Is buying crypto without KYC check or SSN a risk? The philosophy behind cryptocurrencies was to offer the users a safer and faster payment system that will allow them to transfer funds, even across borders, without the need of any middlemen.
It is all due to the innovative blockchain technology that it relies on.
The main driving factor of crypto is that all transactions made on the blockchain are anonymous.
Therefore, your personal details and identity will not be revealed.
However, to transfer funds you will need a crypto platform which might need your personal details for verification purposes.
Due to rapid adoption of crypto and the anonymity factor a lot of incidents of ensuing fraudulent activities such as terrorism financing and money laundering by both individuals as well as institutional investors were noted.
This forced the legislators to create strict regulatory measures to fill its void in cryptocurrency.
Therefore, the crypto world had to adapt KYC regulations, SSN and other personal details requirements in order to verify the identity of the users properly.
Most of the crypto exchanges now have to comply with Know Your Customer and Anti-Money Laundering regulations.
If that is your concern, then there are several options available which will allow you to use crypto and its platforms without needing to go through any KYC protocols or giving away your Social Security Number.
If you want to take that route it is better to know what you are getting into as well as the consequences.
This is an article that will tell you all about it in the most comprehensive manner.
In this article you will come to know about the reasons people want to buy crypto without verification, the pros and cons, and a lot of other important aspects.
Is Buying Crypto Without KYC Check or SSN a Risk?
Typically, buying crypto without KYC check or SSN is an immense risk.
This is not only for the crypto users but it is also very risky for the crypto platform operators as well causing them some serious regulatory complexities.
With the rise in popularity and use of crypto all over the world by individuals and institutional investors, the regulators in the United States as well as in the other parts of the world started to introduce stricter regulations on crypto gradually.
With these regulations in place now, it is becoming quite difficult to trade or invest in crypto as easily as it was possible even a few years back without a proper and valid ID.
However, this does not mean that any person without a proper and valid proof of identity will not be able to buy or trade crypto.
There are quite a few websites that allow buying crypto without any verification.
Of course, there may be some other requirements that you will need to satisfy.
These crypto platforms are gaining a lot of traction now with the stricter enforcement of the regulatory measures by the SEC or the US Securities and Exchange Commission and other central regulatory authorities of other countries.
Users who value their privacy a lot and do not want to divulge it in any way while dealing with crypto also find these platforms to be suitable alternatives to go for.
However, it is advised that you research on the particular platform you want to use.
Reasons People Want to
The general opinion of the public about the reason to buy Bitcoin and other crypto coins without proper KYC check is to pay for the illegal goods and services that are sold over the dark web.
Though this idea is very true, it is not the only one.
There are also a few other good (or bad) reasons for people wanting to cover their crypto tracks by choosing to buy them without a proper ID verification.
Here are some of the most significant reasons people want to buy crypto without KYC or SSN check:
- There are some staunch supporters of crypto who believe that buying crypto with identity verification is against the fundamental ethos of it and its creation and they will not support it
- There are people who want to avoid embargo, sanctions, Specially Designated Nationals And Blocked Persons or SDN list, or Politically Exposed Persons or PEP lists screenings
- There are illicit organizations and individuals who want to use crypto exchanges to launder money unlawfully
- A few users may want to simply evade taxes on crypto earnings and
- Some users may be simply underage but may be ardent crypto enthusiasts looking to trade crypto coins though it is not allowed legally.
In addition to the above, some people also want to take this route fearing that the crypto exchanges may be targeted by hackers and their personal information will be stolen from their passport or driver’s license.
Also, people who own or want to own a lot of crypto coins typically do not want to be identified easily and become a target of the thieves.
People who do not trust their governments and their regulatory measures also tend to take this route to buy crypto coins.
Finally, the simple fact that the ID verification process on a few specific major crypto platforms can be extremely and annoyingly slow which may make people think twice before buying crypto through them.
This can be exceptionally frustrating when there is an increase in demand for a specific crypto that you want to lay your hands on quickly, or if you expect that there will be a price change in the coin and you want to buy it before it happens.
In such a situation, the best and quicker option is to buy them through crypto exchanges that do not need any ID verification.
A Regulatory Risk
If you or the crypto platform is caught failing KYC processes, both may run into some strong regulatory risks.
Typically, the main idea behind creating and implementing the KYC procedures is to prevent the users from signing up without proper verification of their identity and being.
However, with these restrictions in place, it allowed the black markets to flourish.
There are different marketplaces that you will find on several dark webs, Tor network in particular.
These marketplaces offer approved accounts on different crypto exchanges, P2P trading platforms, as well as in several other conventional payments services.
These accounts are created in different ways including and not limited to by providing fake names, addresses, and ID documents.
Sometimes, these vetted crypto accounts may be created by offering genuine data that may be obtained by any other means, obviously unfair.
These accounts may exist in multiple crypto exchanges, even in the major ones.
They charge a small amount of money for that and it may range anywhere from US $150 to $500.
However, the users of these acquired accounts from the black market run into the risk of their account being flagged as not genuine by a platform, if caught.
And, in such a situation they stand a chance of jeopardizing and even losing their assets as a result.
According to a survey report, most of these fake accounts were found to belong to genuine citizens of the United States and the European Union in particular.
These accounts typically use the VPN or Virtual Private Network to operate.
It was also found in the reports that the credentials of the users for the email addresses were typically linked to the Google Voice numbers and the exchange account.
Usually, the Google Voice numbers seem to be the more favored tool for the scammers to create such forged crypto accounts.
These fraudsters even adopt particular behavioral patterns of the victims or their geo locations as well as the transaction amount and lots more to create fake accounts of other individuals.
What is even more worrying is the fact that billions of user credentials are on sale online which gives these fraudsters an easy way to access names and addresses to leverage their illegal purposes.
All these activities by the fraudsters pose a significant risk to both the service providers and the crypto platforms.
US regulators such as the US Office of Foreign Assets Control or OFAC have fined several crypto platforms such as BitGo for violating several US sanctions programs.
The platform is also alleged to have allowed individuals from Syria, Sudan, Cuba, Iran, and probably North Korea to access the platform and use their trading services, though unknowingly.
There was another crypto platform exchange, BitPay, which was also alleged of similar violations and was forced to cough up more than US $500,000 to settle its liability.
And then there is the crypto giant, Coinbase that has also faced the ire of OFAC investigation for KYC and other violations.
Market Development Perspective
The KYC processes support crypto market development as well and therefore when you avoid this procedure your activity also has a notable impact on the crypto market on the whole.
As stated earlier, black market trading of approved crypto accounts is a commonplace in the crypto space and the crypto exchanges are well aware of this fact.
It is only through robust KYC procedures that these kinds of risks to the market can be mitigated.
It is to protect the crypto market that the regulators have made the KYC procedures mandatory for every crypto exchange to follow.
However, there is one point of concern regarding this aspect.
The KYC procedures surrounding crypto is not as simple as it is in any other financial services.
The regulators therefore need to analyze the robustness of these processes and even put them to proper tests before implementing.
This will ensure that the KYC obligation will not become the reason for a diminishing adoption.
It will also ensure that people have more trust on the legitimacy and confidence on the security aspect of a crypto exchange as well as the market on the whole.
This will drive more responsible customers towards these crypto exchanges and markets resulting in a mass adoption.
Yes, there will be loss of customers as well for strict KYC requirements but that loss will be negligible and worth sacrificing for ensuring safety and security of the platform and the crypto market.
Typically, a boring and tedious KYC procedure can be improved and made more effective by combining several different identification techniques and by implementing a layered approach.
The different methods of identification can be anything such as video identification apart from snaps of official documents.
This will make the KYC approach much more solid and effective for crypto actors since a simple selfie is not enough anymore to keep the scammers at bay.
However, it is also required to make sure that the KYC process is simple, fast, and painless for the users.
It should be hassle-free and created in a user-friendly environment.
All these will ensure that the experience of getting onboard is better and intact.
Perhaps the best way today to mitigate the risks brought in by the fraudsters by getting around the KYC processes is to use automated systems.
This will ensure faster response time.
If it is combined with Artificial Intelligence, geo location checks, and proper screening mechanisms, it will surely become an unparalleled KYC solution.
With such effective and better rules, the crypto exchanges can now take part in the democratization of crypto and its mass adoption to ensure more growth of the crypto market by deterring scammers.
Risks for Crypto Platforms
The crypto platforms should also be aware of the risks that they can run into for violating KYC protocols and even for following inferior KYC mechanisms.
The KYC processes must be painless and transparent but it should not harm the conversion rates.
Since the crypto exchanges now have to comply with AML or Anti Money Laundering rules, the crypto platforms should consider this to be the best time to revamp their KYC as well as their AML procedures.
This will not only benefit the users but will also save the crypto exchanges from running into the risks of OFAC investigations for non-compliance and other regulatory violations.
Why is It Difficult?
Apart from the risk factor, it is also quite difficult to buy crypto, especially Bitcoin without KYC or SSN check.
There are quite a few good reasons to say so. These are:
- Increase in regulation – Regulators all over the world are introducing legislation and rules gradually on the crypto space to govern the digital currency exchange platforms as well as in buying and selling crypto coins. Though the US market is quite unregulated when it comes to crypto, the exchanges based in the US often need proper ID proof for the users to buy and sell crypto and for them to operate smoothly on a global scale.
- Bitcoin is pseudonymous – Most people think that Bitcoin and other cryptocurrencies are anonymous. This is far from reality. In fact, crypto is pseudonymous and not anonymous.
All these are against the widespread notion, which is of course wrong, that it is very easy to buy crypto anonymously.
Since every crypto transaction is stored in the public ledger called blockchain for all eternity, all of it can be traced back if it is hacked or your address and transaction is linked to your identity.
Pros and Cons
However, there are also a few upsides as well as few significant downsides of buying crypto without KYC check or SSN.
As for the benefits of taking such a route, it includes:
- It allows you to keep all your financial transactions and information private
- You can buy the coins quickly since you will not need to go through the lengthy and tedious verification process and
- It makes crypto and the crypto market easily accessible to those billion people all over the world who do not have any proper ID proof.
As for the demerits of this route, the list includes:
- The process can be more inconvenient and complicated than the process followed by a traditional crypto exchange.
- You may need to satisfy other requirements
- You may often have to settle for a much higher price
- You will normally be allowed to buy a very small amount of coins in this process
- You will be asked for a proper and valid ID if you want to buy more and
- Your desire to stay anonymous may attract unwanted attention and suspicion.
Most importantly, your transaction may be linked with your identity as several crypto coins may not be actually anonymous.
Protecting Your Privacy
If protecting privacy is your primary concern while buying crypto coins, it is true that the first thought that will come to your mind is to buy the coins from an exchange or a place where you do not need to go through KYC procedure or provide your SSN or any other personal details.
However, there are lots of other ways in which you can protect your privacy while buying, sending or receiving crypto coins. Here they are:
You may use a new address every time you make a transaction.
This is the simplest yet legal way to stay anonymous and most importantly prevent your transactions from being traced back to you being the common owner.
You can use Hierarchical Deterministic or HD wallets such as the Ledger Nano S for that matter.
You may even create and maintain multiple wallets to retain your anonymity and increase it while transacting your crypto.
It is also good to use a mixing service to stay anonymous while sending crypto coins or receiving funds.
Bitcoin mixing service, in particular, typically depends on a data anonymizing technique called CoinJoin.
This type of mixing services clutters payments together from several users into one single transaction.
This makes it very difficult for those prying eyes to figure out who sent or received the money.
Your IP address is unique for your computer. This will reveal all your connections to the internet.
You may also hide your IP address by using a VPN service to protect your privacy.
You may also encrypt and reroute your internet traffic through special services such as Tor for the same.
Sometimes, dealing with specific types of crypto coins such as Monero and Bytecoin may also allow you to protect your privacy.
These dedicated privacy coins come with special features built in them to allow making transactions anonymously.
Finally, you can also take some simple precautionary measures to protect your privacy.
Some of these include being careful about your footprint while using specific crypto buying methods such as not giving your phone number to anyone when you pay cash to buy Bitcoin from a local exchange.
What Do People Say?
Different people have different opinions regarding buying Bitcoin or crypto coins without going through a KYC check or providing SSN.
While a few crypto users say that it is not a route that you should take if you do not know a lot about the platforms that allow you to do so, there are others who say that you should take this route if you are not very comfortable providing your SSN to a crypto platform that you do not know a lot about.
Ideally, in both these cases, research seems to be the key.
Recently, PayPal has extended its support to crypto. Well, this may make you feel that you do not have to research a lot on PayPal which has already proved it to be one of the most favored and reliable payment services platforms of the world.
Well, it is true, but people say that you should be aware of the fact while using this platform that when you buy crypto on PayPal you are actually speculating on PayPal.
You practically do not own the coins. You simply own an IOU.
Also, when you buy crypto through PayPal you may not be asked to provide your SSN but may be asked to link your PayPal account with your bank checking account, where you have already provided your SSN while opening the account.
For the users in the United States, it is however required to go through the KYC process or provide social ID for buying crypto on all legit crypto exchanges just like it is required to use any brokerage account.
This is because most of the crypto exchanges here follow stringent IRS reporting requirements and also work very closely with the US government agencies such as the SEC to be a legit exchange.
Few users suggest that one should not go around the SSN or KYC requirements if they are looking for safety and security mostly while buying crypto on an exchange.
Other users suggest that there is certainly nothing to be scared about the KYC or AML regulations while buying crypto.
It is good for both the users as well as the crypto market.
Still, if you are wary about it, it is best to buy crypto directly from a person instead of looking for a crypto exchange that does not have KYC or SSN requirements from the users who want to buy or sell crypto assets.
You will also come across users in different forums who will say that buying crypto without SSN or KYC may not be as great a problem as selling without them is.
This is because when you sell crypto assets, you invariably are liable to pay taxes.
Not providing your SSN does not mean you will not have to pay taxes.
In fact, if you do not provide your SSN while selling your crypto coins it may raise some eyebrows in suspicion.
If you are primarily concerned about your privacy, then a few users suggest that you should use a hardware wallet.
This will allow you to stay off the grid completely.
However, make sure that you choose the right type of wallet that will meet all your needs.
Therefore, having said all that, the bottom line is that all major exchanges now will need KYC and AML rules to follow.
These are however the easiest and also the most cost effective options to buy crypto safely using fiat money.
As other people have noted, choosing an on-ramp platform will need you to go through a proper and often a strict verification process.
However, you should stay away from those services which do not let you own the crypto you bought such as PayPal.
In such cases you will have nothing to do with your crypto but to sell them off when they are ready.
And most importantly, do not get into anything without conducting a thorough research on all your available options.
This will not only ensure that you choose the safest option but also ensure that you do not end up paying an additional premium simply to get the privacy you wish for.
No matter whatever the reason is for you to buy crypto without KYC or SSN, there are quite a few options available.
However, remember that all of these come with a significant amount of risks as well as their pros and cons, as pointed out by this article.
I have special interest in crypto and intend to help common people to gain knowledge about the digital asset as well as its potential. Follow Me at Linkedin.