KYC propagation beyond my ownership

[DaveF]

In most places so long as you can show it was no longer under your control it's not your problem.
No different then if you sold your car for cash and the person who bought drove it away from your house and then used it to be the getaway driver in a bank heist.

Do you have a bill of sale for the car or did you just take the cash and hand over the keys?
If you do have a bill of sale can you prove that it is legitimate? Did you make a copy of that persons ID or did they just tell you their name?
If they did show you their ID and you made a copy is it legitimate or a forgery?
And so on.

This really can be applied to just about anything. So, can it happen? Yes. Is it worth worrying about? No.

-Dave

[1714265911]

1714265911

[88mph]

Something else occurred to me as a possible work-around to this issue. I don't know a lot about it yet, but there seem to be various Bitcoin "cash" (not BCH!) projects like "Cashu" that seem to offer privacy benefits for Bitcoin:

https://cashu.space/

https://twitter.com/callebtc/status/1644618535593824257
(Calle is the creator of Cashu.)

[DaveF]

Something else occurred to me as a possible work-around to this issue. I don't know a lot about it yet, but there seem to be various Bitcoin "cash" (not BCH!) projects like "Cashu" that seem to offer privacy benefits for Bitcoin:

https://cashu.space/

https://twitter.com/callebtc/status/1644618535593824257
(Calle is the creator of Cashu.)

Don't walk away from that. RUN away. Seriously take your BTC and convert it to another token and then convert it back.
NO. JUST NO.
That is how you loose your BTC. Either when there is a bug in the programming or the entire thing turned out to be a scam or there are so few people using such an obscure thing that it's worthless.

-Dave

[Flexystar]

Honestly I have never thought about the Bitcoin transaction like that. I’m not sure how it is possible they will blame you for being the original holder because when you purchased it then it probably came from the exchanger right? So why hasn’t possible that they would also further track from where exchanger got it? Exchangers do not just make the bitcoins out of blue and they will be getting them exchanged in their escrow or on their wallet from the other users of their exchanger. Moreover, whenever you are sending it to someone it doesn’t really prove you are the first hand owner of the same? If that’s the thing then damn I will need to rethink the way I am using my bitcoins.

[BlackHatCoiner]

https://cashu.space/

But why messing around with custodial services, forfeiting the ownership of your coins to questionably protect your privacy from centralized exchanges and such, at the very moment when decentralized, privacy-friendly, non-custodial solutions exist (i.e., Bisq)?

From the Twitter post you shared, I think that's the best reply:

People use custodial wallets because they don't know better. Making more custodial wallets rather than more self custody wallets just makes it more likely people make a bad choice.

People who don't have custody should rather be educated to ensure they have that (and privacy later on).

[GreatArkansas]

In most places so long as you can show it was no longer under your control it's not your problem.
No different then if you sold your car for cash and the person who bought drove it away from your house and then used it to be the getaway driver in a bank heist.
(....)

I agree with you here, just show them all of the proof that you have that you didn't use Bitcoin for illegal things. Just prove.
Because for sure most transactions now already have proof especially if it is done online transactions.
These days, exchanges now started to have KYC, and only a few are left without (some are also complying with regulations or just to prevent fraud).

[20kevin20]

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.

It’s scary indeed. What’s even scarier is that unless you have a freshly mined BTC, if you get to have one with a very long history you have no idea how far back they go to check it. It could be 100 transactions. It could be the last 365 days, who knows? You’re just sitting there waiting for your deposit to be confirmed while some random company nobody’s heard of is looking at a history that often doesn’t even belong to you, attributes it to your name and punishes you for it.

[Findingnemo]

In most places so long as you can show it was no longer under your control it's not your problem.
No different then if you sold your car for cash and the person who bought drove it away from your house and then used it to be the getaway driver in a bank heist.

Do you have a bill of sale for the car or did you just take the cash and hand over the keys?
If you do have a bill of sale can you prove that it is legitimate? Did you make a copy of that persons ID or did they just tell you their name?
If they did show you their ID and you made a copy is it legitimate or a forgery?
And so on.

This really can be applied to just about anything. So, can it happen? Yes. Is it worth worrying about? No.

-Dave

Unlike bank accounts where we have our name and all the documents submitted while in Bitcoin there is no such documentation all we can do is to claim we received the money from someone when you sold your car but the transaction I'd can't serve as solid evidence that you received it from someone else. But when we have such monetary system the laws also will be created based on that which will ensure we are not involved in shady practices.

[Who is John Galt?]

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.

With centralized exchanges, you can never know what else has changed in their rules, why, as o_e_l_e_o correctly wrote, they can suddenly declare "dirty" even bitcoins bought on another centralized exchange. And at the same time, they often say that they do not disclose their algorithms for determining problematic transactions. That is, when interacting with a centralized exchange, you have to completely rely on the fact that it will not deceive you. All funds transferred to it instantly end up in its full and undivided power.

And you correctly write in the first post that they will transfer all your KYC data on the first request to anyone, not to mention how many leaks of critical data from exchanges occur. And the fact that you potentially become a convenient suspect, even if you later manage to prove your innocence, will lead to a waste of time and nerves.

The less we interact with centralized exchanges, the better, in my opinion. And we should never go through KYC for bitcoins at all.

[teosanru]

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.

A very interesting question not only because there is a no visibility in the area but also you can be an easy scapegoat in such cases. answer to this question doesn't exist at all because even the law itself doesn't properly exists. Obviously in this scenario you'll be considered as the culprit but if you have proofs showing that these are genuine transaction bonafide which you made in good faith I don't think you have anything to worry here.

[Wildwest]

if you are worried about this then there are currently many ways to make transactions without using KYC, one of which you can use P2P when buying Bitcoin because P2P does not use KYC so you will not worry about it, but I am sure if the person commits an illegal crime by that person then you will not be involved even though there is a transaction that occurs, The important thing is that you have no problems with the Bitcoin you have, and don't think too long because all problems must have a solution.

[yazher]

To be honest, this is something alarming, and also, we have some incidents where some people are falsely arrested because they are involved in such kinds of transactions in the past. That is why you really need to calculate and know what you are doing before you start giving them your personal information because it will end badly if they think you are the mastermind of such malicious transactions. As of now, we haven't heard any severe matter regarding this but this is something we need to consider when we are about to send our KYC to some random exchanges available out there.

[wiss19]

The simplest way to stay out of all those problems that you think might occur is to have some proof of spending them, whether you've donated them to a charity, given them to a friend, or used them to buy something online, you should have some kind of proof that you actually did that so that if something illegal is done using the coins propagated by your KYC and investigations link it to you, you can show the proof and unlink the activities from you by proving that you've spent them earlier.

Though I'm not really sure if you can actually get in trouble for this or not but by doing that, you can definitely avoid getting in trouble even if something goes wrong. That's why it's always important to have some proof of where you've spent your Bitcoins so that you can show it to authorities when questioned.

[Blitzboy]

The simplest way to stay out of all those problems that you think might occur is to have some proof of spending them, whether you've donated them to a charity, given them to a friend, or used them to buy something online, you should have some kind of proof that you actually did that so that if something illegal is done using the coins propagated by your KYC and investigations link it to you, you can show the proof and unlink the activities from you by proving that you've spent them earlier.

Though I'm not really sure if you can actually get in trouble for this or not but by doing that, you can definitely avoid getting in trouble even if something goes wrong. That's why it's always important to have some proof of where you've spent your Bitcoins so that you can show it to authorities when questioned.

Your idea supports a bitcoin governance principle: transaction transparency and accountability. This precaution may prevent unauthorized coin use after transmission. Post-transaction abuse liability is disputed. Bitcoin's public ledger provides traceability. Thus, proving bitcoin expenditure or transfer is easier than it seems. However, off-chain transaction data like products or services transferred may be valuable. Bitcoin promotes financial sovereignty via peer-to-peer transactions. Thus, this value must be maintained when cooperating with legal institutions and following the law.