Cryptocurrencies provide a new way of value exchange for the people. Although the irony is that they have to comply with government regulations in order to thrive.
Bitcoin was created as a solution to the crumbling of the traditional financial system, which has seen numerous collapses including the most recent Great Depression in 2008. When the concept of Bitcoin and the underlying blockchain technology were introduced to the world, it gave a glimmering hope to people who are increasingly doubtful of the government and corporations. Cryptocurrencies allow fiat currencies to expand the use beyond an asset for wealth transfer and as a store of value. Numerous tokenisation models found in blockchains like Ethereum and Cosmos, redefine the definition of currency, as these projects’ tokens (cryptocurrencies) enable people to utilise them to incentivise the ecosystem within them, as well as to empower individuals to freely choose the currency that they are fond of associating with.
However, cryptocurrency adoption was being stifled by a lack of trust from international governments and expert bodies, and so industry leaders had to make a regulatory decision. While some people are embracing the government’s intervention in the business processes of cryptocurrency and blockchain companies, most people are instead against regulations and KYC. Blockchains are initially designed to not only be immutable, permissionless and transparent, but a tool to facilitate greatest transfer of wealth in history, from governments and corporations to the people. The decentralised nature aims to eliminate third-parties like banks, governments and corporations in any transactions made on the blockchain. And early adopters who were sold to the idea of cryptocurrencies were convinced that this technology could very well be the revolutionary financial technology crafted for the people.
What is Know-Your-Customer (KYC) and why is it required for buying Bitcoin?
The process of KYC involves understanding who your users are and why they are using your platform. This process has existed for decades and is commonly used by banks, insurances and other financial institutions. The primary purpose of KYC is to support Anti-Money Laundering (AML) measures as well as combating the Financing of Terrorism (FT). KYC procedures are in place throughout the world, but the way that banks, financial intermediaries and cryptocurrency exchanges carry out this process varies greatly. KYC is an extremely vague term, and there is no list which exhaustively details all possible ways to carry this out. As a result, most reputable organisations implement industry best-practices and processes developed internally.
One of the best reasons to buy Bitcoin from a known source is reliability. Users who have been vetted and are known to an exchange are unlikely to carry out any fraud. If they do, local authorities can be informed and take the necessary steps. This protects all users of an exchange, returning trust to an industry which has seen numerous scams and fraudulent transactions.
Ways to Acquire Cryptocurrencies Anonymously and Without KYC
Bitcoin (BTC) remains the most purchased/traded cryptocurrency in the market. Although BTC is not designed to be an anonymous cryptocurrency, there are a few methods to ensure users can obtain BTC without identity verification. Entities that support such demands offer an assurance to users that buying/selling through their platforms will be anonymous and untraceable. For those who are looking into maximising the anonymity level, a bitcoin mixer is used increasingly by privacy-savvy individuals who are dealing in non-anonymous cryptocurrencies such as Bitcoin. To find out which bitcoin mixers are best suited for your usage, check out the Top 5 Crypto Mixers in 2020 for some good recommendations.
In the following paragraphs, we will be discovering several methods that allow you to purchase your favorite cryptocurrencies without verifications. Do note that as with most services, these solutions may charge for a fee, in addition to your usual transaction fee deducted for miners.
This option is suitable for anyone that is looking to invest in Bitcoin with a decent amount, without the need to go through the cumbersome KYC process. To date, many major cryptocurrency exchanges such as Binance and OKex have offered these options. Most often than not, however, bigger exchanges tend to attract unwanted regulatory attention. Therefore, the safer route would be to purchase from smaller and reputable exchanges, these include Bitcoin.com Exchange, BitMax and Bybit. These platforms are specially catered to protect the user’s privacy interest, and offer a safe and secure in-built wallet to store your assets. Depending on the platforms, a variety of other cryptocurrencies can be purchased from the platform. Also, trading Bitcoin Futures contracts allow users the ability to trade on margin, opening larger positions than we would otherwise be able to.
Peer-to-Peer (P2P) Cryptocurrency Marketplaces
Users that are looking for buying experience, which they could interact with actual Bitcoin sellers may be relieved to hear that P2P marketplaces such as LocalCryptos, LocalCoinSwap and Paxful are available without the need to verify the identity to use the platform. One advantage of using a P2P marketplace is that users could safely proceed with the entire buying process through the platform, which utilised escrow to ensure correct Bitcoin funds are received before releasing the payment to the bitcoin seller. Depending on the geographical location, bank transfer, paypal, and in-person dealing are most preferred by users using P2P marketplaces. If the buyer is lucky, they may be able to find deals that are lower than rates offered by exchanges. Multiple popular cryptocurrencies such as Ether (ETH) and Bitcoin Cash (BCH) may also be available on these platforms.
Decentralised Exchanges (DEX)
As mentioned in the Bitcoin derivative’s section, most popular cryptocurrency exchanges are subjected to regulations, this is due to the fact that they are centralised exchanges (CEX). Luckily, there is a good number of DEX such as Fork Delta and Ether Delta, where users can trade Ether (ETH) for other Ethereum-based (ERC-20) Tokens, and vice versa, without the need of an account or KYC verification. TOR browser DEX such as Bisq is also gaining prominence in the DEX arena, and is one of the few DEX around that offers BTC. The only downside of DEX is that their liquidity may be significantly lower than their centralised counterpart.
There are users who invest in cryptocurrencies for short-term gains and require a quick fix in buying cryptos while having their purchase activities concealed. Therefore, the first three methods may be preferable for them (coupled with an additional layer of anonymity with mixers). But there is also a growing number of new crypto investors or less-tech savvy individuals who are looking to load up their crypto portfolio for long-term holds. In this case, Bitcoin ATMs will be recommended for them.
Also known as Bitcoin Teller Machines (BTMs), they offer a straightforward way to acquire BTC without the need for any account registrations or verifications. Interested users simply follow a brief 5-minute on-screen instructions and complete the buying process by inserting your credit or debit card, followed by the input of your Bitcoin deposit address to complete the purchase. Do note, however, that credit card or debit card transactions are traceable by the card issuers. It will be advisable to make a payment using prepaid debit cards which do not require identification details for top-ups.
Cryptocurrency Gift Cards
The last method is likely the least preferred option. But, there is one important factor that made physical gift cards highly effective in concealing the identity of the cryptocurrency buyer. These gift cards are designed in a way where they are a wallet of their own. Each gift card is priced according to the amount of BTC (or whichever cryptocurrency) shown on the card. Upon purchase, the user will be able to find the seed phrase (private key) at the back of the gift card. Users who are particular about complete anonymity may choose to purchase locally in retail stores that sell these gift cards. They are readily available in crypto-friendly countries. Additionally, users can send BTC from the gift card through a bitcoin mixer, to a newly created bitcoin wallet, in order to obfuscate the entire transaction record.
Privacy can be secured with careful planning
As government bodies around the world are working on regulatory guidelines for cryptocurrencies and cryptocurrency exchanges, some countries are embracing and adopting the blockchain technology while others are more hostile to Bitcoin (BTC) and other cryptocurrencies. Regardless of the outcome, decentralisation is here to stay. And solutions that provide users with anonymity will be evolving and changing with time.
With elaborate planning using the above suggested methods and bitcoin mixers, users can still get to purchase their favorite cryptocurrencies without risking their transaction history to the prying eyes.