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Quick Answer:
While Bitcoin transactions are pseudonymous, they’re not truly anonymous, leaving digital footprints on the blockchain that are publicly accessible. To cash out Bitcoin anonymously, options include peer-to-peer exchanges, in-person sales, Bitcoin ATMs, private crypto wallets, and gift cards.
Exchanges often implement KYC and AML regulations which can compromise anonymity. Peer-to-peer platforms connect users for trading without requiring identity verification but may charge fees. In-person sales are direct but carry the risk of dealing with strangers.
Bitcoin ATMs provide a quick and easy way to convert Bitcoin to cash, although they typically have transaction limits and high fees. Private crypto wallets like Incognito Wallet offer anonymity by converting Bitcoin into a private version for transactions.
Gift cards are another method where Bitcoin is used to purchase goods or services directly, avoiding the need to convert to cash. While Bitcoin in itself cannot be traced back to an individual, transactions can be linked to your identity through other means unless one of these anonymous methods is used.
Staying anonymous in the digital world can be quite tricky because your actions often leave digital footprints. For instance, Bitcoin, the world’s first cryptocurrency, has a reputation for being an anonymous digital currency. However, this isn’t quite true. In fact, Bitcoin is a non-anonymous or pseudonymous cryptocurrency.
Therefore, every Bitcoin transaction leaves digital footprints.
So exactly, how to cash out crypto anonymously? Generally, you have five options: using peer-to-peer exchanges, in-person BTC exchanges, Bitcoin ATMs, private crypto wallets, and gift cards.
In this article, we’ll explain to you why the Bitcoin trade isn’t really anonymous and how to convert Bitcoins to cash anonymously despite that. Let’s get started!
Are Bitcoin Transactions Anonymous?
As we said previously, Bitcoin is pseudonymous. What this means is that anyone can create an encrypted Bitcoin address on its public blockchain, and then use this address to receive and send Bitcoin. However, when your transaction appears on the blockchain, you actually leave a digital footprint, and the problem is that this digital print never “fades.”
In fact, the blockchain works as a public record of all Bitcoin transactions on the network. This means that every Bitcoin transaction you make is stored immutably on the blockchain.
Your transaction history is open for everyone to see, including the addresses of the other people that were involved and the balance of your address.
To summarize, there is full-on public access to all of the Bitcoin transactions that were made until this day, even if the sender is pseudonymous (i.e. you don’t disclose your personal identity, only your wallet address). This is a double-edged sword as it makes Bitcoin a transparent cryptocurrency, but on the other hand, it jeopardizes your privacy.
How to Sell Bitcoin Anonymously
The main reason why it’s getting harder to sell Bitcoin for cash anonymously is that more and more crypto exchanges, such as Coinbase or Kraken, implement Know Your Customer (KYC) and Anti Money Laundering (AML) protocols.
Anti-Money Laundering (AML) is a combined set of processes, rules, and regulations that combat money laundering, terrorism funding, and other financial crimes like identity fraud.
Consequently, Know Your Customer (KYC) is a type of AML regulatory method, i.e. a protocol that helps the crypto exchanges to verify the identity of their customers. This protocol allows the exchanges to ensure that their customers are who they claim to be and to avoid any scams or malicious activity through their services.
Although both AML and KYC protect the users and their digital assets, these protocols also infringe on the ability of the user to remain anonymous when they want to use and buy Bitcoin and other altcoins.
If you choose to use a cryptocurrency exchange that implements KYC checks before accepting you as a customer, you should know that the cryptocurrency exchange would have your personal information thereafter. This makes it easy to tie the public Bitcoin address to your IP address. So, if you want to convert Bitcoin to cash anonymously, we recommend you avoid these types of Bitcoin exchanges.
How to Cash Out Bitcoin Anonymously
As we’ve already established, Bitcoin transactions aren’t anonymous as of now, but you can find a number of ways to trade Bitcoin for cash and keep your privacy and anonymity without compromising your account’s and funds’ security.
Peer-to-Peer Exchanges
A peer-to-peer (P2P) platform is an exchange that works like an online marketplace that connects sellers and buyers from all around the world. It plays the role of an intermediary between you and the buyer, but it offers a higher degree of anonymity because it connects you with other Bitcoin users who don’t ask for verification of your identity.
By using P2P trading platforms, you can accept various payment methods, such as paying in cash (using PayPal or bank account), wire transfer, or paying with other cryptocurrencies. However, you can’t use these exchanges for free. P2P trading platforms still operate as a third party, so they charge you a small fee for their services. If you don’t make frequent purchases, you wouldn’t mind paying these fees, but if your purchases are more frequent, the costs may add up.
There are a handful of these trading platforms online, one of those is Paxful. These trading platforms have a ranking system, which means that after each trade, you can share your experience and rate the buyer/seller. This can help you choose a more trustworthy buyer.
If you want to trade on LocalBitcoins, you simply put up an advertisem*nt on the platform or respond to a prospective advertisem*nt that was put up by a buyer and work out a deal. There is a catch, though. Unfortunately, LocalBitcoins recently introduced a mandatory verification process. A possible solution is to use a Tor Browser coupled with a logless VPN or use a secondary email ID that can hide your real ID.
The advantage of LocalBitcoins is that it has a secure escrow service, which means that LocalBitcoins holds your BTC until the buyer completes the payment and only releases the BTC after the transfer of money is completed.
The escrow service protects the seller and the buyer and shields their identities at the same time.
In-Person BTC Sales
Another option you can cash out crypto anonymously is by finding a buyer which lives close to you and selling the Bitcoin in person. You’ll be amazed by the number of people who will want to make a deal this way as it allows them to avoid any extra fees and secure their privacy.
The easiest way to do this is by joining a local group such as Telegram or Facebook and seeking buyers there. After you find a buyer, you two can arrange the price, payment method, and the place where you can meet.
However, there is a risk in making deals with strangers as you can’t be sure of their intentions and don’t have methods to secure yourself. To minimize your risk of running into a scam, you can meet with this person at a public place, put on a hat or glasses to hide your face, ask a friend to keep you company, etc.
Bitcoin ATM (BATM)
Using a Bitcoin ATM to anonymously cash out your Bitcoin is probably the quickest, safest, and easiest way to do so. Bitcoin ATMs are similar to fiat ATMs (ATMs for fiat currencies), as they are devices that accept Bitcoin in exchange for cash. If you want to cash out your Bitcoin at a Bitcoin ATM, you simply go to the nearest Bitcoin ATM, send the amount of Bitcoin you want to sell, and receive the cash.
Let’s take a look at how to use a Bitcoin ATM in five steps:
- Select Withdraw Cash;
- Choose Bitcoin to sell;
- Write the sum that you want to withdraw;
- Send the identical amount of BTC to the address that was provided by the BATM;
- And finally, take your fiat currency.
There are a few things that you have to take into consideration before you decide to use a Bitcoin ATM. The first thing is the amount of Bitcoin, because most Bitcoin ATMs have transaction limits for sellers.
Using the BATM, you’ll be able to sell only a small amount of Bitcoin in exchange for cash (approximately 100 or 200 USD per day). This is fine if you are looking for some pocket money. However, if you want to cash out a large amount of Bitcoin, you’ll need to spread your cashing out at different BATMs or over the span of a few days. But we have to admit that this is not very practical.
On top of that, almost every BATM will charge you an extra fee as a seller, so you won’t get the same price as you’d get on a crypto exchange. Still, this is a small price to pay to keep your privacy. Another drawback is that the fees on crypto ATM is hefty, and can go as high as 8-10% of the amount withdrawn.
There is an app for Android and iOS devices that can help you “find a Bitcoin ATM near me,” such as the Bitcoin ATM Map app from CoinATMRadar. This app even lists all the cryptocurrencies each ATM supports as well as its fees, limits, and addresses.
Private Crypto Wallets
Private crypto wallets were created to provide privacy and anonymity for the users of Bitcoin. Each private crypto wallet uses different methods in order to secure your Bitcoin transaction. One of the best anonymous crypto wallet app on the market is Incognito Wallet.
This wallet is developed using a sidechain for all blockchains. By using trustless custodians and smart contracts, this crypto wallet converts your digital currencies into a private version of them and allows you to trade crypto anonymously.
The rate of a regular Bitcoin (BTC) and the privacy Bitcoin (pBTC) is 1:1. After switching your BTC to pBTC, you can cash them out anonymously, meaning that no one will find any clues leading to your identity or be able to discover your balance.
If you want to sell BTC anonymously, you only need to send pBTC to the buyer’s Incognito Wallet address and receive a payment for that. There is a second option, where you can exchange pBTC in the app by the use of pDEX, the only permissionless, privacy-focused, and free decentralized exchange. If you don’t want to use pBTC at the time being, you can simply release them from the smart contract and return them to your Bitcoin wallet.
The Incognito Wallet is entirely free and it’s available for Android and iOS devices. This app doesn’t only support Bitcoin – it also supports various other cryptocurrencies such as Ethereum, Binance Coin, Litecoin, and Monero.
Gift Cards
This method allows you to spend Bitcoin directly, without converting it to cash. There are thousands of services and retailers worldwide that accept payment in Bitcoin, even big players like Amazon. You can purchase some items that are in big demand and then resell them on eBay.
With the gift card method, you can simply use a BTC merchant directory to find a retailer that sells the goods you want to buy in exchange for Bitcoin. If you cannot find a merchant, you can simply buy an Amazon, Starbucks, or iTunes gift card from sites like Paxful that support this option and then use the card to buy your item.
Frequently Asked Questions
Can Bitcoin be traced back to me?
Bitcoin cannot be traced back to you. However, if someone buys something with bitcoins from another person, it will show up on their transaction history. If you are worried about this, you should use any of the 5 options we just mentioned.
Do Bitcoin ATMs require ID?
Yes, they do require an ID for verification purposes, however, it can be done anonymously.
A Few Words Before You Go…
As you can see, using Bitcoin anonymously isn’t that simple, and it doesn’t come for free. But, like with everything else – if you want anonymity, you’ll have to trade it off for convenience.
Moreover, learning about how to convert bitcoins to cash anonymously will help you protect the privacy of your funds and your personal details.
With the ever-increasing amounts of personal data being harvested by big companies, we can agree that in the digital world, protecting your personal information remains the number one priority.
About The Author
Written by
Writer
Abiodun Oladokun, a seasoned Lawyer and Blockchain Research Analyst, offers a unique perspective on the legal aspects of blockchain technology, cryptocurrency, DeFi, and NFTs.
His deep understanding of these fields, combined with practical experience in the legal domain, provides readers with nuanced insights into the evolving digital asset landscape.
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