How to convert your crypto footprint from public to anonymous.
So, you have bought some crypto over the last few years and want to keep tax agencies and other entities from seeing your blockchain history. This guide will provide you with some ways you could hypothetically hide your future blockchain transactions.
***I am not a financial advisor and this is not financial or legal advice. The information in this post should not be considered as such and is for educational purposes only. Consult your tax professional before considering such actions.***
First, we will go through a few assumptions. First, we will assume that you have entered the crypto market through matters that are connected to your personal identity. This includes connecting your bank to a CeX such as CoinBase, or even using so called decentralized on-ramp solutions such as Transak or Wyre. These methods of on-ramping effectively link your identity to your wallet. Second, we will assume you have some access to alternative methods of acquiring cryptocurrencies. And third, I will be speaking specifically about U.S. tax laws, this does not mean this guide will not be helpful for other tax jurisdictions.
Ok, you have your crypto in a wallet and want to anonymize your footprint going forward. How will you do this? You have a few options.
First option of going about this is to off-ramp all of your crypto into cash, back into your bank account, realizing tax gains or losses in the process. You then will on-ramp through an anonymous method, a cryptocurrency ATM. There are disadvantages however. One being is you must transact in sums of less than $10k. You cannot withdraw $10k in cash from your bank without filling out a form stating your purpose for the funds. Additionally, at most CATMs you cannot buy or sell more than $10k without showing ID. It is also possible some CATMs will require SMS verification. In which case your crypto will not be anonymous. On top of that you will be paying out 5-10% at the CATM in fee, so keep that in mind. You will also most likely need to wait 5-7 days for your funds to be transferred from your crypto exchange to your bank.
Another way to anonymize your crypto is to use a cryptocurrency tumbler. Tumbling is a process by which you take your crypto and mix it into a bunch of wallets then new bitcoin is sent to your new wallet. Depending on the tumbling service, you will have varying levels of success. So, find one that you trust and do your own research on it. The following videos help with tumbling:
Now you want to cash out. This will be the tricky part. Depending on what you will use your funds for will decide which ways you can cash out. If you are using the funds for everyday goods that you can use a Visa card for, then you can use the following step:
Using a VPN or TOR, go to egifter. Search for “Visa” in the search bar. Select either the $25, $50, or $100 Vanilla eGift Visa Gift card. There is a $4 fee for $25 cards, a $5 fee on $50 cards or a $6 fee on $100 cards. Select how many cards you wish to purchase. You then can proceed to checkout with BTC, ETH, or LTC. The gift cards will be sent to your email, so make sure you are using a private email.
Another option is to use localBitcoins to find a p2p buyer. The following guide will help you with localBitcoins.
Now even after all this, you still may catch an eye of the IRS. So be prepared to pay taxes if it comes down to that. If large sums of cash suddenly come into your bank accounts, it may arise suspicion that something fishy is going on. So please continue with caution if you actually plan on using such strategy.
