need to sell a lot of my holdings. In most of Europe, cash in hand transactions up to €15000 eur are still legal without kyc and aml and estate agents don't even ask where funds come from still they just want your identity to cover themselves and pretend they did that check...

[SFR10]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC.
~Snipped~
if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

Have you tried searching the address that LocalBitcoins used for sending the amount in question, on a website like "WalletExplorer"?
^{- They're great at tagging the addresses that belong to most exchanges.}

• LocalBitcoins old addresses
• LocalBitcoins addresses
  - When you click on each one of those addresses, it has the following label attached to them:
  

  part of wallet LocalBitcoins.com

One way to launder it would be to go to non-KYC ATMs,

Not sure if there's still such a thing as "non-KYC ATMs", but based on what I've seen, all of the BTMs have some sort of a KYC process when you exchange beyond a certain limit.

[Poker Player]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.

If he bought BTC with legally earned money, and if there is evidence of a transaction with Localbitcoins, then it is not a problem to prove the origin of that BTC if it is ever necessary. It is a completely different matter if the purchase was made live for cash.

This question has appeared several times in the thread. I'm sorry I didn't make it clearer before: it was made live for cash.

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

Using an ATM usually means paying a big fee - and in order to send money to Coinbase, he has to deposit it into his bank account first - I don't see how to legalize the whole thing this way.

That's why I tell him that sometimes it's better to have everything legal because what you have non-KYC will cost you more to use. Regarding the other thing you said, he can go one month to an ATM, withdraw $500 in cash, spend that cash for his current expenses, and from the money he has in his account send a transfer to Coinbase. That will cost him some time, at the rate of $500 or $1,000 a month.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

The best thing is that you can very easily take Bitcoin with you anywhere in the world, and also that you can always sell it for cash to someone in person. Bitcoin is always easy to spend, there are so many online stores that accept it - and anyway with every purchase we pay VAT which in my country is on average about 20% (max 25%). Personally, I do not want to pay another 20% tax on capital gains, because I do not live in a country that deserves it, given the degree of corruption and the way taxpayers' money is spent.

This of course is just my thinking, and everyone should decide for themselves.

In the end, I am undecided, I see some advantages and disadvantages to non-KYC Bitcoin holding. Yes, you avoid capital gains tax but you will always have expenses to be able to use that money, like what we said about ATM fees, or if you have a huge capital, say $100K or more, you can spend $500 on a gift certificate or withdraw $1K from an ATM, but you can't take it all out and buy a car or a house. In order to legalize that amount all at once you will have to pay a lawyer and/or a tax advisor and who knows whether to go to another country, typically a tax haven or what.

If you naively go to the authorities of your country to declare that you have, for example, $250K in Bitcoin, they will ask you to justify the origin, and if you can't justify it, you will be investigated for money laundering and tax fraud at the very least.

[yhiaali3]

Of course I would not use this method to get money laundering on Coinbase, I do not even want to do KYC procedures because I prefer to maintain my privacy, the problem is not trying to evade taxes The problem is that unfortunately there are no laws regulating Bitcoin in many countries of the world, most People around the world keep their bitcoins secret not to evade taxes but for fear that it will be confiscated by the government because it is illegal in the country, if bitcoins were legitimate and had clear regulatory laws I am sure many people would want to pay taxes and would not try to evade.

[odolvlobo]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.
We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

None of the bitcoins that I own were obtained with any kind of KYC and I have absolutely no problem spending them or selling them in the U.S.

Gemini occasionally asks me where I got the bitcoins that I sell on their exchange (AML compliance I assume), and I tell them I obtained them anonymously many years ago (which is the truth). End of discussion.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

Absolutely untrue in my experience.

BTW, it is "money-laundering" only if the coins are associated with a crime.

[HeRetiK]

None of the bitcoins that I own were obtained with any kind of KYC and I have absolutely no problem spending them or selling them in the U.S.

Gemini occasionally asks me where I got the bitcoins that I sell on their exchange (AML compliance I assume), and I tell them I obtained them anonymously many years ago (which is the truth). End of discussion.

Yes, I also think that at least in theory even non-KYC Bitcoin shouldn't cause much troubles further down the road, as long as the fiat amounts involved can be explained through your income. Having bought 10 BTC for cash in 2012 is simply not the same as having bought 10 BTC for cash in 2020.

With banks I'm not so sure though. They are generally more wary about cryptocurrencies, so cash-bought Bitcoins may raise some eyebrows there, regardless of the amounts involved. Still, it's not like buying (or selling) Bitcoin is illegal (except for the places where it is, of course) so at worst they can quit their business relations with you.

BTW, it is "money-laundering" only if the coins are associated with a crime.

Precisely this. Just because Bitcoin has allowed people to make gains that seem too good to be true to be legitimate doesn't make it criminal.

[teosanru]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.

We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

I know some of you on the forum are big fans of privacy and non-KYC and I would like to know what you think about it.

Just like the enormous bitcoin, how will you justify the excessive cash deposit into your account for buying the cryptocurrencies? Technically the best way is to declare some income every year so that the whole burden doesn't fall on you in a single year because chances are by hook or by the crook government will collect the tax on bitcoin at the end of the day so it's best to have some safeguard, this way you are saying is really bad, you might not fall into suspicion by declaring cryptocurrencies but by declaring cash you will definitely be under scrutiny.

[dansus021]

Bitcoin ATMs will surely be regulated when time comes

10000% will true,
things that make us profit sooner or later government will regulated

and why confuse hodling non kyc bitcoin if you buy on bitcoin or binance transfer to personal address there's dozen p2p exchanger or OTC that buy and sell bitcoin without kyc

but dont WD all in withdraw the bitcoin part by part if you still scare

[NeuroticFish]

I think that you are seeing problems even where they aren't.

1. Bitcoin ATMs are already regulated and one cannot sell more than certain limits (per transaction or per year, it depends) without KYC.

2. Unless it's indeed dirty money, money that can be tracked to a hack or anything, there's nothing to worry; P2P selling does exist, many people did acquire their coins before the regulations were this strict (remember the Binance 2 BTC withdrawing rule?) and have no KYC. You really think that all that money can "become" dirty for no good reason? And if the money is not dirty, why would you see it as money that needs laundering?!

3. Non KYC market will always exist.

[Poker Player]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.
We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

None of the bitcoins that I own were obtained with any kind of KYC and I have absolutely no problem spending them or selling them in the U.S.

Gemini occasionally asks me where I got the bitcoins that I sell on their exchange (AML compliance I assume), and I tell them I obtained them anonymously many years ago (which is the truth). End of discussion.

What amounts are we talking about, thousands, tens of thousands, hundreds of thousands...? Do you declare them in your income tax statement? I understand that you may not want to specify for privacy reasons, but it would help to know what we are talking about.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

Absolutely untrue in my experience.

BTW, it is "money-laundering" only if the coins are associated with a crime.

I don't know how it is in the USA, but in general, you can't show up at your bank today with $1M in cash that you can't justify the origin of. The same for Bitcoin. Appearing today with $1M of dubious origin will set off alarms and you will be investigated, if you cannot justify with documents that they have a legal origin you will be accused of money laundering and tax fraud, even if they have a legal origin. The problem is if you cannot prove it.

I think that you are seeing problems even where they aren't.

That remains to be seen.

1. Bitcoin ATMs are already regulated and one cannot sell more than certain limits (per transaction or per year, it depends) without KYC.

You better put it to me, since there are limits, it is easy to withdraw $5K even in several times, but if you have $1M you won't be able to withdraw it from the ATM.

2. Unless it's indeed dirty money, money that can be tracked to a hack or anything, there's nothing to worry; P2P selling does exist, many people did acquire their coins before the regulations were this strict (remember the Binance 2 BTC withdrawing rule?) and have no KYC. You really think that all that money can "become" dirty for no good reason? And if the money is not dirty, why would you see it as money that needs laundering?!

I think you are not getting the point here. As I said in the example above, try to show up in your bank with $1M of which you cannot justify the origin, no matter how much you got it in the past legally. Normally they will block your account, but if they accept you to deposit it, they will call directly to the tax authorities who will start an investigation.

3. Non KYC market will always exist.

The non-KYC market has less supply and liquidity than the KYC market and it will become smaller and smaller:

EU wants to ban crypto anonymous transactions and wallets

Devastating "Infrastructure" bill in US - contact your representatives

[HeRetiK]

I don't know how it is in the USA, but in general, you can't show up at your bank today with $1M in cash that you can't justify the origin of. The same for Bitcoin. Appearing today with $1M of dubious origin will set off alarms and you will be investigated, if you cannot justify with documents that they have a legal origin you will be accused of money laundering and tax fraud, even if they have a legal origin. The problem is if you cannot prove it.

Being accused of money laundering and tax fraud is not the same as being guilty of. Sure, there might be some additional paperwork, but in the end you'll worst case have to switch banks and maybe pay more taxes than you need to since the cost basis and therefore the taxable profits are not fully clear. But unless you've burned every wallet backup you ever had proving the time and therefore roughly the price of your initial purchase shouldn't be a problem. It's all verifiable, public data after all.

You better put it to me, since there are limits, it is easy to withdraw $5K even in several times, but if you have $1M you won't be able to withdraw it from the ATM.

Seems like a bit of a contrived use case, no? Why would you want to withdraw $1M, in cash, all at once? Not even regular bank ATMs hold close that much of an amount.

The non-KYC market has less supply and liquidity than the KYC market and it will become smaller and smaller:

EU wants to ban crypto anonymous transactions and wallets

Devastating "Infrastructure" bill in US - contact your representatives

Agreed, but the EU proposal you're referring to does not say what the article implies. The proposed regulation applies to Crypto Asset Service Providers which refers to centralized platforms such as exchanges, payment gateways and custodial wallets. Person-to-person transactions are explicitely excempt and non-custodial wallets are not even in the scope of the proposal so I'm not sure where the news agencies are pulling that from.

Now I'm not saying that they won't try to regulate non-custodial wallets and person-to-person transactions further down the road, but as is it stands those articles don't seem properly researched.

[odolvlobo]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.
We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

None of the bitcoins that I own were obtained with any kind of KYC and I have absolutely no problem spending them or selling them in the U.S.
Gemini occasionally asks me where I got the bitcoins that I sell on their exchange (AML compliance I assume), and I tell them I obtained them anonymously many years ago (which is the truth). End of discussion.

What amounts are we talking about, thousands, tens of thousands, hundreds of thousands...? Do you declare them in your income tax statement? I understand that you may not want to specify for privacy reasons, but it would help to know what we are talking about.

Thousands, and yes I pay the income tax on the gains.

I don't know how it is in the USA, but in general, you can't show up at your bank today with $1M in cash that you can't justify the origin of. The same for Bitcoin. Appearing today with $1M of dubious origin will set off alarms and you will be investigated, if you cannot justify with documents that they have a legal origin you will be accused of money laundering and tax fraud, even if they have a legal origin. The problem is if you cannot prove it.

In the U.S., a cash transaction more than $10,000 will require the bank to file a SAR, which may or may not provoke an investigation (which could be as trivial as asking the questions that Gemini asked me).

I am skeptical that being unable to "justify with documents that they have a legal origin" will result in criminal charges of money laundering and tax fraud in your country because there would be no evidence of either of those crimes.

[LoyceV]

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

The next question will be: how did you get the dollars you used to buy Bitcoin? This only makes it worse. The moment you feel the need to "launder your money", you're going down a path you can't honestly explain anymore.

I prefer to have the "original" address. You can prove on-chain when you obtained it, and if the value went up from $500 to $100k, you can honestly explain you bought a small amount of Bitcoin years earlier and got a 20,000% capital gain. You probably won't even be the first, many Bitcoin owners will have a similar story.

In the end, I am undecided, I see some advantages and disadvantages to non-KYC Bitcoin holding. Yes, you avoid capital gains tax but you will always have expenses to be able to use that money, like what we said about ATM fees, or if you have a huge capital, say $100K or more, you can spend $500 on a gift certificate or withdraw $1K from an ATM, but you can't take it all out and buy a car or a house.

I'm required to annually report total savings/capital to taxes, and pay a recurring tax on it. You could easily hide Bitcoin, but that would give the above problem if you ever want to sell it. At the same time, reporting to taxes annually ensures a paper trail of long-term ownership.

If you naively go to the authorities of your country to declare that you have, for example, $250K in Bitcoin, they will ask you to justify the origin, and if you can't justify it, you will be investigated for money laundering and tax fraud at the very least.

I guess it varies per country.

[20kevin20]

I might be wrong, but I personally think that unless these coins come from a direct link to your identity, proving their origin is going to be very hard. The main issue for authorities is that a large-scale investigation is needed for your initial, real addresses to be linked to all or most of your actions. And even then, some pieces of the puzzle will be missing if you tried to maximize your privacy while using crypto.

What I'd do is just avoid banks at all. And as Loyce said, if you go down the money-laundering rabbit hole, it's going to be a quite harsh ride.

To prove the "legitimate" origin those $100k or more, you would need to have an income in your past history of at least $100k that you haven't spent in a verifiable ledger (e.g. through card) but offline through cash. Because if you spent it, you don't have it anymore. But then, if you have $100k that you withdrew from an ATM and $100k more of your past earnings which you used for proving the ATM-withdrawn $100k, you'd have a total of $200k out of which $100k will once again be impossible to prove.

Say I have a total of $100k earned in BTC, undeclared. On the other hand, I have ~$100k that I earned through my monthly salary. The salary earnings have always been withdrawn from ATMs and never spent through card, which means they're "anonymous" spendings. Nobody knows if I ever spent it or not, so I'll be using that to prove the origin of my $100k BTC.

If I withdraw my $100k worth of BTC through an ATM and deposit it through Coinbase to launder it after which I purchase a car worth $100k, a question will arise: if you earned $100k through your job, how do you now have $100k worth of BTC + a $100k worth car?

What I do agree with is that if you can't prove the origin of your money, you better not declare anything at all until things clear out about your financial history and you are ready to declare 100% legitimately. I personally think that filing uncertain information could easily mean digging your own grave. If you're unsure about something, better get an expert help you with this stuff.

[Poker Player]

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

The next question will be: how did you get the dollars you used to buy Bitcoin? This only makes it worse. The moment you feel the need to "launder your money", you're going down a path you can't honestly explain anymore.

I think you have misunderstood me here LoyceV. Let's say you spend $500 a month buying groceries using cash. So usually, you withdraw $500 a month from ATMs, and with that you buy groceries for the month.

Instead of buying them with your paycheck money, you go withdraw money from the non-KYC ATM and with that cash you buy the groceries. Then, with the money from your paycheck, the money you get paid from your job and is in your account, you make a transfer to Coinbase and buy Bitcoin.

You might say, well, someone at the bank might notice that you've underspent this month, which is what you've sent to Coinbase. Not necessarily, if you spend cash mainly for everything, buy clothes, put gas, etc. That you spend $500 less that month is irrelevant. That's why you can do it in small amounts and little by little. You can do $500 one month, $200 the next month, then wait for another month, etc.

That way you have spent Bitcoin of which you cannot justify the origin to have the same amount of Bitcoin (maybe a little less because of the fees) with an origin that you will be able to justify in the future.

This is not just a theoretical problem, we have a comment above:

This occurred to me as well. A local exchange that I was using for quite some time temporarily blocked my account for some reason as I cannot justify the source of my bitcoins. Mind you, I stay in a country wherein bitcoin or any crypto-related laws aren't even drafted or being thought into consideration in 2017. I was able to regain control of my account by explaining and showing proofs that I buy cryptocurrency on another exchange and just transferring some to that account. It was a hassle as I also needed to provide my proof of income before they release my account. Had those funds reached a considerable sum on that account, I'll have a hard time explaining why I got those and how I got those.

If you naively go to the authorities of your country to declare that you have, for example, $250K in Bitcoin, they will ask you to justify the origin, and if you can't justify it, you will be investigated for money laundering and tax fraud at the very least.

I guess it varies per country.

I also assume so, but if it is true that you live in Switzerland (according to what it says in your profile) I understand that they will have a more favorable legislation in this regard.

But in general you are going to face a big problem if you suddenly appear before the tax authorities of your country with a large sum, be it $100K or $1M and you cannot justify the origin.

In this example it is something simple but let's think about the people who mined in their day and then made trades in exchanges that no longer exist, and also passed their bitcoins through mixers. The bitcoins he has today have a lawful origin, but he cannot justify it.

If I withdraw my $100k worth of BTC through an ATM and deposit it through Coinbase to launder it after which I purchase a car worth $100k, a question will arise: if you earned $100k through your job, how do you now have $100k worth of BTC + a $100k worth car?

You are making it too complicated. We're talking about as of today, making small ATM withdrawals, say $500 at $500, to pass $5K of source that you can't account for to Coinbase. You don't end up with $5K plus $5K. You move $5K from one place to another.

And that's to prevent that $5K from becoming $100K or $1M tomorrow, and you can't justify its origin.

What I do agree with is that if you can't prove the origin of your money, you better not declare anything at all until things clear out about your financial history and you are ready to declare 100% legitimately. I personally think that filing uncertain information could easily mean digging your own grave. If you're unsure about something, better get an expert help you with this stuff.

Yes, there are people who think that even if you can't prove the origin, since the authorities won't prove that it has an illicit origin (because it doesn't), you won't have any problem.

And here I say that it will depend a lot on the amount, and you can face tax evasion charges.

[LoyceV]

I think you have misunderstood me here LoyceV. Let's say you spend $500 a month buying groceries using cash. So usually, you withdraw $500 a month from ATMs, and with that you buy groceries for the month.

Instead of buying them with your paycheck money, you go withdraw money from the non-KYC ATM and with that cash you buy the groceries. Then, with the money from your paycheck, the money you get paid from your job and is in your account, you make a transfer to Coinbase and buy Bitcoin.

You might say, well, someone at the bank might notice that you've underspent this month, which is what you've sent to Coinbase. Not necessarily, if you spend cash mainly for everything, buy clothes, put gas, etc. That you spend $500 less that month is irrelevant. That's why you can do it in small amounts and little by little. You can do $500 one month, $200 the next month, then wait for another month, etc.

That's my point: if you want to "launder" $100k, it's going to draw attention. But if you do $500 every other month, it's going to take a very long time.
That's why I suggested to just keep it legit: "I bought a Bitcoin for $100, I sold it for $100,000 after 10 years". If you have the blockchain to back it up, nobody is going to care who you bought the Bitcoin from 10 years earlier.

That way you have spent Bitcoin of which you cannot justify the origin to have the same amount of Bitcoin (maybe a little less because of the fees) with an origin that you will be able to justify in the future.

I still think it's way worse: You're turning a Bitcoin that you bought for $100 years ago into many small parts that you bought for $500 each. Unless you're trying to avoid capital gains tax, or you didn't obtain the Bitcoin legally in the first place, I'd say that's a dumb thing to do.

This is not just a theoretical problem

My bank questions me once in a while too. They want to know what I spend my money on (I don't think "hookers and cocaine" is the answer they're looking for) and how much savings I have in other bank accounts too. They really word hard to get their industry replaced, Bitcoin never asks me those questions!

if it is true that you live in Switzerland

Nope, that's a nickname Lauda gave me.

But in general you are going to face a big problem if you suddenly appear before the tax authorities of your country with a large sum, be it $100K or $1M and you cannot justify the origin.

In this example it is something simple but let's think about the people who mined in their day and then made trades in exchanges that no longer exist, and also passed their bitcoins through mixers. The bitcoins he has today have a lawful origin, but he cannot justify it.

If you have your original private key that shows you mined the Bitcoins, you can simply explain what you did.
I've seen several topics where people try to buy old private keys, I assume they want to use it for tax purposes.

Yes, there are people who think that even if you can't prove the origin, since the authorities won't prove that it has an illicit origin (because it doesn't), you won't have any problem.

And sometimes it works out the other way, like this drug dealer who had 36 Bitcoin seized years ago, and now gets 33 Bitcoin back because the price went up by the time authorities auctioned it

And here I say that it will depend a lot on the amount, and you can face tax evasion charges.

That's very easy to prevent: pay your taxes As much as I dislike our very high taxes, paying it means I won't get charged years later.

[malevolent]

As always with these sort of threads, if privacy is not too strong a concern, it could be easier for someone to give a better answer if you mentioned your friend's tax residence, different countries have different law and realities, etc. Your friend may be unjustly worried but in some jurisdictions it may actually seem that for certain crimes guilt is presumed.

[bitcoin_user]

Maybe your friend could do a a bitcoin-backed loan? They don't ask about the origin of the bitcoins.

He can even do P2P lending (completely anonymous) with HodlHodl: https://www.coindesk.com/business/2020/10/22/bitcoin-hodlers-get-a-lending-option-with-no-kyc/

[yat97]

A friend of mine bought a small amount of Bitcoin some time ago through Localbitcoins without KYC. As of today they have turned into quite a few thousand $. Apart from that, he has also bought Bitcoin on Coinbase.

We were discussing whether it would be worthwhile to continue holding non-KYC bitcoin, because if the price continues to rise, in the future he may have accumulated $100K or more of which he cannot justify the source.

One way to launder it would be to go to non-KYC ATMs, withdraw cash and that same money invest it in Bitcoin in Coinbase. This way he would end up having the same amount of Bitcoin but he would be able to justify the origin of everything.

The problem with accumulating a large amount of money in Bitcoin that you cannot justify is that if you want to use it, it will have a cost as well. You will probably have to hire a lawyer or a tax advisor, you may have to go to a tax haven and/or set up a company to launder it. All this has an economic cost as well and I think it is better to launder it now easily. You'll also sleep better.

I know some of you on the forum are big fans of privacy and non-KYC and I would like to know what you think about it.

Okay so wait... non kyc bitcoin is the best to have. You dont HAVE to justify it. You got it before KYC was a thing! So unless your nation or situation states you can't have more than a certain amount of assets then yeah. If you're in the USA you can sell at long term cap gain tax rate whenever you want to, OR even better, not pay taxes on selling by simply getting a loan and having your btc at collateral. You could buy a rental place or something pay it off and keep both and wait to sell when btc goes to a million one day idk. That one will link your name to your bitcoin but you dont trigger a taxable event in the USA afaik?

The ATMs are gonna RIP you sideways man. Unless you live in an area where they're more reasonable but the ones that you can sell btc for cash cut your legs off. Lets say btc is 100k, they will say okay we'll buy btc and give you cash but you're gonna sell btc for 60k to us. so you might as well pay cap gain taxes at that point.


Also, I wouldn't talk about laundering anything if I were you. At least use code words or something. if you live in the USA, and maybe a few other nations, the IRS/glow boys probably read these forums.

You're not laundering btc, you're cleaning it or legitimizing it or something. Dont criminalize yourself. and yeah ik you prob dont have any info connected to your account here but still. dont talk like that, only saying it to you any anyone else reading this because I support your game plan so I'm just saying.

[Poker Player]

As always with these sort of threads, if privacy is not too strong a concern, it could be easier for someone to give a better answer if you mentioned your friend's tax residence, different countries have different law and realities, etc. Your friend may be unjustly worried but in some jurisdictions it may actually seem that for certain crimes guilt is presumed.

No need, it's already clear, I'll wait a little bit to see if any more interesting answer comes up and I'll proceed to lock the thread. Anyway I don't trust giving data to someone who calls himself "malevolent", lol.

The ATMs are gonna RIP you sideways man.

I agree.

Lets say btc is 100k, they will say okay we'll buy btc and give you cash but you're gonna sell btc for 60k to us. so you might as well pay cap gain taxes at that point.

Not a chance. It doesn't work that way.

Also, I wouldn't talk about laundering anything if I were you. At least use code words or something. if you live in the USA, and maybe a few other nations, the IRS/glow boys probably read these forums.

You're not laundering btc, you're cleaning it or legitimizing it or something. Dont criminalize yourself. and yeah ik you prob dont have any info connected to your account here but still. dont talk like that, only saying it to you any anyone else reading this because I support your game plan so I'm just saying.

Yes, maybe "launder" isn't the most appropriate word, but I'm not talking about me to begin with, I'm talking about my friend, I don't have that problem. Besides, we are talking about a purchased amount of a few hundred that has turned into a few thousand. That is not a problem today. The IRS is not going to waste time starting an investigation, requesting IPs, etc. because someone supposedly has $3k that they have not declared (yet). It's not even a tax crime.

Edit: I am locking the thread, as there is another similar one and my friend went to consult a specialized tax advisor and he has already solved the doubt.