Kraken crypto exchange is next to close doors to Russian users

October 20, 2022 Coin Telegraph

Former Kraken CEO Jesse Powell previously warned crypto investors about the risks of holding crypto on a centralized exchange.

Kraken is the latest cryptocurrency exchange to restrict accounts of Russian users on its platform in compliance with sanctions from the European Union.

On Oct. 19, Kraken sent out email statements to its Russian clients to announce that the exchange is halting services to its Russian customers.

“Due to the new European legislation, we have to take measures to restrict your Kraken account,” the company said. According to an email statement seen by Cointelegraph, Russian users would be able to withdraw their funds by request.

“We will update our support center if there are any changes,” Kraken noted, adding: “We apologize for the inconvenience caused.”

Kraken didn’t specify whether there’s a time limit to withdraw the funds from the exchange for Russian citizens. A spokesperson for Kraken told Cointelegraph that the firm complies with the “legal and regulatory requirements in all jurisdictions” of its operations. “Since the EU’s announcement, we have been working to make the changes needed to comply with the latest package of sanctions against Russia,” the representative noted.

The latest restrictions on Kraken are not the first time the exchange has dealt with regulators forcing centralized exchanges to shut down certain accounts.

In February 2022, former Kraken CEO Jesse Powell condemned the Canadian authorities for freezing crypto wallets involved in funding local COVID-19 protests. He explicitly warned the public that Kraken could be forced to freeze some wallets by regulators, advising crypto investors to move crypto out of exchanges.

“If you’re worried about it, don’t keep your funds with any centralized or regulated custodian. We cannot protect you,” Powell said at the time.

By restricting Russian users on its platform, Kraken joins the increasing number of global crypto exchanges and wallets that stopped servicing Russians in compliance with the latest EU sanctions against Russia.

As previously reported, several crypto firms, including Blockchain.com, Crypto.com and LocalBitcoins, have ceased operations for Russians.

Bitfinex, one of few exchanges that previously opposed banning non-sanctioned Russians from using its platform, appears to have been forced to comply with sanctions as well.

“We comply with all the regulations under which we are bound and are monitoring this situation closely,” Bitfinex’s senior PR manager, Joe Morgan, told Cointelegraph on Oct. 20. Bitfinex chief technology officer Paolo Ardoino previously recommended that investors use noncustodial hardware wallets to better protect their funds.

The new crypto sanctions are part of the EU’s eighth package of sanctions that were imposed on Oct. 6. The sanctions put a blanket ban on any crypto transactions and payments between Europe-regulated companies and Russian users. The EU initially adopted its first crypto sanctions against Russia in April, limiting Russian users or residents from trading if their holdings exceeded 10,000 euros ($10,000) at the time.

Zero-knowledge KYC could solve the privacy vs compliance conundrum: VC partner

October 11, 2022 Coin Telegraph

AML

Zero-knowledge Know Your Customer (KYC) would allow businesses to adhere to strict AML/CTF rules while ensuring customer privacy.

As the Web3 industry matures, Zero-knowledge Know Your Customer (zkKYC) is becoming more widely discussed as a means to comply with strict financial regulations while maintaining user privacy, according to the partner of a venture capital firm.

In an interview with Cointelegraph, John Henderson, partner at Australian-based venture capital firm Airtree Ventures said the successful implementation of a zkKYC system would be “great news for both regulators and consumers” and could increase cryptocurrency adoption:

“Institutions and retail users are more likely to participate in DeFi if they can be confident that they are complying with their AML/CTF obligations.”

Henderson explained a zkKYC system would allow users to prove certain things about themselves to service providers without having to divulge personally identifying data such as their names or identification documents.

In theory, the sharing of that information would be enough to satisfy Anti-Money Laundering (AML) and Counter-terrorist Financing (CTF) regulatory requirements placed on the crypto industry.

“[The system] involves a trusted third party validating my personal information and then issuing a cryptographic proof to my personal wallet, which I could then choose to share, or share attributes of, with financial service providers.”

The benefit of such an approach is that no personally identifying information could be leaked in the event of a security breach of a service provider such as a crypto exchange, Henderson claims, with the identification documents only recoverable when required by authorities.

Many in the crypto community have been critical of the way their personally identifiable information has been handled by some crypto platforms.

Recently, the community shared their concerns after court documents published on Oct. 5 publicly disclosed the personal information and transaction history of thousands of Celsius customers, with some warning they could be used to “dox” users.

Calls to improve privacy for individuals were also loudly sounded at the September Converge22 conference in San Francisco.

Jeremy Allaire, CEO of stablecoin issuer Circle, expressed the need for “advancements” in technologies that prove identities and credentials while simultaneously ensuring individuals’ privacy.

Henderson however admitted that “storage of sensitive information is still an unsolved problem,” sharing two ideas on how the management of such information could take place.

“One idea would be to have trusted entities hold identity documents off-chain and port proof of identity on-chain, without the original documents. Another idea is to sign a wallet transaction with a regulatory institution, who would then register that account with an identity.”

Despite the challenge, Henderson was adamant a zkKYC protocol will form the “building blocks of on-chain reputation scores” allowing “more useful” financial products and services.

“My priority is onboarding the next hundred million users to crypto,” he said, “If we want to achieve internet scale, we need a solution for AML/CTF compliance.”

Airtree Ventures led a $4.7 million seed round into ReputationDAO on Apr. 13, a decentralized autonomous organization which aims to provide a financial reputation and identity service for decentralized finance (DeFi).

Mt Gox Saga Nears End of the Road — Creditors Required to Register With Exchanges, Bitstamp Selected by Trustee

October 8, 2022 Bitcoin.com

Are decentralized digital identities the future or just a niche use case?

September 28, 2022 Coin Telegraph

Coin Telegraph

Are decentralized digital identities the future or are they a niche use case for blockchain technology doomed to solely be used by crypto natives?

As users take advantage of online services and explore the internet, they eventually create a digital identity. This type of identity is then tied to central entities like Google and Facebook, which make it easier to share data with new services through simple sign-in buttons.

While these digital identity management systems are convenient, they are relying on centralized intermediaries that hold and control user data. Personal identifiers and attestations are in their hands, and they can decide — or be forced — to share this information with other parties.

Blockchains offer a solution: decentralized digital identities. These allow individuals to manage information related to their identities, create identifiers, control who they’re shared with and hold attestations without relying on a central authority, like a government agency.

A decentralized identifier for a decentralized identity can take the form of an Ethereum account. Users can create as many accounts as they want on the Ethereum network without anyone’s permission and without anything being stored in a central registry. Credentials on the Ethereum blockchain are easily verifiable and tamper-proof, making them extremely trustworthy.

Other use cases are out there. In August 2022, Binance catapulted the decentralized identity debate to social media platforms after moving to launch its first soulbound token, BAB, serving as users’ Know Your Customer (KYC) credentials.

Whether decentralized identities are the future of online activity remains to be seen.

Managing decentralized identities

Speaking to Cointelegraph, Witek Radomski, chief technology officer and co-founder of nonfungible token ecosystem Enjin, revealed he sees a future in which the metaverse will see a “blend of social media networks, email, crypto wallet addresses, and decentralized applications,” suggesting there will be a mix of digital and decentralized identities.

Per Radomski, the key to identity management will be the “preservation and protection of sensitive information,” as different networks have “distinct technical methods to track digital ownership of data.”

Recent: Vietnam’s crypto adoption: Factors driving growth in Southeast Asia

Radomski added that individuals entrusting protocols with their personal data should consider that big business decisions will be made based on an enterprise’s needs and philosophy, adding:

“The ownership of digital assets mimics asset possession in the physical world. Assuming that owners are operating within the bounds of the law, blockchain-enabled digital ownership cannot be interfered with by the government.”

He added that decentralized identities will play a role in preserving individuality, which will “depend on proving that you’re not a bot” and will have online activity as one of the “most compelling testaments to demonstrate this.”

The potential of decentralized identities

Managing digital identities is a challenge, as one mistake can easily lead to a breach of personal information. Centralized entities have been known targets, with a recent case seeing the personal data of Portugal’s president stolen in a cyberattack. The use of decentralized identities eliminates this risk, as only the users are responsible for their data.

Speaking to Cointelegraph, Dmitry Suhamera, co-founder of IDNTTY — a decentralized public infrastructure layer enabling a decentralized identity approach — said that centralized digital identity providers “compete with each other, which actually hinders widespread adoption,” as in the end, “the user needs an ID for government services, an ID to interact with a bank, an ID to work with a cooperation.”

Real-world use cases have seen digital identity programs’ adoption slow down shortly after launching, with Suhamera using Gov.UK Verify in the United Kingdom, which saw less than 10% of the population signing up, as an example. Nigeria’s adoption of eID, Suhamera added, stalled in 2017 amid issues with public-private partnerships used to launch the program.

Per Suhamera, centralized digital identity solutions tend to “be quite expensive and offer an inconvenient monetization model” as users have to buy and pay for national IDs before using them digitally.

Cross-border uses of digital IDs are also complex, Suhamera added, as corporations and regulators have to line up bureaucracy, which can be a slow process. Suhamera added:

“Decentralized ID allows for the creation of a distributed ‘cheap,’ easy to integrate repository of personal ID (for which only the user is responsible) with which any service can integrate, from KYC providers and digital signatures to any online or identity services.”

While decentralized identity can make identifiable information more portable while keeping it safe, centralized entities managing digital IDs “tend to provide a set of services at once,” boosting user experience.

Decentralized identities have a number of use cases, including the potential for universal logins across a number of applications without the use of passwords. Service providers can issue attestation tokens granting users access to their platforms after a single sign-up, for example.

Binance’s soulbound token shows that user authentication and KYC is also a possibility on the blockchain through the use of non-transferable tokens. Because these tokens aren’t transferable, voting through the blockchain without manipulation is a real possibility.

Security concerns

While decentralized identity management does appear to have significant advantages, the technology does not come without its drawbacks. For one, self-sovereignty means it may not be the most user-friendly approach.

Speaking to Cointelegraph, Charlotte Wells, communications manager at crypto platform Wirex, said digital identities have been around for some time, although blockchain-based digital identities will “be a game-changer in the future web 3 due to their decentralized nature.”

Wells pointed out that the amount of user data stored online is steadily growing, creating “huge security concerns over how this data will be stored and who will have access to it.” She pointed to data breaches at Facebook, which exposed the data of millions of its users. Per her words, decentralized digital identities will be “vital in allowing us to have ownership and control over our credentials.” Wells commented:

“Self-sovereign identities use blockchain technology and zero-knowledge proofs to store digital identities on non-custodial wallets – the biggest advantage being that users have complete control over this and decide what companies, apps and individuals have access to this data.”

She added that there are drawbacks: One important role of centralized entities is “enforcing standards of regulation, giving users and businesses the reassurance they need to work on the web.” Without these central authorities, Wells concluded, there may not be the same level of protection for decentralized identities.

Zero-knowledge proofs are a way of proving the validity of a set of data without revealing the data itself. This technology, paired with decentralized identities, could mean users can prove who they are while under pseudonyms, ensuring their security isn’t affected.

Recent: Institutional crypto custody: How banks are housing digital assets

To Fabrice Cheng, co-founder and CEO of Quadrata, blockchain-based digital identities are going to change the concept of digital IDs and create new use cases for the Web3 space. Speaking to Cointelegraph, Cheng noted that it is still important to be mindful of what’s shared, noting that people should “be aware o their behaviors on the blockchain.”

With the Ethereum blockchain acting as a global directory for decentralized identities of users who choose what they share and are in control of their data, it’s hard to imagine a scenario in which crypto-native users wouldn’t prefer this alternative. Non-crypto native users, however, may prefer to keep using centralized providers and share their data, at least until the user experience becomes as simple.

Enhanced KYC checks can be a win-win for crypto exchanges and consumers — here’s why

September 20, 2022 Coin Telegraph

Coin Telegraph

Adopting more stringent Know Your Customer (KYC) checks can give crypto exchanges a competitive edge over those that meet minimal standards.

Crypto is a fast-moving sector where new trends — decentralized finance and nonfungible tokens among them — accelerate in the blink of an eye. And as demand for digital assets grows, the need for regulation grows too.

Anticipating those regulations and having the systems in place for future compliance can position crypto exchanges as industry leaders. Those that do the bare minimum risk falling behind as customers turn to more trusted options.

Exchanges, though, can adopt a substantial role in setting the regulatory tone by taking the initiative to go beyond compliance and better protect their users. That can help a business build a reputation for security and deliver a compelling point of difference from the competition. More than that, it can show regulators how policies can work in practice.

The business case

Prioritizing adaptable, futureproof solutions can make it easier for exchanges to expand quickly into new markets. It can help them control operating costs, reduce risks and enhance the customer experience.

Beyond helping crypto exchanges achieve compliance, identity verification technology that draws from hundreds of global data sources can accelerate onboarding, offering the right balance between security and friction. Onboarding customers quickly and safely can give exchanges the competitive edge they need in a market that gets more crowded with every crypto bull run.

Trulioo, an identity verification service that enables exchanges worldwide to quickly and securely onboard customers, is helping crypto platforms achieve their full potential in a constantly shifting market.

Fast, accurate digital identity verification can help exchanges build trust and safety while quickly expanding their customer base, the company says. Enhanced Know Your Customer (KYC) checks can help exchanges scale more quickly. By knowing exactly who their customers are and establishing the provenance of funds, exchanges can position themselves to adapt to future regulation changes.

"Regulation is a hot topic in the crypto space and one of the reasons we’re seeing so many crypto exchanges looking to partner with us," Trulioo CEO Steve Munford told Cointelegraph. "Working with a platform such as Trulioo can help exchanges stay ahead of the curve and remain compliant while preparing for tighter regulations that might be on the horizon."

How does enhanced KYC work?

Conventional KYC measures can limit the number of people an exchange can verify, especially if it requires a passport, driver's license or bank account. By contrast, Trulioo offers validation in more than 195 countries and against more than 400 reliable data sources — including mobile networks, credit bureaus, banks, governments and business registers. It's also possible to authenticate new users with the help of a selfie.

Trulioo recently acquired the no-code orchestration solution HelloFlow to accelerate digital onboarding and unveiled major product updates that include document-free proof of address verification. In another significant development, company executives said they achieved unicorn status after a $394 million Series D funding round.

Trulioo wants to help exchanges navigate the choppy waters of regulation now and in the future with fast, secure and accurate KYC and Anti-Money Laundering crypto checks.

That approach can help crypto businesses bolster their infrastructure to ensure they're ready when the next bull run brings a new wave of customers to exchanges.

Learn more about Trulioo

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

Can the government track Bitcoin?

September 4, 2022 Coin Telegraph

Anonymity

The law enforcers like the IRS and FBI track Bitcoin with blockchain data and collaborate with private companies in an attempt to trace criminals and taxes.

What happens with unreported cryptocurrency?

Not reporting Bitcoin despite the obligation to do so may have severe consequences for individuals’ lives and finances. The fine for making an incorrect declaration can be substantial and can even be considered a felony in certain circumstances.

Individuals may wonder whether centralized cryptocurrency exchanges actively report to the IRS. Centralized exchanges do issue tax forms to the IRS. Likewise, the IRS has issued so-called John Doe Summons to exchanges, including Coinbase, to request people’s information and catch those who try to cheat on their tax obligations.

But, such summonses are not the only law enforcement tool that the IRS uses on its quest to enforce Bitcoin taxes. Form 1040, for instance, specifically asks U.S. taxpayers whether they transacted with cryptocurrencies such as Bitcoin.

Some people may choose to avoid reporting their Bitcoin transactions, income and capital gains. When U.S. taxpayers do not report taxable cryptocurrency activity and face an IRS audit or investigative procedure, however, it may be considered tax evasion or fraud. Individuals may ultimately be obliged to pay penalties or even face criminal charges. Indeed, tax evasion is considered a felony. The penalty may extend to half a decade of prison and a fine of up to tens of thousands of dollars.

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How is Bitcoin taxed?

How to report Bitcoin on taxes and rules for Bitcoin taxation depend on the specific situation and someone’s country of fiscal residence. For instance, United States taxpayers must report cryptocurrency sales and other taxable events, and each of these transactions has different legal implications.

The fiat currency gained from cryptocurrency activities, also considered as realized gains, is taxed at different rates and can be considered capital or as income. Keep an eye out for the latest updates in terms of tax requirements and obligations.

Events may be taxable as capital gains when one sells Bitcoin for cash, when one converts BTC to another cryptocurrency or when one spends Bitcoin to purchase goods or services. According to the latest requirements, cryptocurrency capital gains in the US should be recorded by submitting Form 8949.

Bitcoin may also be taxed if it is considered income when someone receives a salary in BTC or receives Bitcoin for providing goods or services. Keep an eye on specific blockchain-related events because other incentives or rewards may also be taxable (for instance, staking rewards or obtaining new assets due to a hard fork or airdrop).

On the contrary, certain situations are not taxable, for instance, when one is simply holding Bitcoin passively or when BTC donations or gifts are transferred. Depending on the situation, there may still exist legal obligations or requirements to report such events to the IRS or an alternative qualified agency.

Do the authorities know when and where Bitcoin is bought?

Apart from data analysis done alone or in cooperation with private companies, authorities may request information from centralized exchanges. Due to regulation, centralized exchanges may also be obligated to share such information. However, not all cryptocurrency exchanges collaborate with authorities.

A centralized exchange is a cryptocurrency exchange that is run by a single entity, such as Coinbase. To become a licensed operator in a certain country or territory, centralized exchanges need to comply with regulations.

For instance, to decrease cryptocurrency anonymity and the illicit use of cryptocurrencies, most centralized exchanges have incorporated Know Your Customer (KYC) checks. KYC is meant to verify customers’ identities alongside helping authorities to analyze activity on the blockchain. In practice, individuals need to submit a range of documents and their data before they are allowed to trade, invest and transact.

After KYC has been conducted, exchanges may be requested or may be obligated to share that data with law enforcement agencies. Since the exchange has individuals’ personal data and transaction data, so may the government. By using information obtained from centralized exchanges, the IRS can identify unknown Bitcoin wallets using KYC checks and corresponding personal information.

Nonetheless, not all exchanges use KYC. For example, it is difficult to make decentralized exchanges (DEXs) comply with regulations because they lack a headquarter and are not run by a centralized company or a small group of individuals.

How does the government track Bitcoin?

Bitcoin’s blockchain technology is, in principle, anonymous but also traceable due to the transparency element. Bitcoin can thus be called “pseudo-anonymous.” Government agencies are hiring cryptocurrency experts to help them with BTCtracking and identity verification.

In practice, how can authorities like the police, the IRS or the FBI track Bitcoin? Since enforcers may not directly identify the parties involved in a Bitcoin transaction, they can try to observe the blockchain and analyze BTC movements and corresponding patterns. In this manner, they seek to profile, de-anonymize and identify those that are transacting.

So, why would governments do that and with whom do they collaborate? Importantly, most Bitcoin transactions are not associated with criminal activity. Yet, enforcers like the police or the FBI still aim to catch people or organizations that use cryptocurrencies such as Bitcoin for illicit purposes, such as money laundering or fraud. Likewise, an agency like the IRS wants to track BTC owners, traders and investors in order to raise taxes from capital gains or income.

Companies like Chainalysis provide services for blockchain monitoring and analytics. These companies analyze if certain BTC moving between wallets are, in some way, associated with criminal activity and they may collaborate with the FBI in helping investigators track certain cryptocurrency funds internationally.

Does the government know who owns Bitcoin?

At the basis of cryptocurrencies like Bitcoin (BTC) stands blockchain technology. A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain.

Bitcoin transactions are publicly accessible because of the transparent nature of blockchain technology. Besides, the history of Bitcoin transactions is permanently stored on the Bitcoin blockchain, implying that it is not hard to observe BTC transactions. The government, in the form of law enforcement authorities, may thus watch what happens on the Bitcoin blockchain.

So, can authorities like the police, the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS) trace Bitcoin ownership? And, do authorities know who owns which Bitcoin? The traceability of BTC transactions depends on whether someone’s transaction activity on the Bitcoin blockchain can be linked to their identity.

Anyone can observe all cryptocurrency transactions of any Bitcoin wallet address. To find out where the Bitcoin is coming from and where they are being sent, authorities can analyze the BTC addresses that are used for transacting. In this manner, authorities get insights into what is happening and when.

Many Bitcoin users reveal their identity at some point (for instance, on centralized exchanges or through interactions with known wallets). Thus, BTC transactions do not always remain 100% anonymous and the government can trace Bitcoin ownership whenever (a series of) Bitcoin transactions can be linked to one’s identity. With that new knowledge, governments can enforce duties such as Bitcoin or cryptocurrency tax liabilities or fight criminal conduct like money laundering.

Are Bitcoin transactions anonymous and traceable?

September 3, 2022 Coin Telegraph

Anonymity

Bitcoin transactions are easily traceable through blockchain explorers but do not directly reveal the identities behind Bitcoin wallet addresses.

Should I share my Bitcoin address publicly?

It is not a problem to share public keys, but make sure the private key cannot be found by third parties. Transactions can be sent to the public key, which is completely secure.

It is safe to share your Bitcoin address publicly. This way, it is possible to safely complete donations or payments. No cryptocurrencies can be stolen through a public address. The only way by which stealing crypto is possible is if someone has managed to get hold of the private keys.

Bitcoin wallets always make a difference between public keys and private keys. A public key can be compared to your email address. Anyone can send emails to it, but only the owner of the email address can read them. With a cryptocurrency address, this is no different since others can use this address to send crypto, and the owner of the address is the only one who can use the digital asset.

The private key is the password to enter the wallet. It is important that this unique code is kept in an offline place where no one can access it. Sharing personal data, such as the private keys and the wallet password, with others can cause the wallet in question to be emptied. Therefore, only share the public key if necessary and keep the other codes in a safe place.

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Can you have an anonymous Bitcoin wallet?

Anonymous Bitcoin wallets exist, but be careful while handling them. You can reveal your identity, which defeats the purpose of the wallet.

It is certainly possible to have an anonymous Bitcoin wallet. However, a wallet alone is not enough to ensure this anonymity. When someone makes several transactions, an identity can be linked to a wallet where this information is known. Due to the tightened KYC rules for exchanges, it seems to be increasingly challenging to conduct transactions in a completely anonymous way.

Nevertheless, there are Bitcoin wallets that allow you to operate completely anonymously. The Electrum wallet is an example of this, which can also be integrated with a hardware wallet. Before making the choice to use an anonymous wallet, it is useful to first consider how Bitcoin will get on this wallet. When BTC is sent from an exchange with KYC, the anonymity is already gone.

What are the challenges in tracking a Bitcoin address?

It can be difficult to track Bitcoin transactions when people use various wallets and Bitcoin mixers. These factors disrupt the search process and take up a lot of time.

Despite the fact that it is challenging for users of a Bitcoin wallet to conduct transactions completely anonymously, there are several ways to get close to anonymity. For example, it is possible to use a cryptocurrency mixer.

In this case, it is a Bitcoin mixer, which ensures that it is more difficult to make Bitcoin traceable. This is done by mixing BTC transactions from different people together in a pool, then sending the transactions to the intended addresses.

In addition, wallets can also be very difficult to monitor. If someone does not want their activities on the Bitcoin network to be traceable, it is possible to create a sort of smoke screen. By creating many crypto wallets and carrying out various transactions between these wallets, it can be more difficult for anyone to trace transactions and wallets.

Both challenges are difficult on their own, but combining them can make tracking Bitcoin addresses a lot more difficult. Tracking transactions and wallets will take an enormous amount of time and energy.

Can you search for a Bitcoin wallet address?

It is possible to search for a Bitcoin wallet address through a Bitcoin explorer. However, finding a crypto address does not mean that you also know the identity behind it.

When you don’t have any identifying information that goes with the Bitcoin wallet, it’s hard to search. Through a blockchain explorer, it is easy to find transactions and addresses, but it can take a lot of time to find out the identity behind a wallet address.

Because someone’s wallet address does not have to be anonymous but can be hard to find, a Bitcoin wallet address is called a pseudonym, an alias, which is different from someone’s actual name. The data is not linked to an identity, but it is still possible to trace someone’s identity or a pseudonym.

How are Bitcoin transactions traced?

With increasing legislation and surveillance, governments can trace fraudulent BTC transactions more easily by finding the identity behind a Bitcoin wallet address.

In recent years, millions in cryptocurrencies have been seized by various governments worldwide. Criminals saw the opportunities that blockchain technology has to offer and tried to buy cryptocurrencies such as Bitcoin as anonymously as possible.

Ultimately, this did not work out well for many fraudsters and it can be stated that Bitcoin transactions are not fully anonymous. These events have helped to tighten legislation in this area and intensify the search for fraudulent transactions.

When trading from Bitcoin wallets whose identity is not known, transactions can be traced quickly, but it can take time to find out the identity. When someone wants to exchange their cryptocurrencies for United States dollars, it already becomes a lot easier to trace the identity of the wallet owner and trace back the transactions.

What makes Bitcoin traceable?

Bitcoin transactions are traceable because Bitcoin’s blockchain is completely transparent and every transaction is publicly stored on a distributed ledger.

Since 2013, various studies have been looking into tracking Bitcoin transactions and their associated identities. Although it is possible to create a certain form of anonymity with cryptocurrencies, it is difficult to send transactions completely anonymously via the Bitcoin blockchain. Blockchains remain fully open and accessible to everyone.

Thanks to the transparency of the blockchain, it is possible to easily track money flows. If the identity behind a wallet address is known, then the transactions made can be traced back and traced in the future. All these transactions can be viewed in detail. In this way, it is possible to see which amount was sent, but also on which date and to which wallet.

Can you trace a Bitcoin transaction?

Through blockchain explorers, one can easily track Bitcoin transactions, but it is becoming increasingly difficult to conduct Bitcoin transactions anonymously.

It is certainly possible to trace a Bitcoin (BTC) transaction. Bitcoin explorers allow you to map activity on the Bitcoin blockchain. Thanks to this transparency, transactions are traceable and you can think of the blockchain as a kind of open database full of Bitcoin transactions.

Other cryptocurrencies like Ether (ETH) and Solana (SOL) also have their own blockchain explorers called Etherscan and SolScan. In all these explorers, you can find information about the transactions on the blockchain, such as how much crypto was sent and which addresses were involved in the transaction. Despite the transparency of the blockchain, many people think that you can still make Bitcoin transactions anonymously.

However, more and more countries are implementing Know Your Customer (KYC) rules, which require you to reveal your identity on centralized trading platforms. By disclosing your identity, it becomes a lot easier for the government to discover what transactions you have carried out and to see what is in your Bitcoin wallet.

To be able to trade on a central exchange, personal data will have to be supplied to the exchange. Bitcoin addresses can therefore be linked to personal data. Since the data of previous Bitcoin transactions is not deleted, it is always possible to view past transactions.

Mt Gox Creditors Updated, Trustee Says Rehabilitation Custodian Is ‘Currently Preparing to Make Repayments’

September 2, 2022 Bitcoin.com

Georgia aims to adopt European crypto standards for Anti-Money Laundering

August 31, 2022 Coin Telegraph

AML

One of the most crypto-friendly countries in the world wants to synchronize its crypto regulations with associated rules in the European Union.

Georgia, one of the world’s most cryptocurrency-friendly countries, is moving to introduce new crypto regulations to pursue its ambitions to become a global crypto hub.

Georgian lawmakers have prepared a new regulatory framework targeting digital business and cryptocurrency trading in the country, Georgian Minister of Economy and Vice Prime Minister Levan Davitashvili announced.

Davitashvili said that a draft bill has been sent to the parliament and the amendments are expected to be passed in the autumn session, local news agency Business Media Georgia reported on Monday.

According to the minister, the draft bill aims to coordinate local cryptocurrency laws with three major European Union directives, including the Payment Services Directive (PSD2), the Capital Requirements Directive (CRD) as well as the Virtual Asset Service Provider (VASP) law.

The VASP law aims to provide legal status to entities involved in digital asset trading. The new framework will also prevent the use of cryptocurrencies for money laundering or terrorist financing, the report notes.

According to Davitashvili, the adoption of VASP rules is crucial for Georgia to ensure sustainable regulation of the cryptocurrency industry. The minister reportedly emphasized that it’s important to synchronize the Georgian financial legislation with associated rules in the EU. The latest framework is only the first step as Georgia aims to become a crypto hub in the future, in line with the government’s official 2022–2025 development strategy.

Georgia has emerged as one of the most crypto-friendly countries in the world. In a study by Forex Suggest, Georgia was ranked the fourth most crypto-friendly jurisdiction after Hong Kong, the United States and Switzerland as of July 2022. Georgia is specifically associated with a high density of crypto ATMs, allowing users to easily buy and sell crypto in exchange for cash. According to data from CoinATMRadar, Georgia hosts 45 crypto ATMs at the time of writing.

Lawmakers in Georgia have been working on cryptocurrency legislation this year, with central bank governor Koba Gvenetadze noting the lack of crypto regulation in the country in April. The first reports on Georgia’s upcoming new crypto rules came as tens of thousands of Russians flee to Georgia due to Western sanctions on Russia and uncertainty about the economy. Crypto apparently became an important tool for many Russians arriving in Georgia to handle their finances amid sanctions on credit and debit cards.

Are non-KYC crypto exchanges as safe as their KYC-compliant peers?

August 20, 2022 Coin Telegraph

AML

While most crypto exchanges have begun implementing KYC mandates, investors still have the choice to opt for crypto exchanges that promote greater anonymity by not imposing KYC.

Many see implementing Know Your Customer (KYC) tools in crypto as a deterrent to the Bitcoin (BTC) Standard, which has predominantly promoted anonymized peer-to-peer transactions. However, regulators stay put on promoting KYC and anti-money laundering (AML) implementations as a means to ensure investors’ safety and protection against financial fraud.

While most crypto exchanges have begun implementing regulatory recommendations to remain at the forefront of crypto’s mainstream adoption, investors still have the choice to opt for crypto exchanges that promote greater anonymity by not imposing KYC processes. But does opting for the latter as an investor mean compromising on safety?

A matter of trust

Anonymity goes both ways in most cases. Owners of crypto exchanges running non-KYC (or non-compliant) operations often choose to remain anonymous to avoid legal scrutiny. As a result, investors must have a high level of trust in the people responsible for running the exchange.

On the other hand, decentralized exchanges such as dYdX use trustless protocols for establishing a community-controlled trading platform. This, in turn, instills trust within investors despite no mandate of KYC on the platform.

Therefore, monitoring the platform's track record and the people running it becomes paramount when trading on non-KYC platforms.

Blockchain remembers forever

While the suits backing traditional finance portray crypto as tools of money laundering, illicit cryptocurrency transactions have consistently declined year-over-year. Despite the ease of using cryptocurrencies without KYC verification, a Chainalysis study confirmed that only 0.15% of all crypto transactions in 2021 were linked to illicit activities.

Moreover, immutable blockchain records allow authorities to retrace owners of the transactions, further deterring bad actors from using crypto — both KYC and non-KYC platforms — to fund their practices.

The permanent nature of blockchain has allowed authorities across the world to hunt down scammers, fraudsters and launderers of crimes they committed years ago.

Not your keys, not your coins

One of the biggest concerns when operating with crypto exchanges is the lack of control over the assets. Cryptocurrencies stored over crypto exchanges mean handing over the private keys to the exchange.

Using unvetted crypto exchanges that market no KYC requirements exposes investors to the risks of permanently losing their funds. While both types of exchanges — compliant and non-compliant to KYC — require investors to hand over their crypto assets to third parties, KYC-compliant exchanges instill greater trust among investors and regulators.

The answer to the question ‘Are non-KYC crypto exchanges safe?’ lies in understanding the abovementioned nuances. KYC or not, crypto investors remain equally vulnerable to the risks related to external factors such as the intent of the owner and shady business practices, in addition to getting no backing from the government.

Additionally, investing with a non-KYC crypto exchange comes with limitations on the trading value, available tokens and other services offered by the provider.

KYC