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Keep Calm And Trade On: Cryptocurrency Anonymity Explained

anonymous crypto

Here at SBL, we’ve seen it all.

And we’re not just talking about betting odds or types of online gambling. We’re talking about types of online gamblers.

When people first follow their interest in sports betting to an actual online sportsbook, most of them understand that these are perfectly legitimate operations that comply with industry best practices, follow typical KYC protocols, and so on.

However, there’s also a prevalent misconception out there that legal online gambling – when using an offshore or international betting site – is somehow anonymous.

And while legal offshore sports betting is more anonymous than legal domestic sports betting (which is frankly the opposite of anonymous in every way), it’s not adequately anonymous in a way that allows you to skirt the laws in your state or country.

For example, some gamblers are under the impression that winnings earned from sportsbooks based outside of the US aren’t subject to taxation. Some players believe online sports betting sites are effectively tax shelters.

Well, let’s get one thing absolutely clear: They aren’t. Not by a long shot.

In fact, if you want to keep any of your winnings, you’d better report them on your annual income taxes. Uncle Sam doesn’t care where you gamble as long as he gets his cut.

And if he doesn’t get his cut, your winnings are guaranteed to go full “bad beat” in a hurry.

Now, once this is understood, there’s a second issue:

Just as players wrongly believe that offshore gambling is tax exempt, so too might they believe that offshore gambling in cryptocurrency is even more tax exempt.

That is, they might believe that crypto is fundamentally untraceable and that their winnings – delivered in crypto – can’t effectively be taxed.

While it’s true that crypto taxes are administered on something of an “honor system” at this time in the United States, all your trades in and out of the major exchanges are tracked. If the IRS suspects you’re holding out on them, they’ll simply audit your records.

For honest investors and gamblers, this isn’t an issue. But if you intend to gamble with crypto (or use crypto in general) as a way to “hide” your income and earnings, it’s not really feasible.

We suspect there are ways to go about this if one is so inclined (as there are ways to do so with fiat money), but we’ve never been so inclined.

Sure, we don’t like paying taxes, but we do like holding onto as much of our money as we can with as little drama and as few hoops to jump through as possible.

In short, pay your taxes. It probably won’t turn out favorably if you don’t.

Now, all that said, there are perfectly legitimate reasons to want greater anonymity online when gambling or when using crypto (or both in tandem).

“What happens in Vegas stays in Vegas” was such a popular catchphrase because your lawful activities are really nobody else’s business.

Some gamblers like to keep their sessions private or have jobs where the stigma of gambling isn’t conducive to their professional development. While gambling is less and less “taboo” in the US thanks to the PASPA overturn in 2018, it’s still a “vice” that not everyone cares to advertise.

Ditto for the acquisition and trading of cryptocurrencies.

There are plenty of people who dabble in crypto as a big, loud F-U to the establishment fiat model, and we get that. It’s a thumb in the eye of the traditional banking system, the FED, etc. Fair enough.

But there are just as many people who want their crypto trades – and their crypto portfolios – to remain as private as possible.

For these kinds of people, it can be very difficult to buy crypto in the first place, much less use it as a means to facilitate online sports betting or gambling in general.

We’ve written plenty about many of the most common ways to acquire cryptocurrency, of course.

We’ve pointed out that the major commercial exchanges – platforms like Coinbase and Binance US – are the easiest ways (albeit not the fastest ways) to go about getting started.

We’ve discussed how the Zelle-To-Bitcoin process can help folks acquire BTC even more quickly, and how the Cash App Bitcoin exchange is a great way to buy and send BTC to any online wallet ASAP.

We’ve even talked about Atomic Wallet’s instant-buy crypto storefront and how it’s the easiest way for first-timers to acquire many of the most popular coins (most especially Ripple XRP).

But all of these buy-in options are still more or less centralized. One way or another, you’ve got to verify your ID to use them.

Interestingly, there are ways to buy crypto without using your identification directly.

You’ll still be ID’d – somewhere – by a transaction record in converting electronic fiat money (via credit cards, debit cards, etc.) to non-fiat cryptocurrency. There’s no getting around that unless you literally use cash to buy some coins from a real-life acquaintance.

But in general, if you value increased anonymity and privacy, the fewer platforms and services on which you must verify your data, the better.

So what are your real options?

Honestly, it’s tough to say.

Decentralized exchanges are a thing, allowing individuals to buy and sell crypto directly between one another with no central intermediary. These venues don’t use KYC processes, but they have their own issues and are – in many ways – less economically sound and less secure.

P2P exchanges – such as LocalBitcoins and KuCoin – may offer avenues where members can link up with other members to make crypto buys off-platform (or even in-person).

But when buying online – as in the case of LocalBitcoins itself – KYC is still employed. Of the two, KuCoin is more anonymous, but you already have to hodl some crypto before you can use KuCoin.

As a general rule, any exchange that offers USD-to-crypto or crypto-to-USD services is not particularly anonymous in nature (even to the limited degree of increased anonymity we’re discussing).

In reality, the best approach to maximizing the anonymity you can actually attain when buying crypto and/or using it to bet online has to do with what you do with your coins after you buy them.

If you accept that your initial exchange purchases will be associated with your payment method and ID, you can still increase the privacy of your activities – that is, how you store, trade, and use your crypto – after the fact.

Here are a few tips if this matters to you, particularly if trepidation over crypto privacy is holding you back from making the best online sports betting deposits (or simply getting started in the market to begin with):

  • Send all your crypto to a private crypto wallet. Never leave any assets on the exchanges once you purchase them and once off-platform sending is allowed.
  • Do not buy crypto with P2P apps like PayPal or Venmo. If you use Cash App to buy BTC, send your Bitcoin to a private wallet ASAP.
  • Use multiple wallets. This is less convenient than hodling all your crypto in, say, a universal crypto wallet app like Atomic or Exodus, but wallets are not tied to your identity. This means the more wallets you have, the less easy your activities are to trace by interested parties, hackers, etc.
  • Use new wallet sending addresses and receiving addresses for every transaction. This is already considered a best practice, and many wallets automatically generate new addresses for each transaction. You can manually force this if your wallet does not generate new addresses as a matter of course.
  • Use a VPN service when trading crypto assets. However, if you do this, please be sure to disable your VPN before you log into your online sports betting site, as active VPN use violates most betting sites’ terms of service.
  • Hodl your funds in a dedicated privacy coin (Monero, Bytecoin, etc.). This isn’t a great option for investing or making online sports betting deposits, but it is an option for enhancing anonymity with general trading.
  • Use a “cryptocurrency tumbler” or “cryptocurrency mixing service.” Mixer services allow users to pool their coins together over long periods of time. Coins are then randomly disbursed back to their holders, making the seed amounts and return amounts difficult to trace. However, because such services might be used by bad actors for money laundering, it might be tactically unsound to align your own activities with them.

Ultimately, our advice is pretty straightforward.

We aren’t all that concerned with the taxman or the middlemen or the threat of ID shenanigans with our personal information.

We’re satisfied that the crypto purchasing options we recommend are legitimate and reputable, and we’re similarly satisfied that the online betting sites we use employ industry best practices on the data privacy front.

And besides, if you’ve ever used a credit card to buy something in a retail store or on the Internet, your ID and spending habits are already logged, parsed, and extrapolated ad infinitum.

As long as the service providers you use – whether that be crypto exchanges, online sportsbooks, or literally anything else – maintain an established reputation for being legitimate businesses, you’re pretty much good to go.

And never, ever try to cheat the tax collector.

1 Comment

1 Comment

  1. Dan

    November 9, 2021 at 6:48 am

    And I love the UtopiaP2P project from decentralized blockchain projects. I will even call it an alt-tech platform. I also love their Crypton coin, which is by the way growing really fast these days and has its own no KYC decentralized exchange. I have no idea how can anyone provide more privacy than Utopia does.

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