Bitcoin is a digital currency that works on Blockchain, a decentralized network. While Bitcoin transactions themselves are pseudonymous, which means that the addresses involved are not tied to a person’s identity, centralized exchanges (CEXs) require KYC procedures to comply with regulations. This means that you will need to provide personal information on most CEXs. Because of this, many users wonder, Can you buy Bitcoin using a centralized exchange and remain anonymous? The simple answer is no. You cannot buy Bitcoin with fiat without going through a KYC process.
How Can You Buy Bitcoin Using a Centralized Exchange and Remain Anonymous
Now, let’s find the answer to the following question, How can you buy Bitcoin using a centralized exchange and remain anonymous?
There are some centralized exchanges that allow you to do crypto exchanges without going through KYC using the cryptocurrency you already have. The reason behind this is that KYC is usually required for fiat (government-issued currency) deposits but not always for crypto-to-crypto trades.
Here are some CEXs that allow you to buy Bitcoin using cryptocurrency you already own without going through KYC.
PlasBit
PlasBit offers a no-KYC crypto debit card and exchange. You do not have to provide any personal information and can still buy Bitcoin with another cryptocurrency you already own. It provides various benefits to users. PlasBit claims to never disclose any personal information to third-party authorities. Moreover, it offers real-time customer service. No other centralized exchange offers customer service like PlasBit.
Another benefit of going with PlasBit is that it is a registered company that holds a crypto-exchange license. They are accountable for their actions and protect customer funds.
PlasBit offers a user-friendly interface so that novice users buying Bitcoins can easily navigate through the website. They use encryption and 2FA to ensure maximum security. Additionally, they have a number of articles and blogs on their website to educate users about the crypto world. With PlasBit, your funds are 100% stored offline and insured.
MEXC
This is a popular exchange and offers a wide range of cryptocurrencies (over 2000, including Bitcoin and Ethereum). It does not require KYC for basic trading functions like buying and selling crypto with existing holdings. MEXC also offers margin reading and launch pads.
While it is a popular choice, it comes with its risks. Unverified accounts on MEXC may have limitations on withdrawal amounts. They are less transparent about fees compared to some other KYC exchanges. Moreover, in MEXC, security measures are less robust when there is no KYC verification.
CoinEx
CoinEx supports spot trading (buying and selling crypto) and futures trading (contracts depending on price movements). You can perform basic trading activities without KYC, and they are generally known for their lower fees compared to other larger exchanges.
Nevertheless, the selection of cryptocurrencies is smaller in contrast to MEXC. The user interface is less intuitive for beginners, and there is a limited customer support option.
ByBit
ByBit focuses on crypto derivatives, especially margin trading (borrowing funds to augment returns). It allows some activity without KYC verification and has a user-friendly interface. Additionally, ByBit is known for fast order execution.
However, ByBit is not ideal for those who want to simply buy and hold crypto. There is a potential for losses, so it is not suitable for beginners. Furthermore, KYC verification is mandatory after a certain withdrawal limit is reached.
PrimeXBT
KYC is not required for basic trading using PrimeXBT. It focuses on margin trading and traditional assets like commodities. The platform offers charting tools and order types for experienced traders.
But, PrimeXBT is only limited to margin trading. If you want to buy and hold Bitcoin, the platform is not for you. There is limited customer support without KYC verification.
TradeOgre
Like other platforms, KYC is not needed for basic trading. The platform is simple and user-friendly, and the fee is lower than that of other CEXs. There is a very limited selection of cryptocurrencies and lower liquidity that leads to wider price spreads. It can also negatively affect the trade execution.
Pros and Cons of Buying Bitcoin Anonymously
Anonymity means that your identity (like name and address) is hidden when making a Bitcoin transaction. Here are some advantages and disadvantages of doing so.
| Pros | Cons |
| There is financial privacy as your personal details and purchase history are not linked to your identity. | Anonymous methods are tricky for purchasing Bitcoin, and beginners may lack technical knowledge. |
| There is a lower risk of identity theft. | It is harder to guard against scams. |
| If you belong to a region with limited access to traditional exchanges, anonymous methods can be a way to buy Bitcoin. | There is a higher fee associated with anonymous methods compared to regular exchanges. |
| You can buy Bitcoin without having to associate your identity with a specific exchange or digital wallet. | Without a clear transaction record, resolving disputes or recovering any funds lost can be daunting. |
Now that we have answered the question, can you buy Bitcoin using a centralized exchange and remain anonymous? Let’s look at what KYC and AML are.
What are KYC and AML?
Know Your Customer (KYC) is a process used by financial institutions for identity verification of their clients. It is the first step in the Anti Money Laundering (AML) process. The goal of KYC is to protect and maintain the assets of consumers during the onboarding process. Similarly, AML regulations aim to prevent money laundering and terrorist financing.
Centralized exchanges are integrated with traditional finance and have to abide by KYC and AML compliance standards. They usually require users to provide personal information such as ID documents, social security numbers, face verification, utility bills, and proof of address, etc. This information is used to verify your identity and avoid risks like illegal activities.
While centralized exchanges offer a user-friendly experience for buying and selling bitcoin and boast deep liquidity (there are many buyers and sellers), this convenience can cost you some anonymity. When you complete KYC, you link your real-world identity to your Bitcoin purchases.
How do Anonymous Bitcoin Transactions Work?
As discussed earlier, Bitcoins are pseudonymous, which means they are not directly tied to the transactions but can be traced. Here is how it works.
- Public Ledger: All transactions related to Bitcoin are recorded on a public ledger called the blockchain. It is visible to everyone, and they can see when a Bitcoin moves from one address to another.
- No Names Attached: No personal information, such as name and address, is included in Bitcoin addresses. These are just a string of characters.
- Tracing Transactions: While the names are not there if someone is able to link a Bitcoin address to a real identity, which can be done through several ways, like in an exchange requiring ID verification, they can then trace all transactions associated with that address.
Why Go for Crypto-to-Crypto Exchange
There are different reasons why someone might prefer to exchange one cryptocurrency for another instead of buying Bitcoin with fiat currency.
- Investors might buy a cryptocurrency when its price is low and exchange it for the one that is expected to grow in the future.
- Investors can take advantage of price discrepancies between different exchanges.
- It is beneficial when investors want to hedge their positions and reduce risk.
- New projects are continuously emerging. This allows for a diverse portfolio and exposure.
- Many cryptocurrencies are utility tokens that give you access to specific services or platforms.
- Investors can earn rewards for helping to secure the blockchain network, as many cryptocurrencies use a Proof-of-Stake consensus mechanism.
- Some cryptocurrencies can be staked to earn interest. In staking, you lock up your crypto for a certain period of time.
Crypto-to-Crypto vs. Cashing Out
Cashing out Bitcoin means converting it to fiat currency. You can do this by selling your Bitcoin on a CEX or through a peer-to-peer marketplace. There are certain elements to consider before you decide whether to exchange your Bitcoin for another cryptocurrency or cash out.
- There is a fee required for both procedures. Make sure to compare them and choose what suits you.
- The price of a Bitcoin can be volatile and uncertain. The value could go up and down significantly in a short time.
- Cryptocurrency regulations are always changing, and it will be hard to cash out your Bitcoin in the future.
How to Buy Bitcoin Anonymous Without Using a Centralized Exchange
There are ways to purchase your Bitcoin using a centralized exchange and remain anonymous. However, there are some alternatives that might be the safer choice.
Peer-to-Peer Marketplaces
Platforms like LocalBitcoins connect buyers and sellers directly. They facilitate cash transactions for Bitcoin purchases. When you meet the seller personally, there is a significant degree of anonymity. You can also use prepaid cards to buy on these platforms without using any ID. Additionally, use a burner phone paid in cash for further anonymity. Create anonymous emails for communication.
But, it is hard to find a trustworthy seller and arrange a secure meetup location. You have to stay aware of scams and make sure to never send cash upfront without receiving the Bitcoin first. Sellers can also impose transaction limits.
Bitcoin ATMs
With Bitcoin ATMs, you get a convenient way of buying Bitcoin with cash. The problem with these is that the fees are higher than those on exchanges. Transaction limits are also common. Therefore, you cannot make large purchases. Moreover, availability is a big issue as not all regions have Bitcoin ATMs.
Here is the process of using Bitcoin ATMs.
- Find a Bitcoin ATM near you with the help of a directory
- Carry your phone and cash to the ATM
- Press “Buy Bitcoin” and specify the amount you want to spend
- The ATM will then generate a QR code that contains the wallet address of your BTC
- Now, insert the cash into the ATM
- Receive BTC instantly by scanning the QR code with your Bitcoin wallet app
Privacy Focused Coins
While these directly do not focus on acquiring Bitcoin, privacy-focused coins like Monero (XMR) prioritize the anonymity of its users. They use cryptographic techniques to make it difficult to track who sent or received the coins.
However, privacy coins are often met with regulatory problems. Their adoptions by exchanges may also be limited. Merchant acceptance is also lower compared to Bitcoin.
Here are some of the most famous privacy coins.
Monero (XMR)
It is one of the most popular privacy coins and has a strong focus on anonymity. It uses a technique called ring signatures, which enables it to hide the sender’s address and ringCT to conceal the amount of transactions.
Zcash (ZEC)
Zcash offers selective transparency. Users can choose between public or private transactions. The public ones are visible on the blockchain, and shielded transactions hide sender and receiver information along with the traction amount.
DASH
Dash uses a process called CoinJoin to offer some privacy features to its users. The platform mixes transactions from multiple users, which makes it difficult to track the origin of the funds.
Oasis Network (ROSE)
This is a privacy-enabled blockchain platform with a focus on confidential computing. It allows you to run smart contracts on encrypted data and protect sensitive information.
Use VPN
Use software to mask your identity and IP address before buying or cashing out Bitcoin. You can do this by using a reliable VPN. Hiding your location adds an extra layer of anonymity to your purchases.
Additionally, try to use a logless virtual private network (VPN), as it does not store the history of your activities on its servers.
Tumbling Your Coins
You can also mix and tumble your coins. After you are done with purchasing the Bitcoin, use a mixing service before spending or cashing it out to conceal the origin of these funds. Mixers help you combine your coins with others, which makes them untraceable. The fee for this usually ranges from 0.5-3% per transaction.
Make sure to find a reputable tumbling service. Services that are well established are least likely to steal your funds. Create a temporary wallet and use it to send coins from the exchange to a temporary wallet.
There is an option to choose from shared or dedicated servers. The shared servers will pool your coins with many users. On the other hand, dedicated ones pool only your coins. There is more privacy with dedicated ones, but they are obviously more expensive.
Decentralized Exchanges (DEXs)
In DEX, there is no need for a central authority as they operate entirely on blockchain. They allow users to interact with each other for buying and selling Bitcoin.
Centralized vs. Decentralized Exchanges
Centralized Exchanges (CEXs) are just like stock exchanges but for cryptocurrency. They are operated by a company that matches buyers and sellers and makes sure that the security of the transactions is not compromised.
On the other hand, Decentralized Exchanges (DEXs) are operated by any one entity. They are run on a peer-to-peer (P2P) network. Users can directly interact with each other.
Problems with DEXs
Although you can get greater anonymity with DEXs compared to CEXs, they are more difficult to use. You will need a good understanding of how cryptocurrency and Blockchain technology work in order to use DEX effectively.
Moreover, DEXs lack liquidity, which is in contrast to CEXs. This means that it may be more difficult to buy and sell large amounts of Bitcoin on a DEX.
DEXs also often require users to pay gas fees for transactions. The fees vary depending on network congestion and how complex the transaction is.
Cash by Mail
Some platforms allow you to purchase Bitcoins by mailing cash to the seller. They act as an intermediary, charge around a 2% fee, and only forward your cash to the buyer when verified.
Disk Encryption
When you leave traces of your anonymity on your hard drive or other removable media, your anonymity is further compromised. Disk encryption software could be useful in this regard, as the files and folders are no longer accessible without a password. Read online reviews for a good comparison between disk encryption software and choose the one best suited to your needs.
Crypto Gift Cards
Gift cards are one of the easiest methods for anonymous Bitcoin trading. If you have a $20 crypto voucher, you can exchange that amount equal to its value in BTC. This is just how game vouchers work.
Can You Buy Bitcoin With Credit Card Anonymously?
It does not matter if you have read this online or not, but you cannot buy Bitcoin using credit cards and stay anonymous. A KYC process is necessary to complete the transaction regardless of CEX or DEX. Additionally, if you are going for P2P and want to use your credit card, they are still going to ask you for some ID.
How to Stay Safe When Purchasing Bitcoin Without KYC
Now that you are familiar with can you buy Bitcoin using a centralized exchange and remain anonymous? and have evaluated other methods as well, it is important to understand the risks of doing so.
- Platforms that are not under regulations can be the breeding ground for scams. Sellers might disappear with your money or worse, the platform itself might be fraudulent.
- Some payment methods in such situations, like gift cards, are usually reversible. You might lose both the Bitcoin and the payment.
- Some of these platforms may be used for illegal activities. There is a risk that you might be buying stolen Bitcoin.
Here is how you can keep yourself safe when buying Bitcoin without KYC.
- Always check seller reviews and use reputable escrow services
- If you are giving cash in person, meet the seller in a public place
- Always secure your Bitcoin in a secure wallet
- Make small transaction first to test the platform
- Generate a new Bitcoin address for each transaction to make tracing difficult.
Conclusion
While the concept of staying anonymous when buying Bitcoin is appealing, the reality is that achieving complete anonymity through centralized exchange is challenging because of the KYC requirements. However, there are still different methods.
If you are searching, can you buy Bitcoin using a centralized exchange and remain anonymous, our guide evaluates these methods for you. Each method has its own pros and cons, and it is important to weigh them properly. After careful evaluation of all the CEX platforms, PlasBit stands out for us. Ultimately, you have the choice of which approach to use. Whatever platform or service you choose, staying safe and protecting yourself from potential scams is important by properly reviewing sellers and making small transactions first. Stay informed and make good decisions!
