How To Buy/Sell Bitcoin Without KYC

FACT: There is No Perfect Privacy Solution for KYC Bitcoin

When I sat down to write this paper, I was responding to a question that came to our support desk from one of our crypto members of LearningCrypto.com. They asked for advice on how to cash out their Bitcoin (and other crypto) privately without having to identify themselves with KYC.

NOTE: IF YOU WANT TO SKIP AHEAD, THE KYC-FREE RESOURCE IS AVAILABLE AT THE END

The Challenges of Selling KYC Bitcoin for Fiat with Privacy

My original intent was to show how Bitcoin could be sold for fiat currency with relatively good privacy. However, I quickly realized that this is almost an impossible task if you are selling BTC that you purchased from a commercial exchange like Binance or Coinbase that requires KYC.

The reason is that the KYC exchange keeps all of your personally identifying information on file and associates it with records of every satoshi you purchased from them—including the date of purchase, amount, price paid, etc. They keep this information to comply with tax reporting requirements in your country and for law enforcement purposes, should a warrant be issued. Theoretically, law enforcement would only do this if they suspected criminal activity associated with your Bitcoin. However, in this post-COVID age of Big Tech and censorship, they might do it for less legitimate reasons if your government labels you as an insurrectionist or terrorist due to public criticism of their policies.

The problem is, even if you transfer your Bitcoin to a private wallet under your control, self-custody does not erase your transaction history from the public blockchain. All of your transaction history from the time of purchase on that exchange is now associated with your private wallet address. It will be on the public, immutable blockchain forever, by design.

Why Does This Matter?

Because your KYC exchange recorded the private wallet address to which you “withdrew” or sent your Bitcoin, they can then track every transaction you make with that BTC on the public blockchain from that point onward.

If you try to use a mixing service like CoinJoin to obscure your transaction history, it's not entirely foolproof because not all of your transaction history is fully obscured—a majority of it may be, but not 100%. Using a mixing service will make it much harder to trace future transactions and may be sufficient to preserve your forward privacy; however, mixing activity is detectable on the blockchain. So, if you try to trade those sats on a centralized exchange (CEX) later, they may flag your funds as suspicious and freeze them because of your past mixer use.

If you trade privately with another individual (P2P), that can work in a lot of cases, but even that last transaction to the buyer’s wallet will be recorded on the blockchain. All of your previous transaction history, including your initial purchase at the KYC CEX, will now be associated with the buyer’s wallet address and recorded on the blockchain. Essentially, you never fully escape the taint of KYC records linked to any wallet addresses used to store your KYC Bitcoin.

How to Stay KYC-Free while Buying Bitcoin

To obtain totally KYC-free Bitcoin, you must avoid acquiring it from a KYC CEX. Possible sources for clean BTC are mining rewards, buying “virgin” BTC directly from a miner, picking up transaction fees from running a Lightning Network (LN) node, or receiving payments from individuals for work or business services.

The best solution to achieve absolute privacy is to sell your BTC for fiat currency, pay any tax penalties if you made a profit, and then acquire clean, KYC-free (a.k.a. “virgin”) Bitcoin carefully without any transaction history. An example would be buying directly from a Bitcoin miner’s wallet.

Another way is to buy privately from reputable sellers on P2P platforms that care about selling NO-KYC Bitcoin. However, “virgin” sats are usually sold at a premium, with a significant markup over average market prices. You may need to absorb some loss in order to “clean” your stack of sats in this way.

So—caveat emptor.

Typical P2P Payment Methods Available

There are many options available, including cash in person, cash deposits to your bank, ACH transfers to American bank accounts, or SEPA transfers to EU bank accounts. Popular money transfer services like Zelle, Chime, CashApp, Venmo, PayPal, or Revolut are also often available. However, many of these services come with some risk as buyers could potentially reverse charges, so make sure you use the P2P site’s escrow system properly.

It's also worth noting that these money transfer services all require KYC, which means your buyer will have that information. Although it’s unlikely that they will keep it, there is always a possibility. In the future, you could even be unknowingly trading with an undercover tax agent, so pay attention to reputation scores, seller and buyer reviews, and use common sense. Check all the details, guarantees offered, and make sure you receive funds before releasing your crypto from escrow.

Best No-KYC Bitcoin Exchanges To Buy

Here are some of the columns and notes included in the table:

• Lightning Capable: Good news for BTC holders! There are still a few reliable CEX, DEX, and swap sites that accept LN transactions. I’ve included a list with extended notes.
• P2P: This is a good option for Americans, as you can often get fiat USD deposited directly into your bank account using services like Zelle, CashApp, Venmo, PayPal, etc.
• BTC Only: I have noted which DEX, P2P, and swap sites only have trading pairs with BTC and only accept BTC deposits.
• BTC + Crypto: Websites that trade both BTC and other cryptocurrencies.
• Crypto Only: Some sites do not deal with BTC at all.
• KYC: This is straightforward: ‘Yes’, ‘No’, or ‘Partial’. In some cases, either the buyer or seller must give some KYC information to meet individual trade terms. If using bank deposits or money transfer services, you have to provide your account details for payment purposes.

The remaining columns in the spreadsheet should be self-explanatory.

While these non-KYC methods provide options for Bitcoin purchases, navigating the decentralized crypto landscape requires careful consideration of security, pricing, and best practices.

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