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KYC Exchange funds to non-KYC wallet

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Freebee

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May 7, 2021
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#1
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Hi Freebirds

A friend made gains on crypto, with most funds being on 1 exchange. Unaware of the risks, tax consequences and privacy importance. He now finds out things seem to be quite complicated and a unfavorable possibly 30-50% tax seems to be around the corner.

Asking me to help, we are exploring options. Current trajectory is looking to move funds from the KYC exchange to a non-KYC wallet in a way the funds cannot be linked anymore to the identity once they are on the non-KYC wallet. The exchange used is tight on KYC and even requires to verify the receiving wallet. So First a KYC wallet is also required.

So main KYC exchange -> KYC exchanges/wallet(s) -> Non-KYC wallet(s)

I've looked into mixing but it seems coins get tainted, which we don't want either. I've heard about Scriptless script (elementsproject), but don't really know how to use this.

Questions:
- What (non)KYC wallets do you recommend for this situation?
- What kind of withdrawal/funding amounts get flagged?
- Any experience/suggestions for using mixing, scriptless script?
- How would you handle this scenario?

We are open to all suggestions.

Blessings <3
 
#2
KYC wallets were proposed by the US Treasury in December 2020 but are not law and may never be passed.
What does verify the receiving wallet entail?
When I was transferring funds from my Chinese exchange hosted wallet back when China was closing exchanges I had to verify it by having them phone me and confirm my identity. It was more for security than tax so perhaps check on their exact motives by talking to their customer support.
Keep withdrawals small - under 10 k and you might be ok. I had issues with Poloniex way back when they brought in KYC and had to deal with a maximum of 1000 a day or something like that - lots of tiny withdrawals to get my ether out but it flew under the radar.
Forget coin mixers for anonymising funds. Look at a coin called firo that uses a security protocol called Lelantus that makes all transactions anonymous. You would need to convert your exiting coins into firo then transfer to your firo wallet and then from there send to another exchange to cash out.
Alternatively, convert to USDC or Tether, send to a blockfi account (which would be a KYC wallet) and then collect interest and/or cash out.
 
#4
The exchange most often only ask to verify accounts created on their own system. They receive gladly crypto coins from all wallets. Never faced any issue.
 
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#5
The exchange is Bitvavo.. They say they have to do this to comply with a new Dutch law. You have to send a video where you show the receiving wallet adress on the platform that you use. You can find it searching "Bitvavo Wallet Verification Guide".

Thank you for the input @dread pirate. Bitvavo does not have Firo, nor can crypto be converted to crypto (eg. USDT). It first has to be converted to EU, which we prefer not to since it is a taxable event.

So in that case first transfer to Binance for example? What is the status of Binance flagging transactions?
 
#7
dread pirate said:
KYC wallets were proposed by the US Treasury in December 2020 but are not law and may never be passed.
What does verify the receiving wallet entail?
When I was transferring funds from my Chinese exchange hosted wallet back when China was closing exchanges I had to verify it by having them phone me and confirm my identity. It was more for security than tax so perhaps check on their exact motives by talking to their customer support.
Keep withdrawals small - under 10 k and you might be ok. I had issues with Poloniex way back when they brought in KYC and had to deal with a maximum of 1000 a day or something like that - lots of tiny withdrawals to get my ether out but it flew under the radar.
Forget coin mixers for anonymising funds. Look at a coin called firo that uses a security protocol called Lelantus that makes all transactions anonymous. You would need to convert your exiting coins into firo then transfer to your firo wallet and then from there send to another exchange to cash out.
Alternatively, convert to USDC or Tether, send to a blockfi account (which would be a KYC wallet) and then collect interest and/or cash out.
Click to expand...


I'm reading up that privacy coins get flagged same as mixers..
 
#10
Freebee said:
Because they are often used for ML. So AML detection technology flags them: Crypto AML Red Flags (Exchanges & Wallets) | ComplyAdvantage
Click to expand...
Not sure where you read this stuff - if its on some kind of forum then you shouldn't put much credence in it - but I can't find anything online abt privacy coins being flagged at exchanges or anything other than proposals so I call B.S on it.
Moreover, it doesn't make sense. no real exchange is going to flag XMR/ZEC/FIRO or whatever privacy coin you send to it. You then exchange it into BTC and exchange for USD or whatever to cash out. The only time coins are flagged is if they have been stolen or used in a scam and subsequently traced and blacklisted.
Happy to admit I'm wrong if you or anyone has some real evidence.
I should say I have a bag of privacy coins as they should be part of a diversified crypto portfolio.
 
#11
dread pirate said:
I can't find anything online abt privacy coins being flagged at exchanges or anything other than proposals so I call B.S on it.
Click to expand...
https://www.coindesk.com/bittrex-to-delist-privacy-coins-monero-dash-and-zcashIt is happening. Japan happened long before. It will happen more and more.

Look into VASP regulation. The OECD/FATF/USA/EU/whatever know they can't control the blockchain, so they want to control the interaction between blockchain and what they think is the "real" economy. The Big Question is whether the OECD still control what "real" economy means, or whether they will be the legacy system that we will read about in history books.
 
#12
It is happening. Japan happened long before. It will happen more and more.

Look into VASP regulation. The OECD/FATF/USA/EU/whatever know they can't control the blockchain, so they want to control the interaction between blockchain and what they think is the "real" economy. The Big Question is whether the OECD still control what "real" economy means, or whether they will be the legacy system that we will read about in history books.

You are fear mongering. The Bittrex delistings were 5 months ago. Have other major exchanges delisted these coins since?
And why did Bittrex choose those 3 to delist when it has on its exchange other privacy coins? Only Bittrex knows the answer to this

Soon after The Electric Coin Company, which is the parent company of Zcash came out with a statement:

The ECC says that there is no regulatory basis for delistings and that Bittrex has given "no reason" for its actions. It also says that Bittrex closed Twitter comments on its announcement and refused to respond to its own inquiries.

"If there is someone or something in the US pressuring crypto businesses into submission and forcing delistings, the US public should know," the ECC states.

It also insists that the issue is limited to certain exchanges, specifically Bittrex and Shapeshift (which delisted privacy coins last November). It adds that many other U.S.-based exchanges including Gemini and Coinbase have expressed support for Zcash. Furthermore, Kraken has explicitly stated that it is not under any regulatory pressure.

If the ECC is correct, it seems unlikely that there will be a wave of delistings in the future.
Click to expand...
 
#13
dread pirate said:
You are fear mongering.
Click to expand...
Our predictions for the future are different.

Dutch exchange LiteBit delisted FIRO “partly due to the privacy aspect of this crypto. The regulator of crypto companies in the Netherlands has indicated that cryptocurrencies aimed at privacy are too high a risk.”

OXEx and Upbit removed privacy coins. Huobi removed Monero "because of low trading volumes and anonymity functions". I say that Bithumb will do the same within 2 weeks.

Australian exchanges delisted privacy coins after pressure from banks.

Finance Committee of France’s National Assembly has proposed for a complete ban on privacy-focused cryptocurrencies.

The US has a constitutional issue about banning and distributing the code used to make privacy coins (as with 3d gun designs) but they can and I am sure will regulate licensed exchange interactions with privacy coins and wallets that are linked to tumblers.

I predict that FATF Travel Rule and EU VASP regulations will get stricter, not freer. One area that looks worth prodding, are the GDPR implications of VASP regulations. I'd be interested to see someone in Germany suing that their personal data should not be transferred to VASPs outside the EU.
 
#14
khinkali said:
Our predictions for the future are different.

Dutch exchange LiteBit delisted FIRO “partly due to the privacy aspect of this crypto. The regulator of crypto companies in the Netherlands has indicated that cryptocurrencies aimed at privacy are too high a risk.”

OXEx and Upbit removed privacy coins. Huobi removed Monero "because of low trading volumes and anonymity functions". I say that Bithumb will do the same within 2 weeks.

Australian exchanges delisted privacy coins after pressure from banks.

Finance Committee of France’s National Assembly has proposed for a complete ban on privacy-focused cryptocurrencies.

The US has a constitutional issue about banning and distributing the code used to make privacy coins (as with 3d gun designs) but they can and I am sure will regulate licensed exchange interactions with privacy coins and wallets that are linked to tumblers.

I predict that FATF Travel Rule and EU VASP regulations will get stricter, not freer. One area that looks worth prodding, are the GDPR implications of VASP regulations. I'd be interested to see someone in Germany suing that their personal data should not be transferred to VASPs outside the EU.
Click to expand...
You are talking about things that happened months ago to justify your statement that its "happening".
I'm not sure you of your command of grammar but I would suggest firstly, that the delistings happened in the past and are not 'happening' as we speak.
Second, I suggest you predicate your future predictions with hedging language such as 'may' or 'might' otherwise you are fear mongering and spreading FUD based purely on what you think might happen in the imaginary future.
I should remind you that my comment was that privacy coins should not be flagged by exchanges bc they are not banned.
Which, other than by small exchanges (and bitrrex is a small exchange) they are not.
 
#15
Our predictions remain different. :) It's a trend, there's a direction in crypto regulation which is not surprising when you consider that regulators want to regulate and politicians want to govern. Like FATCA and similar things they will say it's about terrorism and other crime, but we know it's really about tax.

In English language one shouldn't need to hedge predictions with "may" or "might", they _are_ one's own predictions so I won't be following your suggestion. If FTX had a market on "XMR to remain on Coinbase this time next year", we could bet in opposite directions. I predict more delistings, more bannings and more restriction of interaction between regulated fiat-crypto exchanges and wallets related to privacy or tumbling.

Of course you can define what you consider to be "big" or "small" and I might have different opinions about that too. I consider Huobi to be big, but that doesn't mean you have to.
 
#20
CryptoTrader87 said:
And then you get tainted funds from p2p. Only way out is XMR.
Click to expand...
And then still you got no SoF and in the future all XMR transactions might be flagged as risky for AML(?).
 
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