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Criminals tend to go to great lengths to obfuscate their trail by using multiple wallet addresses. However, these tools are not suitable for tracing suspicious transactions. But, if you have ever submitted any KYC documents when buying or selling crypto, then your identity is in fact linked to those coins in some way.Īnyone can do rudimentary bitcoin tracing using standard blockchain explorers. So, if you have a bitcoin wallet that has never been used, it is still totally anonymous. This means that most of these services are required to implement some degree of know-your-customer (KYC) solutions, therefore linking a real-world identity to bitcoin addresses and transactions. While the bitcoin network operates outside of the purview of regulators, crypto service providers like exchanges do not. In the original Bitcoin whitepaper, inventor Satoshi Nakamoto suspected that wallet addresses could be used to link transactions to a common owner and actually recommended that users use a new address for each transaction to provide acceptable levels of privacy. It is anonymous in the sense that you can hold a wallet address without revealing your true identity with that address. Why do people think bitcoin is anonymous?ĭespite being one of the most transparent payment networks in the world, Bitcoin was designed with privacy in mind. Your bitcoin wallet address is essentially an alias used to make transactions on the bitcoin network. This makes bitcoin pseudonymous rather than anonymous. However, the blockchain only stores the public addresses of crypto wallets, not real-world identities. Realistically, every bitcoin can be traced and tracked from its initial wallet to the one it currently sits in today. While bitcoin can be minted, moved around, and stored without the oversight of any central authority like the government, each bitcoin transaction is recorded on a permanent publicly available ledger known as the blockchain. In contrast, Bitcoin is pretty easy to trace, especially when compared to cash. Cash passes from hand to hand, and there is no paper trail left behind. In fact, physical cash is way more commonly used in criminal activities and money laundering because it is difficult to trace. A 2020 report by Elliptic, a crypto compliance firm, found that illicit activity accounts for less than 1% of all cryptocurrency transactions. However, these concerns are largely exaggerated.
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Appointed officials, including US Treasury Secretary Janet Yellen and President of the European Central Bank Christine Lagarde, have both made statements this year that cryptocurrencies are concerning when it comes to terrorist financing and money laundering activity. One of the biggest myths surrounding Bitcoin and other cryptocurrencies is that they are used mainly by criminals to fund illicit activities.
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Each transaction is recorded on a permanent publicly available ledger known as the blockchain.īitcoin is not anonymous it is pseudonymous.