Bitcoin believers are all too aware of the promise of privacy which comes with bitcoins and cryptocurrencies generally. Cryptocurrencies have widely been seen as an escape from the prying eyes of centralized institutions like traditional banks and the government.
But oftentimes this hope of staying outside the purview of these institutions is denied at the very first point of the cryptocurrency journey—the point of purchase. A good number of cryptocurrency holders buy their coins from centralized cryptocurrency exchanges.
Due to government regulations like the Know Your Customer (KYC) requirements, and the Anti-Money Laundering (AML) policies, these exchanges require users to undergo lengthy registration and verification processes. This process requires documents like one’s proof of identity, bank statements, etc thereby ruining any chance of staying under the radar.
In this article, we would explore ways crypto faithful can purchase bitcoins without revealing their true identities.
1. Buy Bitcoin from a Bitcoin ATM
In practice, Bitcoin ATM is the most straightforward way to purchase bitcoin without revealing your identity. To buy bitcoins from a Bitcoin Teller Machine, one simply exchange fiat currency for bitcoins. A one-time pin (OTP) would be sent to your phone number as a security measure.
Some bitcoin ATMs may, however, require some sort of Identification. If you want to make transactions above $700, you may have to verify your identity. To stay anonymous, you may have to keep your purchases below this threshold. Though firms like Genesis coin and Coinsource are adding more and more bitcoin ATMs, there’s still a huge shortfall. Therefore, people would have to look for other means of buying bitcoin anonymously.
2. Buy bitcoins directly from a holder (i.e., Peer-to-peer)
You can buy bitcoin from an individual who is willing to exchange bitcoins for your local fiat currency. Platforms like LocalBitcoins and Paxful allow buyers in a locality to meet with sellers and agree to exchange bitcoins for a specified price. The actual exchange of money can be done via wire transfers, cash deposits, PayPal and cash on hand. Some of these P2P platforms also provide escrow for the transactions.
3. Buy bitcoin using a prepaid debit card
To get a prepaid debit card, you don’t have to provide your identity or personal information. Simply walk into a convenience store and buy the debit card which may cost about $10, then proceed to load the card with money over the counter. With the card loaded, you can purchase bitcoin from a regular cryptocurrency exchange as though you were using your bank card.
Prepaid debit cards work like gift cards and have low purchase limits. Also, these prepaid debit cards attract high transaction fees when compared to others.
4. Buy Bitcoin from a Decentralized Exchange (DEX)
Decentralized Exchanges may be new but they embody the basic tenet of cryptocurrency and are seen as the future of cryptocurrency trading. Decentralized exchanges operate on a distributed ledger like bitcoins themselves. Unlike the regular exchanges which are 3rd party platforms, decentralized exchanges allow users to directly interact and exchange cryptocurrency.
Most centralized exchanges like Coinbase, Binance, and OKEx hold customers’ funds and require identity verification. But DEX like IDEX, AirSwap, and Bisq don’t operate like that and there’s no need to give out one’s identity. To buy bitcoins from these DEX, you only deposit money (equal to the value of bitcoin you wish to buy into the escrow) and then contact the seller directly.
The downsides of DEX are that the platforms are quite complex and difficult to use. They currently have low trade volumes which limit the functionalities available. But with the development in this area, DEX would soon become the standard for transacting cryptocurrency. Binance is currently working towards a DEX.
Solomon Sunny is the market reporter for Smartereum, one of the global leaders in Ethereum, blockchain and currency news. He produces technical price updates on digital currencies and writes recent developments about blockchain.