KYC propagation beyond my ownership

[BIT-BENDER]

Good question but this should not appear strange to you and this are situation that can happen to anyone even those outside of crypto-currency. Imagine you gave your care to your friend to run a close by errand and he just quickly uses it to commit a crime and unfortunately the plate number was spotted but not your friend. Logically after the plate number must have gone through some checks you would first be called in for questioning then you would have to prove your innocence, it's unfair but it sure does happen so in this case you have to maintain innocence and then investigations are Carried out

Or better still don't give our you sensitive information to any exchange there are Decentralized exchanges you can choose from.

You can get more information about decentralized exchange on this link
https://www.google.com/amp/s/cointelegraph.com/learn/what-are-decentralized-exchanges-and-how-do-dexs-work/amp

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[Adbitco]

What i believe is that the bitcoin is no longer is your custody and whatever they finds out may not be subjected to you rather tracked down to the new holder. However, there will be a trace to your wallet if the wallet pass kyc in a centralized exchange though the trace could be termed to the amount of bitcoin that is used for the crime or for illegal activity. Just as they have suggested p2p at this point would be more preferable if your not confident of using centralized exchange to buy bitcoin. I think here is when you would like to make used of mixers if you are that comfortable with it.

[Stalker22]

Thanks. But though I may conceptually be "signing full ownership to a new recipient wallet", from a chain analysis perspective, there may be no way to know that that new wallet is associated with someone else. It could just as easily be another wallet I created. (Of course if the new wallet has KYC Bitcoin associated with the new owner, that would presumably associate the Bitcoin transferred from me with their KYC. Right?)

From a chain analysis perspective, yes. You are the last (only) known owner of those coins. But the investigation carried out by the police or other law enforcement agencies is not limited to chain analysis. In the case of some kind of crime related to "your" coins, you will probably be invited to an interview where you will simply provide evidence that the coins have changed hands and that you no longer have anything to do with them. On the other hand, with the information you provide, you may even help police detectives identify the real criminal.

[hatshepsut93]

Think about it from a point of view of investigator. You found an address used by a criminal, let's say drug dealer. Then among their transaction you find a transaction that leads to an address (your address) which received funds directly from exchange. Keep in mind that exchange wallets are very publicly known. Now the investigator can contact the exchange, and the exchange would likely provide them your identity, and you will get questioned by authorities over your connection with the alleged criminals.

But each of these steps can fail. Maybe investigators won't be interested in those addresses, because it would be clear to them that those belong to bystanders. Or the exchange will refuse to cooperate with law enforcement. Or the investigation is ongoing in a far away country that doesn't cooperate with your law enforcement. 

[Zaguru12]

I'm curious if coins obtained from all non-KYC sources of Bitcoin are equally at risk of being "flagged". Say I buy some Bitcoin off Bisq. Is there a risk I might never be able to send it to a CEX or other "government compliant" entity as it's flagged? In an ideal world everything would be P2P, and this would be a non-issue, but that's not the reality at this stage. Maybe I'm being unnecessarily paranoid, but these are the questions that come up as I'm trying to learn. Thanks again.

No coins from decentralized exchanges are not flagged or tagged tainted and as such you can send your coins out from them to any wallet or exchange. The reason bisq and it likes was suggested for you was that if you can’t buy coins except from exchanges then do so with decentralized exchanges, this way nothing can be traced back to you because the exchange doesn’t have any information related to you. But for convenience reasons if you are scared the funds you are sending out will get you into trouble then the mixers are complete safe, although you might be worried about getting them out without having it tagged. There are just few centralized exchanges that do not accept coins from them. Other than that mixers are safe to use

[The Cryptovator]

This is indeed a fascinating and crucial question that I haven't pondered before. As an initial user, there is a possibility of being traced if you have gone through the KYC (Know Your Customer) process during your purchase. If you have concerns about such a scenario, you have a couple of options. Firstly, you can choose not to use KYC or opt for reputable instant exchanges that do not require KYC verification. Alternatively, you can consider utilizing local resellers to acquire Bitcoin or purchase USDT (Tether) and then exchange it for BTC. By avoiding KYC procedures altogether, you can mitigate the risk of potential harassment or unwanted attention.

[20kevin20]

I don’t know where you’re from but if you buy something with Bitcoin p2p and you’re afraid of the situation presented in OP, think about creating a written agreement for the purchase. You should have there your (and the other peer’s) information, including your address and the receiving one. In case something goes wrong, you’ll at least have a signed document which is infinitely more convincing than a journal where you write down entries.

But since you’re this paranoid, and for a very good reason, I have a different advice.

Are you on a loss currently with your KYC-ed Bitcoins? What I’d do is I’d sell it back to an exchange, print and archive that transaction plus bank statements, withdraw cash and go somewhere I can buy BTC without needing KYC.

Afraid of the different price BTC will have by the time you’ll buy BTC? Do you have enough savings and will to “risk” doubling your holdings for a day or two? Let’s say you have 0.1 KYC-ed BTC, currently worth around $3k. Go get yourself another 0.1 BTC but without KYC. Now sell your KYC-ed BTC immediately and you’re care free.

There’s no point in having these fears, seriously! Don’t let these attacks on BTC catch you. There’s no such thing as taint. It’s just an attack to keep us away and scared.

[Hyphen(-)]

I think it's starting to make more sense to me now. I appreciate the insights.

This is to demonstrate that centralized exchanges can jeopardize our privacy, and Bitcoin is anonymous, which is why we are urged to use the peer-to-peer manner of purchasing Bitcoin rather than centralized exchanges.

And, as many have mentioned, if you must use a centralized exchange, always mix your Bitcoin to maintain your privacy.

[Wiwo]

Viewing it from that perspective can somehow be right. Yes, after you buy Bitcoin through exchanges which requires kyc your identity is actually tied to the ownership of that coin. But after you have used that coin or transferred it to another users, you are actually signing full ownership to a new recipient wallet.

 You don't have any  reason to worry about how the new owner spends it. If he carries out illegal activities, sure it would only be seen on the Blockchain that you were the previous owner of that coin. But I don't think you would be penalized for that.


 

It depends on the level of the illegality committed by the receiver because if the receiver's wallet is flagged for money laundering or scam activities of means all connected addresses will also be looked at and investigated, but if the involvement of the address and its overall transactions volume have not exceeded a significant amount that could attract the investigator's attention you may easily be ignored.

But that doesn't mean you are totally avoided or off the radar, you are just overlooked, so you have to watch who you send your coins to and what they use them for unless on the p2p level where the transaction may be off the chain.

[panganib999]

Hi all,

Sorry for the confusing title. I'll try to explain:

What if I buy some KYC Bitcoin through an exchange and then move it to a wallet. And then, let's say I either give some of that Bitcoin to someone else (maybe a charity or a friend), or use it to buy something (maybe a used car off Craigslist). At this point, from my perspective, I no longer own that Bitcoin (i.e. it is "beyond my ownership"). But now what if the person who now "owns" that Bitcoin uses it for some illegal purpose? I would have no knowledge of that transaction, but my KYC has "propagated" to the new owner. If that transaction were to be traced, assuming it hadn't been linked with KYC transactions with the new owner's identity, I would still be the last owner of the transaction from a chain analysis perspective, right? This is not something I've heard discussed before (but admittedly I'm new hear). Seems like a risk.

Thoughts?

Thanks.

I do not know how this holds ip in court but with every transaction in the blockchain a recorded hash is created, this will signify that a transfer of assets has happened and it has helped people be absolved of crimes in the past at least in the community and local friendship circle level, but my line of thinking is that if you can use it as an immutable and verifiable evidence for stuff like this, then that makes it all the more a capable form of evidence when shit hits the fan and you find yourself persecuted for crimes you didn’t commit, with only leads redirecting you to cops being anything but these transaction hashes I’m talking about.  

[serjent05]

Hi all,

Sorry for the confusing title. I'll try to explain:

What if I buy some KYC Bitcoin through an exchange and then move it to a wallet. And then, let's say I either give some of that Bitcoin to someone else (maybe a charity or a friend), or use it to buy something (maybe a used car off Craigslist). At this point, from my perspective, I no longer own that Bitcoin (i.e. it is "beyond my ownership"). But now what if the person who now "owns" that Bitcoin uses it for some illegal purpose? I would have no knowledge of that transaction, but my KYC has "propagated" to the new owner. If that transaction were to be traced, assuming it hadn't been linked with KYC transactions with the new owner's identity, I would still be the last owner of the transaction from a chain analysis perspective, right? This is not something I've heard discussed before (but admittedly I'm new hear). Seems like a risk.

Thoughts?

Thanks.

I think there is always a process to determine who is the person involved in that illegal activity.  The thing that the address changes, there is a hint that Bitcoin had already changed hands.  If you worry about this kind of event, you can use a mixer service so that you can clean the traces of Bitcoin even if your friend uses it for illegal activity.

I do not know how this holds ip in court but with every transaction in the blockchain a recorded hash is created, this will signify that a transfer of assets has happened and it has helped people be absolved of crimes in the past at least in the community and local friendship circle level, but my line of thinking is that if you can use it as an immutable and verifiable evidence for stuff like this, then that makes it all the more a capable form of evidence when shit hits the fan and you find yourself persecuted for crimes you didn’t commit, with only leads redirecting you to cops being anything but these transaction hashes I’m talking about. 

I also view it that way but come to think of it, there is no proof that his friend is the one who owned that Bitcoin unless the address was also KYC'ed or have link to his friends identity.  I do not know if it will work in court but I now realized that sending Bitcoin to a non-KYC'ed address and that address is used for illegal things might bring problem to the KYC'ed source address.

[Asuspawer09]

Hi all,

Sorry for the confusing title. I'll try to explain:

What if I buy some KYC Bitcoin through an exchange and then move it to a wallet. And then, let's say I either give some of that Bitcoin to someone else (maybe a charity or a friend), or use it to buy something (maybe a used car off Craigslist). At this point, from my perspective, I no longer own that Bitcoin (i.e. it is "beyond my ownership"). But now what if the person who now "owns" that Bitcoin uses it for some illegal purpose? I would have no knowledge of that transaction, but my KYC has "propagated" to the new owner. If that transaction were to be traced, assuming it hadn't been linked with KYC transactions with the new owner's identity, I would still be the last owner of the transaction from a chain analysis perspective, right? This is not something I've heard discussed before (but admittedly I'm new hear). Seems like a risk.

Thoughts?

Thanks.

You don't really need to worry about that if you buy it from P2P trading you're probably going to be fine even though you get Bitcoin is linked to some illegal transactions, Maybe at some point, if your using a certain platform the worst case scenario is they are going to freeze your money, but in my experience, it doesnt really make sense since there will not be enough evidence to support there claims if you actually link to the transactions. I mean there are a lot of mixers out there maybe they could ban all of the transactions that came from illegal mixers but surely it's going to be a big issue for their platforms.

Also, your KYC doesnt really link to your Bitcoin so you don't need to worry about it, there are only a limited amount of Bitcoin so no one really knows if your Bitcoin is linked to illegal transactions, and if yes there are already a lot of transactions happened on that BItcoin does it mean that all of that transactions are illegal. In my experience, just don't worry about it if you didn't really do anything that is illegal you have nothing to fear about it, unless if you actually have some illegal activities.

[BenCodie]

To answer your question directly:
- You will not be at risk of prosecution if you can quickly prove that you did not broadcast/were involved with the transaction
- You will need to provide details about the recipient and your relationship with them to the extent of being able to save yourself.
- Not cooperating may land you with penalties or punishment, or under watchlist.

You are right that the risk is posed in this situation. You must not only be cautious of who you are sending to, but what they do with the coins...sometimes, you might be questioned many transactions down the chain if no one can be identified up until you.

This is the danger of KYC...even though you did nothing wrong, you will be inconvenienced (inconvenienced, at best).

[MusaMohamed]

This is indeed a fascinating and crucial question that I haven't pondered before. As an initial user, there is a possibility of being traced if you have gone through the KYC (Know Your Customer) process during your purchase.

Why KYC is extremely dangerous – and useless.
If we do not about such danger from KYC, when we already did KYC some times on some platforms and realized its danger, it's too late. KYCed and you are known on those platforms and perhaps publicly too if data leaks happen.

If you have concerns about such a scenario, you have a couple of options. Firstly, you can choose not to use KYC or opt for reputable instant exchanges that do not require KYC verification. Alternatively, you can consider utilizing local resellers to acquire Bitcoin or purchase USDT (Tether) and then exchange it for BTC. By avoiding KYC procedures altogether, you can mitigate the risk of potential harassment or unwanted attention.

Not KYC exchanges are reviewed on https://kycnot.me/

[adaseb]

I heard of this actually happening.

Someone withdrew from an exchange to their own wallet. From that wallet they sent to some individual. That individual ended up sending it to a mixer. And a few months later the person who withdrew from the exchange had their account closed.

Sending to a few wallets doesn’t make a difference since the exchange thinks it’s still you. And they don’t want to risk an investigation so it’s easier just to close accounts.

[Jawhead999]

When you send your Bitcoin to a charity, it means you know who's the person you trade or the site you have sent.

When you make a deal to buy an used car on craiglist, you're also know the previous owner and his contact because you must be have a conversation with him before.

My assumption, chainalysis isn't only look on the last KYC they could get from centralized exchange, but most people who use Bitcoin could leave a trace because they're not run full node, using real IP address, using a spyware browser e.g. Chrome etc.

[davis196]

Hi all,

Sorry for the confusing title. I'll try to explain:

What if I buy some KYC Bitcoin through an exchange and then move it to a wallet. And then, let's say I either give some of that Bitcoin to someone else (maybe a charity or a friend), or use it to buy something (maybe a used car off Craigslist). At this point, from my perspective, I no longer own that Bitcoin (i.e. it is "beyond my ownership"). But now what if the person who now "owns" that Bitcoin uses it for some illegal purpose? I would have no knowledge of that transaction, but my KYC has "propagated" to the new owner. If that transaction were to be traced, assuming it hadn't been linked with KYC transactions with the new owner's identity, I would still be the last owner of the transaction from a chain analysis perspective, right? This is not something I've heard discussed before (but admittedly I'm new hear). Seems like a risk.

Thoughts?

Thanks.

You cannot be held responsible for the crimes committed by someone else!
What if you send fiat money to someone and he buys something illegal with the fiat money you gave him? Do you think that the authorities are dumb enough to arrest and sue you instead of the other guy?
You are the not the last owner from a chain analysis perspective. The guy you have sent the BTC is the last owner. It doesn't matter if he isn't KYC verified. KYC verification is done mostly to fight money laundering and tax evasion(even though it's not that effective). KYC cannot stop you from buying something illegal with your BTC(you could use a mixer).

[Z390]

This is well think about, something that most people can't see coming,  it's a job well done OP, and yes your thoughts are very possible to come into play.

The best way to avoid this entirely is very much available and easy, start using a peer to peer Bitcoin trading platforms then you will need to worry less about your thoughts, I don't see any other ways to avoid this and it's possible that this has already happened to someone before.

If you have passed KYC on any platform before, stop using them and find a P2P platform then no one can trace anything back to you.

[o_e_l_e_o]

I'm curious if coins obtained from all non-KYC sources of Bitcoin are equally at risk of being "flagged".

Any and all coins are at risk of being flagged by centralized exchanges. Centralized exchanges use different blockchain analysis services which have different criteria and different blacklists for which coins they will and will not accept. What is acceptable to one exchange may not be acceptable to another, and vice versa. I previously did a quick analysis which showed one particular blockchain analysis service thought that 25% of the coins coming out of Binance should be blacklisted. You could quite easily buy all your coins through a regulated KYC exchange and find them seized when you deposit them to another regulated KYC exchange. Never mind all the other risks which come with using KYC exchanges of zero privacy, zero security, the possibility of scams, insolvencies, hacks, data leaks, etc., and the possibility the government shutdown or seize all their assets at any time.

If you are worried about your coins being seized by centralized exchanges (as you should be!), then the best course of action is not to acquiesce to their insane requirements or to change your behavior to suit them. Rather, it is to avoid using centralized exchange altogether. Bisq, AgoraDesk, and RoboSats are good exchanges to look in to instead. More available here: https://kycnot.me/

If you don't do anything illegal you don't have to worry.

Tell that to the thousands of innocent users who have had exchanges seize their "tainted" coins.

[88mph]

Any and all coins are at risk of being flagged by centralized exchanges. Centralized exchanges use different blockchain analysis services which have different criteria and different blacklists for which coins they will and will not accept. What is acceptable to one exchange may not be acceptable to another, and vice versa. I previously did a quick analysis which showed one particular blockchain analysis service thought that 25% of the coins coming out of Binance should be blacklisted. You could quite easily buy all your coins through a regulated KYC exchange and find them seized when you deposit them to another regulated KYC exchange. Never mind all the other risks which come with using KYC exchanges of zero privacy, zero security, the possibility of scams, insolvencies, hacks, data leaks, etc., and the possibility the government shutdown or seize all their assets at any time.

This is pretty scary! To suddenly lose one's coins to seizure by an over-zealous exchange simply due to the history of those coins.