Everyone thought Bitcoin and most other cryptocurrencies were anonymous for the first few years. During that time, people used Bitcoin mainly for buying drugs and paying for products and services that were clearly out of legal boundaries with activities such as money laundering.
However, not long after, people discovered that Bitcoin is not anonymous. Due to blockchain technology, everything that happens on the main chain is written forever on the chain. That means that people, companies, or governments can use this information and track it back to the users, which, in case they use Bitcoin for illicit activities, can get into real trouble. But technology on both ends is improving.
From Silk Road to MiCA
As mentioned in the introduction, in the early days of Bitcoin, people thought Bitcoin was anonymous, not pseudonymous as it is. The assumption led people to use websites like Silk Road to buy and sell primarily illegal drugs via Bitcoin. However, it did not take that long for the FBI to investigate the website, which had facilitated an estimated 1 billion dollars worth of products and services, and found the administrator.
Ross Ulbricht, then 31-year-old American creator of Silk Road, was sentenced to life imprisonment in February 2015. Since then, different agencies, on-chain analysis companies, governments, and individuals have been looking for ways to connect real-life identities to Bitcoin transactions.
For instance, a relatively newly released regulation in the European Union, MiCA (Markets in Crypto-assets), states that all the transactions happening in the cryptocurrency world need to be tracked. Crypto asset providers must keep records and track where the value was sent, from whom, and to whom.
This makes it very difficult for platforms such as exchanges to operate and goes entirely against the nature of Bitcoin. Bitcoin was created to be a parallel system to the global monetary-financial system that does not seem to be working correctly. However, overregulation and rules like these are simply putting brakes on what could be one of the most significant innovations, development, and progress in the space of money, finance, and wealth in centuries.
Many regulations, such as MiCA, will stifle any progress that Bitcoin could have made, especially in the Eurozone, since MiCA applies in the EU. This will harm customers and users of Bitcoin in the EU and lead many businesses and companies to leave the continent for countries or jurisdictions with more favorable rules.
Most centralized exchanges seem to be onboard.
Sadly, most centralized cryptocurrency exchanges and some wallets or platforms for buying and selling Bitcoin and other cryptocurrencies are helping this effort. Due to rules such as KYC (know-your-customer) or AML (anti-money-laundering), exchanges tend to ask for ID or proper documentation to prove that their clients and users are who they say they are.
That means that from the very first moment you use your ID on any exchange or wallet that asks you to, these companies or governments can track almost all the things you do in the cryptocurrency world connected to that given wallet. Unless you decide to use some form of CoinJoin, Bitcoin mixer, or anonymous cryptocurrency, it is very easy for them.
And even if you do, they still know that you bought some bitcoins or altcoins on the exchange and platform and can thus not only track your whereabouts but also, for instance, ask for taxes in case you made a profit off your investments. Therefore, it is much better to start with non-KYC purchases of bitcoins, then have a KYC account, and then try to anonymize bitcoins bought through KYC platforms.
-
Whir can help
As was mentioned repeatedly in our articles, the best way to protect against any form of surveillance is to try to get non-KYC bitcoins or satoshis. This means not putting any IDs on any platform, not buying with cards connected to your bank accounts, or not running around and showing off your “Bitcoin wealth.”
Another good suggestion would be to use platforms and services that support anonymity and privacy. Whir is one of them. Thanks to this platform, anyone can use and spend bitcoins privately since it uses CoinJoin technology.
The recipients of these transactions are thus off the hook regarding any surveillance companies such as Chainalysis or governments wanting to track them down. It is immensely more difficult for any surveillance entity to connect their identity to any wallet once the transaction has been made using CoinJoin, which is why Whir offers this solution.
Conclusion
Without any doubt, the regulators will only come harder after cryptocurrencies like Bitcoin. Since they can not “ignore it” or “laugh at it” anymore, they will try to “fight it.” But we all know how that saying ends. Unless something completely unpredictable happens, Bitcoin will win thanks to privacy and anonymity features that products and services that platforms such as Whir offer.
Disclaimer: This article contains links to third-party products and services. Coinfomania does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. Readers should do their research before taking any actions related to the company linked in the Content.
