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Many people think bitcoin transactions may be anonymous or untraceable, but they don’t understand how the process works, said Ben Weiss, CEO of ATM crypto operator CoinFlip, during a digital assets webinar this past. week.
“It’s not anonymous. It’s pseudo-anonymous. You can’t buy a large amount of bitcoin without a KYC or ID card or driver’s license,” he said, referring to “know your customer ”and similar identification checks.
“Bitcoin is actually more transparent in many ways than typical things in the financial system,” he added.
The perception is that because digital currency is often associated with illegal activity, then it must protect the identity of the user. But that’s not true, Weiss said.
Bitcoin addresses may not have registered names, but in practice they can be linked to real-world identities, he noted. This is because each investor is required to record their personal information before purchasing the cryptocurrency.
A recent incident, the recovery of much of the $ 4.4 million ransom paid by Colonial Pipeline to a Russian-linked hacker group, has raised the question of whether bitcoin is free of control and government manipulation.
What is not well known is that relevant law enforcement agencies can track bitcoin purchases, if they are willing to put in sufficient effort, Weiss said.
That’s why one of the dumbest things one can do would be to attempt to launder dirty money using bitcoin, Weiss said. The US government can track bitcoin transactions with the help of blockchain analysts and by serving district court authorized seizure warrants, he said.
“You are really playing with fire if you try to do it today,” he said, adding that bitcoin transactions are more traceable than cash.
Taxation is an area in which some people are still learning that they are open when it comes to cryptocurrency transactions. Many U.S. taxpayers may not realize that if they do not report crypto assets when filing their annual returns, they can be discovered and have consequences. Transactions on the blockchain are not hidden and records are public.
To track down unreported crypto-related income, the US Internal Revenue Service has launched “Operation Hidden Treasure”. A dedicated team of IRS criminal investigation professionals research and target taxpayers who do not list cryptocurrency transactions on their tax returns.
Read more: Morningstar Features 10 Most Compelling Bets Made By U.S. Stock Pickers Right Now – And Shares 4 Big Tech Names That Look Cheap
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