Buying bitcoin has become easier than ever: in addition to a wide variety of bitcoin ETFs, there are a large number of bitcoin exchanges that let you purchase the asset.
However, many of these platforms require you to fill out KYC documents, which can be cumbersome and time-intensive. It can also expose your personal information to people or organizations you don’t want to have those details.
Fortunately, it’s still possible to buy bitcoin without having to provide personal information.
In this guide, you’ll learn how to buy bitcoin anonymously, using anonymous bitcoin exchanges and peer-to-peer platforms.
Use A Bitcoin ATM
Bitcoin ATMs are one of the best ways to purchase bitcoin without having to provide your ID. Bitcoin ATMs work similarly to bank ATMs with the difference being that you use dollars to buy bitcoin or vice versa. To purchase bitcoin using a bitcoin ATM, all you need is the cash amount with which you want to buy bitcoin and a personal bitcoin wallet on your smartphone.
Most bitcoin ATMs allow you to purchase bitcoin without needing to provide any identification, provided you stay under a certain limit. For most bitcoin ATMs, that limit is $500 but it varies from machine to machine. Some machines require SMS verification to transact but no personal information beyond that.
Use a Peer-to-Peer Exchange
Peer-to-peer bitcoin exchanges, such as Bisq, allow users to trade cryptocurrency directly with each other on a peer-to-peer basis. These platforms are a great way to purchase bitcoin anonymously if you choose “cash in-person” as the payment method.
To trade on Bisq, here’s what you’ll need to do:
- Create an account by downloading and running the Bisq application on your laptop or desktop computer.
- Configure Bisq with your USD payment method details.
- Take an existing offer from a seller.
- Send USD from your bank to the seller’s bank and indicate you have done so in Bisq.
- Withdraw your BTC to an external wallet or leave it in your Bisq account.
Just a note: you will need to deposit BTC into your account before proceeding with any transactions as a security deposit. If this is your first time purchasing BTC from any exchange, you might want to purchase through a friend or family member first.
Use a Prepaid Card
The third option for buying bitcoin without an ID is through the use of prepaid debit cards. A prepaid debit card is a card that is not linked to any bank account. Instead, the owner loads money into the card before he or she can use it. Prepaid debit cards are a good way to purchase bitcoin online without divulging personal information or linking back your bank account.
There are a handful of exchanges that allow users to purchase bitcoin with debit cards, and without ID verification, up to a certain limit. Two exchanges that stand out in this regard are Changelly and Bisq. Changelly allows for transactions without ID verification up to $10,000, while Bisq enables new users to trade up to 0.1 BTC.
Methods to Maintain Privacy
While we’ve explained how to acquire bitcoin without revealing your identity, there are ways to maintain your privacy even further by anonymizing the bitcoin you already own. Here are four common practices to maintain your privacy.
1. Using New Addresses to Receive Payments
While bitcoin addresses are pseudonymous, all transactions are publicly recorded on the blockchain. When you’re using the same account for multiple transactions, it makes it easier to track your transactions and potentially link the account to your person. Using multiple wallets for different purposes makes it harder for third-parties to identify you.
2. Never Publishing Your Bitcoin Address
Publishing a bitcoin address in any public space means that moving any funds from this account to another can be linked to you, potentially revealing your other addresses.
As an added note, you’ll also want to keep your transactions private (i.e. refrain from posting about them online).
3. Using a VPN
When purchasing bitcoin, your IP address could be logged by exchanges or other services. This potentially reveals your bitcoin transactions to your identity. Though every computer in the bitcoin network also shares transactions from other users, making it hard to tell which computer sent or received a transaction, it would be best to simply hide your IP address altogether.
4. Using CoinJoin
Think of CoinJoin as a laundry machine that washes any trace of who owned your crypto. It’s a way to anonymize a BTC transaction by mixing your BTC with BTC from other parties, usually 50 to 100 other entities.
Consider a case where you have user A and C send money to user B and D, respectively. This would record two separate transactions where A > B and C > D. With CoinJoin, the ledger would record the crypto being paid as one transaction so A + B > C + D. That way, a third-party auditor cannot determine who sent crypto to who, though all users will have the full amount in their accounts.
It’s worth noting that Coinjoins are typically provided by exchange or wallet services and that law enforcement agencies in the European Union and United States have taken action against cryptocurrency mixing platforms that utilize CoinJoin and related methods. The operators of these sites face legal charges, including money laundering and operating unlicensed money transmission businesses. In response to regulatory pressures, some service providers like Wasabi Wallet and Trezor have chosen to cease operations or withdraw their services from these regions.
One of the few services still offering Coinjoins is called Jamapp, which uses a decentralized software protocol called JoinMarket.
Legal Considerations
If privacy is your concern, know that there aren’t any actual laws around bitcoin privacy in the U.S. Current frameworks and legislative acts, such as the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act (HIPAA), and the California Consumer Privacy Consumer Act assume that data processing systems are centralized and controller-based. Some legal experts claim that because bitcoin is decentralized by nature, these frameworks cannot be applied to the technology.
However, legal considerations surrounding privacy in cryptocurrencies like bitcoin are complex. Perhaps the most important are KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations, which have come as a result of expanding the Bank Secrecy Act to include digital currencies. These requirements often clash with users’ expectations of privacy and anonymity in their financial transactions.
FinCEN, a bureau of the U.S. Department of the Treasury, has issued guidance clarifying how the Bank Secrecy Act applies to cryptocurrencies. In 2019, FinCEN released comprehensive guidance on how existing regulations apply to various cryptocurrency business models. This guidance affirmed that many cryptocurrency-related businesses, including exchanges, wallet providers, and certain decentralized finance (DeFi) platforms, fall under the category of “money transmitters” and are thus subject to BSA requirements. This classification necessitates these businesses to register with FinCEN, implement AML programs, and comply with recordkeeping and reporting requirements, all of which can compromise user privacy to some degree.
Tax reporting requirements in many countries further complicate the privacy landscape. Users in many jurisdictions are required to disclose their cryptocurrency holdings and transactions. This can conflict with expectations of financial privacy, sparking ongoing debates about striking a balance between personal privacy rights and governmental needs to prevent illicit activities.
Data protection laws, such as the GDPR in the European Union, also play a crucial role in shaping how cryptocurrency businesses handle user data, including sensitive transaction information. The legality of blockchain analysis tools, used by both private companies and government agencies to de-anonymize transactions, remain contentious issues.
The implementation of the “Travel Rule” recommended by the Financial Action Task Force (FATF) requires virtual asset service providers to share certain transaction information, further impacting user privacy.
As governments and regulatory bodies continue to grapple with the unique challenges posed by cryptocurrencies, the legal landscape is ever changing. The evolving nature of these considerations underscores the complex interplay between maintaining financial privacy and adhering to legal and regulatory requirements in the cryptocurrency space.
Investor Takeaway
If you cherish your financial privacy, then any of these options for buying bitcoin without an ID should work for you. Additionally, you can use a VPN and receive bitcoin through new addresses each time. This makes it harder for third parties to track your transactions and potentially identify you.
If you are looking to make a large investment in bitcoin, however, it would be advisable to buy bitcoin on a regulated bitcoin exchange, even if that means undergoing a potentially lengthy KYC onboarding process.
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